Wednesday, August 18, 2004

'Smiling Bob' firm cutting up to 800

Business plan will be changed

By James McNair
Enquirer staff writer

[IMAGE] Steve Warshak, founder and owner of Berkeley Premium Nutraceuticals.
(Enquirer file photo)
Berkeley Premium Nutraceuticals, the Forest Park company known for its herbal sexual aids and weight-loss pills, said Tuesday that it is laying off 700 to 800 employees, or about half its work force, in a reorganization that will eliminate credit-card billing practices that have generated thousands of consumer complaints.

The layoffs began Monday and continued Tuesday at Berkeley operations in Forest Park and Blue Ash. Berkeley founder and owner Steve Warshak would not say how many employees have been discharged so far, but said the layoffs will be complete in 60 days.

The job cuts were prompted by changes in the company's business plan, Warshak said. Berkeley, the parent of several operating companies dating back to 2001, will expand from telephone and Internet sales into sales at traditional retail outlets. The company said it has discontinued an auto-renewal program that has angered consumers who were billed for a second month's supply of products without their consent.

The company: Berkeley Premium Nutraceuticals. Subsidiaries: LifeKey Inc., Warner Health Care, Wagner Pharmaceuticals, Boland Naturals.
Headquarters: Forest Park.
Owner, chief executive: Steven Warshak.
Pre-layoff workforce: About 1,500.
Annual revenue: $100 million in 2003.
Products: Include herbal supplements designed to enhance sexual performance in men and women, lower cholesterol and improve energy levels and vision.
Source: Berkeley Premium Nutraceuticals

"We need to manage our growth in accordance with the strong demand for our brands and are therefore preparing for a national retail launch, which diminishes our need for such a large, internal sales force at this time," Warshak said Tuesday.

"Without the (auto-renewal) program, there's a lot less shipping, data entry and customer care."

The public's appetite for Berkeley's products, including its controversial Enzyte erection enlargement pill promoted on TV by a character named Smiling Bob, has made Berkeley one of Greater Cincinnati's fastest-growing companies.

In February, it employed 800 people. By mid-July, the work force was up to 1,500. Warshak talks proudly of employees who helped him build Berkeley from scratch into a national enterprise with a $26 million payroll and approaching $250 million a year in sales.

But Berkeley has taken a pounding on the legal and consumer-watchdog front. Berkeley's products have accounted for about 2,000 complaints received by the Cincinnati Better Business Bureau in 2004, about a third of the agency's workload. Creditors, including many media outlets that run Berkeley's ads, have filed a long string of lawsuits. One Enzyte customer filed a class-action suit against Berkeley, claiming that the company failed to honor its refund policy when the product failed to deliver as promised.

"Without question, we had growing pains, and we work very hard to work through them," Warshak said. "We put a lot of our dollars back into the company and build infrastructure to be here the next 30 to 40 years."

Those growth plans, however, don't include half of the employees on board in July. Lucius Farris, a Golf Manor resident who said he had worked six months as a Berkeley customer-care representative, said he was laid off Tuesday afternoon.

"They started pulling people individually into a private office and said, 'You're out,' real quiet-like," Farris said. "They didn't give us any information why."

An undetermined number of temporary employees were affected, too.

"We just got the call that they were changing their business model," said Anne Day, a branch manager for Adecco Employment Services in Fairfield.

On TV and Web sites, Berkeley sells about a dozen products for female sexual arousal, weight management, energy loss, insomnia and other conditions. Its practice of automatically sending products before the end of a 30-day free trial period, however, drew a steady stream of complaints from customers whose credit cards were billed for a second month's supply. Warshak said product was shipped and customers billed to ensure an uninterrupted daily regimen.

Warshak downplayed the impact on laid-off employees.

"Just as General Motors would discontinue a car brand, those engineers and others who worked on that brand would not be part of General Motors anymore," he said.

Told of Tuesday's layoffs, a Berkeley sales representative braced for the worst before heading to work for his midnight shift.

"There's no way I'm going to make it through this, I just know," he said on the condition his name not be printed. "I would lose my house. The job market's poor."


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