Nutrivida in Costa Rica: The King of MLM or MLM Scam?

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Muhammad Yunus, the Bangladeshi Nobel Peace Laureate whose Grameen Bank has been hailed as one of the most brilliant and functional concepts of poverty reduction through microfinance, was recently in Costa Rica to inaugurate Nutrivida, an enterprise he hopes will be a ticket out of poverty for women in Guanacaste, Limon, Heredia, and San Jose. Some aspects of the Nutrivida business model, however, resemble multilevel marketing (MLM) techniques.

According to an article by Oscar Rodriguez and Carolina Ruiz of financial news weekly El Financiero, Mr. Yunus was on hand to attend the first Socially-Responsible Enterprises Summit in Costa Rica in late November. President Laura Chinchilla was also present at this event, which was held at the Marriot in San Antonio de Belen. Mr. Yunus explained that anyone can create a socially-responsible enterprise with simply the right idea to solve a problem, plus access to financing.

The Nutrivida Business Model

Nutrivida seeks to address more than one problem; it actually seeks to eradicate malnutrition and poverty in Central America and Haiti through a sustainable business model. Nutrivida will also focus on generating jobs for women who live in regions of Costa Rica where unemployment is rampant, to wit: Guanacaste, Pavas and La Carpio in San Jose, and Guarari in Heredia.

Nutrivida manufactures and distributes three nutrition products rich in vitamins and minerals. These products include a chicken soup, a powdered beverage and a cereal-based meal for children. The manufacturing plant is located in Barreal de Heredia, which is home to many free-trade zones and multinational business headquarters.

Ten women are directly employed by Nutrivida for the manufacturing and packing process. Another 100 women will distribute Nutripacks, which are combo versions of the products mentioned above. These sales reps will sell the Nutripacks door-to-door in working-class and marginal neighborhoods across Costa Rica that can benefit from low-cost nutritional products. The saleswomen get to pocket a 30 percent commission.

The $600,000 seed capital for Nutrivida comes mostly from Florida Ice & Farm Company (FIFCO), the brewing giant behind two iconic brands: Costa Rica’s Cerveza Imperial and Canada’s Labatt (only U.S. distribution). FIFCO also owns the Musmanni bakeries and convenience stores that are displacing the traditional neighborhood pulperias. As such, the women selling Nutrivida products will face competition from Musmanni stores, which will sell the products on a retail basis.

Traces of MLM

Just like the Marango tree in Costa Rica, there are some aspects of the Nutrivida business model that set off the MLM warning bells. Nutrivida’s initial 100 saleswomen will also be expected to expand the network as they go door-to-door. They will be allowed to form sales teams and draw commissions from associates. Pretty soon you are talking about managers, downlines, pyramid schemes, and other terms used by Amway and Herbalife reps.

There is nothing to indicate that the honorable Professor Yunus intends to form an MLM enterprise in Costa Rica. However, Yunus’ own Grameen Foundation has recognized that MLM has infiltrated its ranks. In 2011, a Grameen America report indicated that officials knew about:

About eight of the women in the center I visited – which had about 30 members attending – were involved in Herbalife, a kind of nutrition program sold through a network of women who are organized like Avon ladies.

Blogger Shyan Sundar of Corporate Frauds Watch has written his opinion about Grameen America and the MLM situation therein:

the actual inventor of micro credit, Professor Muhammad Yunus, has appeared as key-note speaker at a Congress of the so-called ‘World Federation of Direct Selling Associations.’ Apparently, Prof. Yunus was also too naive to know that the majority of so-called ‘Direct Selling’ companies, like ‘Herbalife’ have been the corporate fronts for an insidious form of cultic racketeering which enslaves the poor by offering them the illusion of future financial freedom.

U.S. financial magazine Barron’s has also written on the matter:

In Omaha and New York, it turns out that many women took their Grameen microloans and joined Herbalife (ticker: HLF) and other multi-level sales organizations as self-employed distributors, according to present and former employees of Grameen America.

Once again, there is no direct evidence to link Nutrivida to MLM or pyramid schemes, and the Costa Rica Star hopes that this will never happen. For this reason, it is in the best interest of those involved in socially-responsible non-profit enterprises to ensure that their businesses do not end up as MLM propositions.