Contra Costa Times, August 18, 2006

Shaklee CEO predicts 'double-digit' growth with company's launch of toxin-free products; economists not so sure

SAN FRANCISCO - Shaklee Corp. believes that by Going Green, it can produce a bumper crop of greenbacks.

The Pleasanton-based marketer of nutritional, health care and household cleaning products has been at the forefront of being friendly to the environment, a point its executives made repeatedly at its 50th anniversary gala in San Francisco on Thursday. Now, the company is convinced that its decades-long commitment to "green" products can dramatically increase its sales and profits.

To be sure, Shaklee's push to launch a line of toxin-free household products, plant 1 million trees, install solar power in impoverished African villages, sponsor expeditions to the Arctic to investigate global warming, become the world's first carbon-neutral corporation, and generally tout Shaklee as a "green" company, can all burnish the firm's corporate image.

Yet the real question that confronts privately held Shaklee, a multi-level marketing and direct sales company, is whether this whirlwind of activity and business strategies can bolster the company's sales and profits.

Those sales "were stagnating over a period of time" in recent years, said Chairman and Chief Executive Officer Roger Barnett. In 2005, according to Barnett, Shaklee experienced a percent increase of "middle single digits" in revenue, reaching a total of "nearly" $500 million.

The green campaign, bolstered by the "Get Clean" line of household products and the "Cinch Inch" weight management program, both announced on Thursday, could drive revenues much higher.

Barnett predicts "double-digit" growth in sales for 2007, in part spurred by the company's aggressive push into China, which was also announced Thursday.

"We don't think that being green is going to hurt the bottom line, we think it enhances it," Barnett said. "We think taking care of people enhances it. Helping developing world people get better access to nutrition is good for our business."

But economists offer mixed assessments as to whether Shaklee and other companies that emphasize an eco-friendly approach to doing business can be a big financial success.

"A lot of money is being invested in technologies that probably will not go anywhere," said Amy Kaleita, an environmental fellow with the Pacific Research Institute, a conservative think tank. "There is a potential to make money here, but there is also great risk."

She also believes that countries with mega-economies, such as the United States, could suffer financially if they drastically reduce greenhouse emissions, as some policy makers have urged.

"Some research completed recently shows that to really implement greenhouse gas offset policies would probably add a minimum of 50 percent to our typical energy costs," Kaleita said. "That would reverberate through every industry and impact every consumer. ... Think of the grumbling we have been hearing with the rising gasoline prices."

But other researchers, including economists at the University of California at Berkeley, believe that going green can stimulate the economy.

About 17,000 new jobs could be created and the state's economy, now valued at $1.55 trillion, would expand by 4.1 percent, or $64 billion a year -- if California returned statewide greenhouse gas emissions to their 1990 levels by 2020, according to a new UC Berkeley study authored by David Roland-Holst, a UC Berkeley adjunct professor of agriculture and resource economics.

"One of the main drivers of California's sustained growth and prosperity is innovation," Roland-Holst said. "We think that green technologies, energy-efficient technologies, will join the knowledge-intensive industries of high-tech and biotech as sources of innovation and jobs."

As a result, the UC Berkeley researchers believe firms such as Shaklee can capture plenty of cash by going green.

"Anybody, Shaklee or any other company, has huge opportunities in front of them in terms of global green initiatives," Roland-Holst said.

Shaklee executives are convinced the company's timing couldn't be better, especially when the new product lines and its push into the huge market of China are combined.

"We are at the tipping point for our company to grow exponentially," Barnett said. "We have a 50-year head start in this market that is just now becoming popular."

George Avalos covers the economy, financial markets, insurance and banks. You can reach him at 925-977-8477 or gavalos@cctimes.com.