It has been a generation in the making, but this year Sam Rehnborg will see the full fruition of his father's cherished dream 33 years after his death WHEN NEW REGULATIONS take effect on December 1 legalising direct sales in China, a bold new frontier will finally be totally opened to Amway. Amway has operated on the mainland since 1992 and already counts it as a hugely important market. But the company's true potential there has been hamstrung by a government ban affecting its direct sales network, which is built on individual 'first-tier' distributors who both sell Amway products and recruit second-tier distributors. With each new tier generating another, the network expands exponentially. Seven years ago, the Chinese government forced Amway to sell through retail stores only. It was suspicious of any organisation potentially even more organised than the communist party and also wary of similarly structured pyramid schemes that had fleeced recruits. Although China's World Trade Organisation accession agreement requires that the ban be lifted, the enabling legislation that comes into effect later this year will allow Amway to recruit distributors but not sub-distributors. And although it would prefer to roll out fully fledged 'multi-level' marketing, the company has embraced the 'single-level' compromise as a promising first step. There is great irony in Amway's protracted struggle to enter the China market on its own terms. For the Michigan-based company, established in 1958 as the American Way Corp, owes much of its success to the China dream of a 20th century US entrepreneur. In 1915, Carl Rehnborg landed in Shanghai, where he found work as a 'manufacturer's rep' - the name for agents trying to sell western companies' products to Chinese consumers. His first employer was Carnation, for whom he tried to move canned milk which looked like a sure-fire sell in a country where osteoporosis was relatively common. Instead, it was fated to be one of the first of many foreign corporate failures in China. Although neither Carnation nor Mr Rehnborg knew it at the time, they had been defeated by a Chinese genetic predilection for lactose intolerance. A chemist and biologist by training, Mr Rehnborg had an intellectual as well as professional interest in dietary trends and habits. He observed that Chinese peasants, although poorer than their urban counterparts, were also healthier. They were, for example, far less prone to beri-beri, or rickets, a disease caused by vitamin deficiency that can damage the heart. Mr Rehnborg wondered if that was because peasants tended to eat nutrition-rich wild rice, complete with husks, while sicklier Shanghai city slickers ate washed white rice. 'He was one of the first Westerners to make a connection between nutrition and health,' says Sam Rehnborg, Carl's son. 'And he really did that in China.' Carl Rehnborg's intuition ran counter to prevailing western scientific notions, which in the early 20th century tended to associate almost all disease with germs or other 'external' agents. But he drew moral support from traditional Chinese medicine, which also recognised that what food lacked in nutrition could be as harmful as any germs or bacteria it might contain. Hence its emphasis on herbal and other dietary 'supplements'. 'In those days, pretty much all of western science totally disregarded Chinese medicine as being beyond science and would have nothing to do with it,' says Sam Rehnborg, who inherited his father's passion for health science. 'It was [regarded as] just a weird thing that the Chinese did. '[My father] thought maybe it wasn't what was in the white rice that was causing [beri-beri] - it was what wasn't in the rice. When you added back the hulls of the rice, the problem went away.' By the late 1920s Carl Rehnborg had switched employers and was trying to sell Colgate toothpaste to the Chinese. But he was at least living the China dream in other ways, with a large house in Shanghai's French quarter, where he lived with his American wife, two children and servants. History would soon catch up with Carl Rehnborg. Chiang Kai-shek's Nationalist Army was marching north from its Guangzhou stronghold, in what would prove an only partially successful campaign to crush regional warlords and unify the country. Shanghai, which was loyal to Chiang, soon resembled an armed camp; food became scarce. In the ensuing chaos, Carl Rehnborg, who had taken the precaution of sending his family back to the US, lost his house and just about everything else. He arrived back in California in 1927, a 40-year old China refugee with just US$24 in his pocket. Although penniless, he turned down a job offer States-side from Colgate to pursue his dream of launching a vitamin supplement company. That was the final straw for his wife, who completed Carl Rehnborg's run of bad luck by leaving him. 