About this episode:
One of the best problems a company can have is grappling with the challenges of fast growth—but those challenges need to be dealt with well to keep the company thriving. Alex Peterson, corporate relations for doTERRA, talks about how the essential oil company has kept up with quality control, consumer satisfaction, and workforce management during their explosive growth.
[The following has been edited for grammar and clarity.]
Lisa Christensen: Hello and welcome to UB Insider. I’m Lisa Christensen, online editor at Utah Business magazine. It was eight months after doTERRA’s founding in 2008 that the essential oil company hit a million dollars in sales. In 2015, it surpassed a billion dollars in sales. Here to talk about the challenges of such swift growth and how the company has tackled them is Alex Peterson, corporate relations for doTERRA. Welcome.
Alex Peterson: Hi. Thanks so much for having me.
Lisa Christensen: Tell me about the growth that doTERRA has had.
Alex Peterson: Sure. Like you said, doTERRA was founded in 2008 in April by a group of healthcare and business professionals who collectively had several decades of experience in the essential oils industry. They shared a common mission to bring a new standard of essential oils to the world and to make them more mainstream and less of a niche market. The founders wanted to take essential oils to every home in the world with a really big focus on education and quality.
Like you mentioned, in 2015 we surpassed one billion dollars in annual sales and we’ve also started to expand internationally. We opened up Singapore and Australia is thriving. Our footprint is also growing in Canada, Mexico and Europe as well.
Lisa Christensen: What were the initial expectations for growth?
Alex Peterson: I think from the very beginning David Stirling and the other founders believed that they could accomplish something really spectacular. But I still think it’s safe to say that the growth has even exceeded their fondest expectations. It has become so much more than just them and so much more than even our 2,000 employees here in Utah and our 500 employees internationally.
We’ve done a lot of market research and found that people strongly prefer to learn about essential oils from someone that they know and trust. And not just oils, but any kind of health and wellness product. I think oils are so experiential that you have to really kind of smell them and feel them to understand what they do. We’ve found that people come to know and love the product and then share it. So much of the growth has just happened really organically.
We now have over five million customers and wellness advocates around the world. We source over 130 essential oils from over 45 countries. And in those countries, we’ve created an estimated 20,000 jobs. It has just become this living, breathing organism that’s grown beyond anyone’s expectations.
Lisa Christensen: Yeah. And you can see a little piece of that here sometimes, for example, your conference last fall.
Alex Peterson: In September.
Lisa Christensen: Your conference in September, I believe, was the largest conference held at the Salt Palace or the largest conference in Utah. I’m not exactly sure which. The bulk of those attendees were international, correct?
Alex Peterson: Right. Yeah. We had 30,500 people attend. It was the largest corporate convention in Utah for, I think, the third year running. We also had another 10,000 people attend via live stream.
Lisa Christensen: So that’s a huge amount of growth. And even if you expect fast growth, I’m sure you couldn’t have expected this kind of growth. So what have been some of the challenges associated with this?
Alex Peterson: I think along with the kind of typical challenges that any new company has as far as meeting product demand, manufacturing, quality control and growing your employee base, we also faced a need to transition to a new business application.
When doTERRA was founded it started with an outsourced IT model that was running on a specialized system for startup network marketing companies. That worked really well early on, but by 2012 we were regularly performing one million dollar days. 90% of our business is through online commerce so we knew we really needed to scale our systems up to keep up with the growth. So we began to look for solutions to do that.
We brought on a CIO, Todd Thompson, who has been amazing. He has been looking for ways to improve our core business functions. Over the past three years he has kind of spearheaded the change to roll out new software and processes that help us run more efficiently. It’s preparing us for all of the growth that’s yet to come. And it’s something that’s going to work internationally so that we can have our websites in different languages and really integrate it that way. It’s been an investment and there have been some growing pains, but I think we’re almost there. That’s really exciting to see.
Lisa Christensen: Let’s break out some of those things you mentioned one by one. How did you keep up with product manufacturing? You mentioned all of the countries that you source the oils from.
Alex Peterson: So I think for us, product manufacturing begins long before the oils reach our manufacturing facility here in Utah. Every essential oil that we distribute comes through our headquarters in Pleasant Grove. But you really have to go back to the source of the oil and ensure that you have the correct measures in place to meet demand. That kind of means something different in each place we source. The need varies from project to project but it always means that we’re aware of supply and demand and we never want to compromise the long term sustainability of any oil.
From the beginning, I think our founders knew that we were going to have to reach all around the world to source the purest oils available. I think they also knew that in some cases demand could potentially outpace supply if we didn’t do that in a really careful, deliberate way. So they developed something called co-impact sourcing, which seeks to develop long term, mutually beneficial supplier partnerships where we’re creating shared value.
We’re partnering with these artisan growers who have a really deep understanding of native plants, local climates, weather patterns, and what seeds and soil to use. There’s a tremendous amount of precision that goes into that – everything from when you plant to where you plant, how you harvest and how you distill to how you bottle and how you store and on and on. The co-impact sourcing initiative has really helped doTERRA be in a unique position to do that effectively and sustainably because we’re working on eliminating the middle man. We have really strong and intimate partnerships that allow us to control for variables all along the way. Let me just give you an example.
With our frankincense oil, we recently engaged a sustainability expert who has been assessing every tree that we source from. We do that to prevent over-tapping and to ensure harvesting seasons never exceed an appropriate amount of time. We really consider our stewardships of all of these botanicals a profound responsibility so that everyone can enjoy the oils for years to come.
Lisa Christensen: So it sounds like the founders had growth in mind in the beginning and said, “Okay, in order to keep this growth and sustainable business model, we’ve got to do this smart from the beginning.”
