Nikken Global Inc. History

Address:

15363 Barranca Parkway
Irvine, California 92618
U.S.A.

Telephone: (949) 789-2000
Fax: (949) 789-2085

Wholly Owned Subsidiary of Nihon Kenko Zoushin Kenkyukai
Founded: 1975 as Nihon Kenko Zoushin Kenkyukai
Employees: 250
Sales: $1.5 billion (1998 est.)
NAIC: 42145 Medical, Dental, and Hospital Equipment and Supplies Wholesalers; 325412 Vitamin Preparations Manufacturing

Key Dates:

1975:: Isamu Masuda founds the parent company in Fukuoka, Japan.
1985:: Hong Kong operations are started.
1988:: Firm expands into Taiwan.
1989:: Company begins operating in the United States and Portugal.
1996:: North American operations move to Irvine, California, which becomes the world headquarters for Nikken; company operations begin in Sweden, Holland, Germany, and the United Kingdom.
1997:: Company starts operating in Italy and the Philippines.
1998:: Firm expands into France.
1999:: Nikken and Amway file lawsuits against each other; Nikken begins operating in Finland.

Company History:

Nikken Global Inc. is one of the world's largest multilevel marketing (MLM) and health products firms, based on its annual sales of over $1.5 billion. Its roots are in Japan, the world leader in the multilevel or network marketing industry, where one in eight homes have a Nikken wellness product. Operating in about 20 nations in Asia, North America, and Europe, hundreds of thousands of independent distributors make Nikken the world leader in selling magnetic health products. Although magnets have a long history in healing, Nikken incorporates its magnets in several kinds of products, such as shoe inserts, flexible support wraps, clothing, water purification devices, sleep masks, mattresses, and other sleep products. It also sells nutritional supplements, massage products, pet care items, jewelry, skin care products, and clothing and other items made with ceramic-reflective fibers to maintain an ideal body temperature. Although Nikken is a large international firm expanding rapidly in the United States and elsewhere, little is available in American publications about this debt-free and well-managed company.

Historical Background of Magnetic Therapy

Some say that historic figures such as Aristotle, Cleopatra, and Galen, a famous physician of ancient history, used lodestones (magnetic rocks) for healing. The Chinese as far back as 2000 B.C. used magnetic stones, along with heat and acupuncture, to help the body correct unhealthy imbalances. Ancient Hindu scriptures, the Vedas, mentioned using stone instruments, probably lodestones, for treating disease. Medieval European doctors reported using magnets to cure gout, arthritis, baldness, depression, and some kinds of poisonings. Paracelsus, the famous physician born in 1493 in Switzerland, used magnets to treat many forms of illness, including epilepsy, diarrhea, and hemorrhage. In 1775 Franz Anton Mesmer wrote On the Medicinal Uses of the Magnet and became well-known for his concepts of animal magnetism and mesmerism, or hypnosis. In the 1800s, with the discoveries of the connections between electricity and magnetism, even more people used electrical or magnetic devices to treat the sick. Many people, however, considered such methods a hoax or quackery, so it was not surprising that most doctors opposed magnetic healing in the 20th century.

Origins of Nikken in Japan

In 1973 Isamu Masuda, a desk clerk for a Japanese bus company, blamed his own poor health when his baby was born without ears. Masuda began using magnetic shoe inserts and in 1975 launched his firm Nihon Kenko Zoushin Kenkyukai in Fukuoka, Japan. He promoted his company on what he called the 'five pillars of health,' namely healthy body, mind, family, finances, and society. In its first four years, Nihon broke all previous records for a Japanese start-up firm, a record still in place in the late 1990s, according to a promotional video produced by independent Nikken distributors Kurt and Kathy Wilkins of Star, Wyoming.

In the 1980s other firms began marketing magnetic products. For example, Fred Rinker in England started in 1981 making magnetic products to wrap around horses' legs, but three years later his firm called, Magna-Pak Inc., began selling magnets for humans, which soon outsold the equine items.

