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The 10,000 people flooding Salt Lake City this week for the annual XanGo convention are a testament to the phenomenal growth of the quirky Utah County supplements company with a funny name.
The company's fourth annual convention began Wednesday but doesn't get into full swing until general sessions Friday and Saturday at the Salt Palace Convention Center.
This year's event will include distributors from 18 foreign countries, as well as the United States, who will be celebrating that growth. One sour note unlikely to be discussed, however, is a lawsuit facing the company claiming that its principals engaged in self-dealing and used XanGo assets for personal use.
Launched in 2002 with 14 employees and leased offices, the privately held, multilevel marketing company now occupies 300,000 square feet of office space in three buildings at Thanksgiving Point in Lehi for its more than 700 employees.
The growth is noteworthy when considering that the company sells essentially one product, juice made from the mangosteen fruit found primarily in Southeast Asia. The fruit had been used as a traditional medicine before the company turned it into a mass-produced concoction marketed as a health drink, and before XanGo joined the large supplements industry in Utah.
"The growth that's happened in the last five years is pretty staggering by Utah standards and outside our industry's standards," said Gordon Morton, president of sales and marketing.
Morton's brother, Joe, came upon the wide use of mangosteen while running operations for a dietary supplements company in Southeast Asia. The two joined brother David and colleague Aaron Garrity in research of the potential health benefits and found that the fruit was a rich source of a compound called xanthones, which they say is a health-promoting antioxidant.
From this encounter and the research, the team in 2002 founded XanGo - a combination of the words xanthones and mangosteen.
XanGo is distinctive in the Utah supplements industry, which had $4.2 billion in revenues in 2005, according to the United Natural Products Alliance, an industry trade group. XanGo depends almost exclusively on a single product, its juice, which it sells in a 25.3 ounce bottle for $37.50 on its Web site or for $25 to its distributors.
As a multilevel marketer, XanGo's distributors can make money by recruiting more distributors with commissions paid up through nine levels of the organization.
The company will be announcing its entry into Taiwan at the convention this week after already operating in Hong Kong, Singapore and Malaysia, three of the four biggest Chinese-speaking markets outside the mainland.
The organizers are promising what is becoming a traditional XanGo convention, with speeches from top company officials and exuberant activities, too, such as the traditional dance party. This year's convention theme is FutureRama, and participants are urged to wear appropriate costumes.
Not all is fun and games, though, for XanGo.
On Tuesday, a 4th District judge in Provo denied XanGo's motion to dismiss a lawsuit by minority investors from a company called Angel Investors LLC. They claim that loans from XanGo were used by XanGo principals to buy out other minority investors and increase the majority owners' stake. The effect was to decrease the holdings of Angel Investors and deny it its proportional share of profits, according to attorney Mary Anne Wood.
In addition, Angel Investors claims that XanGo principals used millions of dollars in corporate funds to purchase houses and luxury autos, and for "unreasonable expenses," Wood said. The self-dealing amounted millions of dollars of XanGo money, she said.
"In other words, using XanGo as though it was their own little playground instead of believing they have interests and obligations to these minority investors who got them started in the first place," Wood said in an interview.
In a statement Wednesday, XanGo said Angel Investors is controlled by people directly associated with XanGo's competitors and a disgruntled former employee, and that it holds only a 1 percent, nonvoting minority interest.
Angels Investors, according to the statement, "has been handsomely rewarded many times over for its initial investment in the company."
"XanGo regrets that a single investor, who has benefited so much from XanGo and the efforts of its founding members, would stoop to legal action in what appears to be an attempt to force the company to buy out its interest at an inflated value," the company said, denying the allegations contained in the lawsuits.