'He was pretty much down and out,' says Sam Rehnborg, who was born in 1936 to the third of his father's four wives. Carl Rehnborg's second wife had died in childbirth along with their child. Carl Rehnborg's company, Nutrilite, developed a line of vitamin supplements. But these were a new-fangled concept in a country where 'three square meals' were reckoned nutrition enough. America, mad about its meat and potatoes, had little time for an oddball entrepreneur pushing vitamin, mineral and plant-concentrate 'rabbit pellets'. It also did not help that Carl Rehnborg, who peddled the product himself, was not much of a retailer. 'It was a long haul,' says Sam Rehnborg, who was his father's first 'lab animal' and accompanied him on sales trips. As one might expect of a California kid who grew up on a diet of vitamins, Sam Rehnborg looks a decade younger than his 69 years, with a lean frame, healthy tan and full-head of hair that is more 'California blonde' than grey. 'My father had his own little route of customers. He tried all kinds of retail methods but found the only way he could sell it was to talk to people one-on-one. He really did his best just by talking to people.' Although business grew, Carl Rehnborg's one-customer-at-a-time approach ensured it did so only slowly. Then a satisfied customer asked if she could sell Nutrilite's products. He demurred at first, but 'in frustration' eventually relented - and gave her a 35 per cent discount on what she sold. 'She turned out to be a much better sales person than he,' Sam Rehnborg recalls. 'She could just sell the heck out of the product. [My father] realised that maybe this was a better way to sell it - let customers become distributors.' It was thus that Carl Rehnborg, who is credited with introducing 'the world's first vitamin and mineral supplement' and launching what is today a US$60 billion a year industry, also accidentally stumbled on direct, multi-level marketing. Two more successful distributors were 'a couple of guys from Michigan', Jay Van Andel and Rich DeVos. Their refinement of Nutrilite's sales strategy was a simple one - they used the same technique to sell a much larger range of household products through Amway, a vehicle separate from their Nutrilite distribution business. Amway took off like a rocket. It soon outpaced Nutrilite, which was bogged down in a protracted legal battle with the Food and Drug Administration that went all the way to the Supreme Court. At issue were advertising claims made by its key distributor, Mytinger and Casselberry, and Nutrilite's novel sales network which, not unlike the Chinese government decades later, the FDA was suspicious of. Nutrilite eventually reached a settlement with the FDA and claimed total exoneration after the 1969 White House Conference on Nutrition, which recognised that the American diet was not all it was cracked up to be and marked - in Sam Rehnborg's estimation - 'the birth of the health and fitness movement'. But the fight had been an enervating one. 'There was a period of time when we didn't know if we'd survive,' Sam Rehnborg remembers. In 1972, by which time Amway was a US$100 million a year company and Nutrilite 'much less than that', Amway acquired the company that had been its inspiration. Carl Rehnborg died that same year, although his son stayed on with the company and served as its president and chief executive for 13 years from 1983 to 1996. Amway's debt to Carl Rehnborg and Nutrilite goes well beyond its own beginnings. Today Nutrilite is the world's largest supplement brand. It will turn over US$3 billion this year, accounting for 45 per cent of Amway's total volume. In Hong Kong and China, Nutrilite accounts for 50 and 60 per cent of Amway's business, respectively. Even with the difficulties it has had, China is still a huge market for Amway, whose business there exceeded US$2 billion last year. Ninety years on from his first crack at the mainland and 33 years after his death, Carl Rehnborg's China dream has finally come true. email@example.com Biography Sam Rehnborg, 69, is president of the Nutrilite Health Institute in Buena Park, southern California. The son of Nutrilite's founder, Carl Rehnborg, who passed away in 1972, he succeeded his father as president and chief executive for 13 years from 1983 to 1996. Today, Nutrilite is the biggest unit under direct sales giant Amway and also the world's largest vitamin and mineral supplement brand, with annual turnover of US$3 billion. Mr Rehnborg studied at the University of California at Berkeley, where he graduated with a bachelor of science degree in chemical engineering and a doctor of philosophy in biophysics. He also studied biochemistry at Stanford. Mr Rehnborg, a health enthusiast who runs marathons, skis, plays tennis and golf and scuba dives, is married and has four children.