Alex Peterson: Yes. Our sourcing team is scaling accordingly and it is comprised of some really incredible individuals that worked at the World Bank. Some of them are commodity traders. They really understand what needs to be done in order to do this in a sustainable way.
Lisa Christensen: It sounds like that would also lend itself to maintaining the quality, if they’re trying to grow in this sustainable way that you mentioned.
Alex Peterson: Yeah, you know, in addition to carefully selecting where and how the oils are sourced, there’s an exhaustive testing process throughout the growing cycle and then once it gets to our facility as well.
At our headquarters in Pleasant Grove, we have over 30 scientists and over 2,200 square feet of state-of-the-art laboratory space where oils are tested. Just to give you a sense, an M2 oil bottle, from being an M2 oil bottle to getting shipped out takes about seven days. And three to five of those days are dedicated to testing. So it gives you a sense of the preeminent focus on that to ensure that every oil is as pure and as potent as it can be.
We’ve also engaged third party labs so it’s not just us testing. It’s independent groups testing. And we’ve established relationships with some prominent universities and clinical environments that help us verify the purity and potency of each oil, and they have developed some groundbreaking research on the effectiveness of oils.
Lisa Christensen: You mentioned that the company has really changed shape in a lot of ways since the beginning. How do you maintain not only company culture but customer satisfaction as you’ve been transforming?
Alex Peterson: Great question. We do everything that we can to get the best possible oil into the hands of our customers. But it doesn’t stop there.
We have a customer service workforce of 1,000 people. Our vice president of member services always says that people come for the product and they stay for the customer service. If you call the main number on our website you’re always going to get a live person.
The company is privately funded. The founders considered outside funding but ultimately decided they didn’t want to sacrifice the integrity of their mission. So they went the first 13 months without any income at all. But they were able to make it work and now have the freedom to stay focused on their mission of sharing oils with every home and doing it in a way that’s filled with integrity. So there’s never really any pressure to sacrifice quality or cut corners for shareholder earnings.
I think that ethos is manifest in everything we do including customer service. They always want to put people first, from novice to expert, so they put a lot of time into educating customers and addressing any concerns that they have.
I’ll give you an interesting vignette. Recently there’s a company in Lehi that’s public and a billion dollar company. They kept hearing again and again that our member services was doing really well and had really high customer satisfaction ratings. They were not experiencing that but wanted to. So they asked if they could come and do a training with their managers at our headquarters.
We welcomed them in and kind of showed them around and told them about our processes and what we do. Then we opened it up for Q&A. The managers just kept asking the same question again and again, which was, “How does this make sense cost-wise?”
You know, at doTERRA we’re training people for weeks and weeks before they even get on the phones so that when they get on they’re ready, they’re prepped. Then the customers can have a really positive experience.
This other company’s lifecycle for training, onboarding and eventually burnout, is much much shorter. And it was just interesting to see the wheels turning. They’re thinking very short term. It’s expensive to train someone for a long time, but we’re thinking it’s expensive to lose a customer over time. And our retention right now is 70%, which is the highest in the industry for customers. That means that 70% of customers who have ever ordered with doTERRA have stayed with doTERRA. I really think that speaks to the founders’ commitment to customer service.
Lisa Christensen: That also sounds like the same philosophy upon which you’ve treated the sources of the oil – that kind of long-term investment type idea.
Alex Peterson: I agree. My background is in politics and policy. One of the things that really drew me to doTERRA was their emphasis on the people. I see them empowering people in everything that they do. If it’s employees, they’re making sure that they’re satisfied at work and contributing and feeling like their role is meaningful there.
The oils are designed to help empower families to find solutions on their own to complement modern medicine. We also aim to work with the growers and the people that we work with in these countries to help set them up for success in a way where they’re going to get paid fairly and on time. We have a whole list of sourcing guiding principles and third party audits that we’re doing to make sure that all of that is being done as ethically as possible.
Lisa Christensen: Do you ever speak with other fast growing companies or other companies in the industry and kind of compare battle stories? Is there some kind of community or camaraderie among companies on this type of trajectory or in this industry?
Alex Peterson: You know, our owners all have extensive experience in the essential oil space and working in the area as well. They’ve held leadership positions there. So I know they’re bringing a lot of experience. I think they’re also talking with their friends that are still there. They’ve kind of experienced some of these battle wounds firsthand. But I think this growth is unprecedented for them.
One thing that we do is a lot of market research to try to understand trends and to stay ahead of our growth. The founders really are very forward thinking as far as not just planning out the sourcing, I think they have a 100-year plan to do this the right way.
We initially broke ground in 2013 for our first phase of growth. Then we had a second phase of growth and just this summer we announced our third phase of growth. It is going to allow us to house 950 new employees and will expand our campus size to a million square feet.
Lisa Christensen: Yeah, I was going to ask, when you have that much growth how do you keep up with a place to put them? A lot of companies invest a lot in their headquarters and so that must be challenging.
Alex Peterson: Yes, we have over 2,000 employees in Utah and right now things are starting to get a little tight. They’re adding new cubicles every day. And so actually next September we’re going to have a new office building completed. It’s going to have a child care center that will house over 84 students for working parents that want to use that benefit.
Our manufacturing center is doubling in size. We have a new fulfillment center coming and we’re looking beyond that as well. But that’s one of the beauties, I think, of being in Pleasant Grove. I think one of the reasons the founders strategically picked Pleasant Grove is that there was still land available and so they were able to plan for the growth.
Lisa Christensen: It sounds like there’s a lot of things coming for you guys.
Alex Peterson: Yeah.
Lisa Christensen: Alright, well thank you so much for coming in today. I really appreciate it.
Alex Peterson: Thank you.
Lisa Christensen: Thanks also to Mike Sasich for production help. You can drop us a line at email@example.com or reach out to us on social media at @utahbusiness. Thanks for listening.