Nikken had operated in at least six nations, including Japan, Hong Kong, and Taiwan, and had accumulated a total of at least $5.5 billion in retail sales before deciding in April 1989 to start operations in the United States. Nikken U.S.A. Inc. began in a high-rise building in Westwood, California. Concentrating on the Asian markets of Los Angeles and New York City, the subsidiary did $3 million in U.S. sales in 1989, but rapid expansion was forthcoming.

The 1990s

Nikken's American sales reached $41 million in 1992, $54 million in 1994, and $135 million in 1995. However, it remained primarily a Japanese and Asian firm. The parent company, Nihon Kenko Zoushin Kenkyukai, traded on the Tokyo Stock Exchange and sold a more diverse line of products, such as portable saunas and cookware. In 1996 Nikken distributor Jeff VanBlaircum of Oregon said that the firm in Japan garnered $700 million in annual sales, but 99 of 100 Americans knew nothing about Nikken, thus presenting new opportunities.

Although Nikken had considerable success with its magnetic products, called Kenko Technology in company literature, in the early 1990s the firm had no way to apply magnetism to elbows, knees, and other often-bent body parts. So in 1993 the company began a major research project. 'Their mission was to create an advanced version of Kenko Technology--a comfortable support wrap that would be stretchable, flexible and durable. Finding nothing suitable already available, Nikken invented a rubber-based product with magnets inside. The result was the firm's trademarked Elastomag Support Wraps, highlighted in company literature as 'an evolution in wellness technology.' Elastomag products in 1999 included wraps for the elbow, hand, knee, thigh, ankle, shoulder, back, and wrist. Nikken also sold its black, zippered Elastomag Vest in both men's and women's sizes.

Nikken by the early 1990s also had developed a line of new products based on what it called in its product literature 'Far-Infrared Technology--The Newest Innovation in Warmth.' Far-Infrared used ceramic-reflective fibers that 'act like millions of tiny heat sponges that then reflect the warmth ... as deep heat. Excess heat is released into the atmosphere, so you'll experience exceptionally comfortable warmth that is continuously activated by your natural body temperature.' One distributor who wished to remain anonymous said Far-Infrared was derived from or inspired by the use of ceramic fibers in American space suits used to keep astronauts from overheating from the sun's direct rays or becoming cold in the chill of outer space.

Far-Infrared Products in 1999 included Nikken's trademarked KenkoTherm Summer and Winter Comforters, both made with 50 percent ceramic fibers and 50 percent wool, and dress and sports sox for men and women made with copper fibers to prevent static cling. Others were ThermoWear Long Johns made of 51.6 percent ceramic-reflective fibers, 36.5 percent cotton, and 11.9 percent nylon, and ThermoWear Vests in black or khaki.

Nikken also sold nutritional supplements and drink mixes that included herbs such as ginseng, valerian root, and camomile, and various vitamins and minerals. Its sleep products included pillows, mattresses, and pads with built-in magnets. Nikken skin care products included cleansers, toners, and lotions, some with herbal extracts. Nikken also provided magnets it claimed prevented mineral buildup inside pipes and decreased any mineral deposits on human skin. In addition, its noncarbon chlorine filter removed chlorine from shower water and also helped decrease any lead, hydrogen sulfide, iron oxide, and sediments. Specially designed handheld metal balls and other self-massage items were sold to help users relieve their stress. Nikken sold blankets with magnets for both household pets and horses. Both ceramic fibers and magnets were used in its Kenko PetPads for pets to rest on. The company also sold nutritional supplements designed just for pets.

Nikken's trademarked SoliTENS unit was the firm's only federally approved medical device and thus required a prescription from a healthcare professional. According to a 1999 company product brochure, 'TENS units have gained increased acceptance by the American medical community over the years and are now acknowledged as effective therapy devices for the relief of aches and discomforts all over the body. TENS stands for Transcutaneous Electrical Nerve Stimulator. Structured like a flattened writing pen, this lightweight instrument emits an electronic pulse that can be directed very specifically at an area that requires treatment, using a set of controls that adjusts for intensity and duration.'

