Blueberries, Gold Bond, Ovaltine and Obesity: The Makings for a Very Good Story (Part 2)
This is the second article in a series. To read the first article, click here: www.benzinga.com/node/2613801. In the previous article, we were left with the question of why a retiree who had built Gold Bond and Ovaltine into nationally-recognized brands with millions of dollars of annual sales would leave retirement to join a small laboratory company specializing in botanicals while paradoxically donating $1 million of his personal funds for accepting the job.
Well, this is where blueberries come into the story. Blueberries are healthy -- that much everyone knows -- but precisely why they are healthy is something far more complicated to explain. What are the actual elements of a blueberry that are healthy, on a chemical level? This question is the foundation of an industry called nutraceuticals- the business of selling the health-giving and medicinally-beneficial substances that occur naturally in nature. Chromadex (OTC: CDXC) is a nutraceutical business that specializes in extracting and testing the healthy substances in ordinary food. The company focuses on blueberries but actually has an entire business division that maintains the definitive standards for almost every other nutraceutical in the world.
Dr. Phillip Frost taught Jeff Himmel (the millionaire retiree who would soon donate a significant portion of his personal savings to go back to work) about Chromadex. Dr. Frost knew that a basic understanding of its business was necessary before Himmel could understand its more exciting possibilities.
He began by explaining that Chromadex, at its core, provides quality assurance and reference standards for institutions doing research on phytochemicals, or the biologically active compounds found in plants. The company maintains a published manual containing detailed specifications for almost every phytochemical in the world. Chromadex publishes this manual and also provides testing for the phytochemicals listed inside. Every year, dozens of businesses, colleges, and laboratories pay Chromadex to test the authenticity, purity, and consistency of their phytochemicals. Likewise, they sometimes pay Chromadex to produce the substances themselves. This business division of quality assurance and reference standards is Chromadex's legacy. It has been operating out of a large laboratory in Boulder, Colorado for many years and generates plenty of cash flow for the business' other operations.
The sales department for Chromadex is located in Irvine, California. From a standard two-story business complex, Chromadex's employees in Irvine sell testing services, phytochemicals, and custom solutions for various clients in the nutraceutical industry. Universities, government agencies, institutions, and laboratories all rely on Chromadex for expertise in these areas. Chromadex actually defines quality standards for much of the industry itself, and so is known for being the highest-purity provider for many phytochemicals.
Cheating in the Chemical Industry
In fact, Chromadex was interviewed on Dateline about cheating and malpractice in the chemical industry. The TV episode came about when there was a vitamin on the market that was inexplicably causing hair loss. Dateline called Chromadex and asked for a an independent quality check on the vitamin. The vitamin had already received approval from another testing company, but Dateline wanted to see if Chromadex might find anything different. Chromadex completed its testing and found over 1,000% more than the recommended dosage of one of the vitamin's compounds. Moreover, Chromadex exposed the other testing company for rubber-stamping the approval without actually conducting real tests.
As Dr. Frost taught Himmel, so long as it is a phytochemical, Chromadex probably tests its purity and defines the standards for its production. (If you enjoy reading over 350 pages of technical specifications, you can see Chromadex's phytochemical standards here: https://chromadex.com/wpresources/Upload/Files/Cat2011Complete.pdf
For Himmel, this legacy division of the business was fine, but working at a laboratory would not have enticed him to leave retirement. What did entice him to leave was something else- something about blueberries and information flow.
Blueberries. Flow. The Good Stuff.
Put yourself in the shoes of Himmel. You have the opportunity to work at a company that is the nationwide leader in phytochemical standards. What will you learn while working at this company? Certainly, you will learn plenty about testing and quality assurance, but who wants to leave retirement for a job as a chemical tester?
Not Himmel. Dr. Frost paused his story and let Himmel interject. "What's the good stuff, Phil? When does this get exciting?"
"OK. Let me tell you," Dr. Frost replied.
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