In 1996 Nikken moved into its North American headquarters in Irvine, California, and later expanded to make Irvine the center of its global activities. Nikken in 1999 remained under the leadership of Chairman Isamu Masuda. Another key leader was Toshizo (Tom) Watanabe, who had earned a B.S. degree from Brandeis University, an MBA from Pepperdine University, and studied at Massachusetts Institute of Technology and Tokyo's Keio University. He joined Nikken in 1984 as its director of training, directed the formation of the U.S. subsidiary in 1989, in 1992 became president of Nikken, USA, oversaw the expansion of the firm into several other nations, and in January 1999 became president/CEO of Nikken's worldwide operations.

Nikken hired Advent Communications, headed by Clifton Jolley, PhD, to take care of its public relations. A former writer for Salt Lake City's Deseret News, Jolley advocated the merits of multilevel marketing, speaking at other MLM firms such as Tele-Sales, Inc.

Like other network marketing firms, Nikken relied on its independent distributors to sell their products. John Kalench in 1998 started his Nikken business after promoting multilevel marketing as an author and speaker. In 1991 he had published Being the Best You Can Be in MLM, followed by The Greatest Opportunity in the History of the World in 1992 and 17 Secrets of the Master Prospectors in 1994. Formed in 1987, Kalench's firm, Millionaires in Motion, was described by writer Ana McClellan as 'one of the world's premiere training and educational companies for the network marketing industry.'

Kalench's turning point came in 1994 when his son was born. He realized that his speaking engagements and other business activities left insufficient time for his wife and child. However, it was not until he recovered from a serious illness that he made the decision to join Nikken. In May 1998 he became a distributor and in just seven months reached the Diamond level, the fastest in Nikken's history, according to McClellan.

Kalench's use of modern technology illustrated how network marketers and other business leaders succeeded in the Information Age. 'Technology has become an instrumental force in building a successful network in the new millennium,' said Kalench in the McClellan article. 'We still use large events to bring the family, the unity, the camaraderie, for people to catch the big vision. However, it's technology that allows us to leverage the personal contacts that really make a difference in building an effective team. The Internet, teleconferencing, conference calls, three-way calls have transformed business in the 90s. In building my Nikken network, I've used video-conferencing extensively. ... I have a video-teleconferencing unit right in my home office that allows me to be in different cities. ... When I'm finished ... I walk out of the room, and there are my two boys. I can pick them up, hug them, and finish breakfast. This is freedom.' Other prominent Nikken distributors included Marty Jeffery, the owner of two large Canadian newspapers, and Dave Johnson, a former Amway distributor who reportedly made $260,000 a month with Nikken.

Of course, few Nikken distributors reached such levels of success. Most network marketing distributors, whether in Nikken, Amway, or other firms, made modest incomes from their efforts. To encourage its distributors, Nikken offered many bonuses, including an auto incentive program in which the corporation paid monthly car payments for qualified distributors.

Nikken's training entity, called Team Diamond, organized large meetings for the firm's growing number of distributors. For example, in 1999 some 7,000 Nikken distributors attended a quarterly conference in the Buffalo, New York Convention Center, the largest gathering in the center's 21-year history. Such sales rallies were common among MLM firms.

In the 1990s several athletes and even some sports teams used magnetic devices, including those from Nikken. For example, the Denver Broncos football team purchased Nikken mattresses. Nikken spokesmen included former Miami Dolphins Bob Kuechenberg, Jim Kiick, Nat Moore, and Don Nottingham, and also former St. Louis Cardinals outfielder John Morris and tennis champion Peter Fleming. Dolphins quarterback Dan Marino and professional golfers Bob Murphy, Jim Colbert, and Donna Andrews endorsed Tectonic products made by Nikken rival Magnet Therapy, Inc. of West Palm Beach, Florida

Amway Challenge: 1999

Amway, the world's largest multilevel marketing firm, in May 1999 began selling its own magnetic products, and then the Ada, Michigan firm filed a patent infringement lawsuit against Nikken. Nikken in turn in June sued Amway in the U.S. District Court for the Central District of California. On October 15, 1999 the U.S. District Court, Middle District of Tennessee, Nashville Division, dismissed the Amway suit, while the Nikken suit was still pending at the end of 1999.

According to a Nikken press release, Amway's literature compared its magnets to those made by Nikken. Kendall Cho, Nikken executive vice president, said in the press release that, 'It's obvious to us that Amway sees Nikken as its major competitor in this market.' Dr. Clifton Jolley added that the firm from the beginning had considered the Amway suit 'bizarre,' because Nikken had been selling magnets for many years before Amway even entered that particular market.

In 1999 Nikken signed a multiyear manufacturing contract with Natural Alternatives International, Inc., a public corporation (NASDAQ: NAII) that provided nutritional product design and clinical testing.

Preparing for a Bright Future, Despite the Skeptics

As the 20th century ended and after a long history of magnetism used for health purposes, users and scholars remained divided on the effectiveness of such products. Baylor College of Medicine conducted a double-blind study most often cited by advocates of magnetic healing. Baylor found that magnets provided some relief to 50 individuals with post-polio pain. In the Washington Post of April 19, 1999, Carlos Vallbona, M.D., said, 'Based on our study, there is no question on the efficacy of magnets for the control of pain in the population we studied,' but he cautioned that the study should be repeated before making any general conclusions. Dr. Vallbona and his coauthors also reported in their medical journal article that the 'safety of application of these electromagnetic fields is attested by the World Health Organization. ...'

J.T. Ryaby of Tempe, Arizona's OrthoLogic published a review article about the clinical uses of electromagnetism to heal fractures that began in the 1970s. A National Library of Medicine abstract stated that since the 1970s, 'several technologies have been developed and shown to promote healing in difficult to heal fractures.'

These medical studies did not test Nikken products, but still they added credibility to the whole field of magnetic therapy. With more research underway, the use of magnets for health was discussed at professional meetings, including the First World Congress on Magnetotherapy held in 1996 in London and the Bioelectromagnetic Society in Bologna, Italy, in 1997.

Yet others remained skeptical. James D. Livingston, author and professor at Massachusetts Institute of Technology, agreed magnets were safe, but he also thought they might be a waste of money since more research was needed. 'It remains to be proven,' said Livingston in the Washington Post. 'The overwhelming majority of the claims of magnetic therapy have been either pure hokum or just some form of the power of suggestion, or secondary things, like local warming, and not related to the magnetic field itself.'

Nikken wisely avoided legal difficulties, with the FDA for example, by not claiming its magnets reduced pain and generally being quite careful in its product descriptions. When Nikken Vice-President Larry M. Proffit was interviewed for a 1996 article in the Los Angeles Times, he said, 'we have to be careful,' and thus the company usually shunned publicity. Since Nikken and its public relations firm declined to provide any information for this profile, that company policy to avoid media attention seemed to continue in 2000.

In spite of skepticism among some people, Nikken's future looked bright, as consumer demand seemed to be increasing for not only its magnets but also its other products. More competitors entered the field, and the whole area of alternative healing gained respectability. In addition, the economic opportunities from network marketing offered people new options as thousands lost their jobs from corporate layoffs.

Principal Subsidiaries: Nikken U.S.A. Inc.; Nikken U.K., Ltd.; Nihon Kenko Zoushin Kenkyukai Canada, Ltd.; Nikken de Mexico; Nikken Puerto Rico; Nikken Dominican Republic; Nikken Sweden; Nikken Finland; Nikken Holland; Nikken France; Nikken Germany; Nikken Spain; Nikken Portugal; Nikken Italy; China Nikken (Taiwan); Nikken Hong Kong; Nikken Philippines, Inc.; Nikken Sales Thailand Company, Ltd.

Principal Competitors: BIOflex; Amway Corporation; Magna-Pak Inc.; Magnetic Health Therapy; Homedics Inc.; Magnetherapy; Biomagnetics.

Nikken Global Inc. History

Key Dates:

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