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Herbalife and the billion-dollar fitness industry

Herbalife is a nutrition MLM, specializing in meal replacement shakes and fitness supplements.

They’ve dodged a few pyramid scheme allegations, but they’re still one of the heavy-hitters in MLM.

Even have Cristiano Ronaldo on the squad.

Does this mean I am on board? Enter my buddy Brad:

You watch the whole thing? Good.

Dan and Brad schedule 45 minutes for each call, so only schedule if you’re serious:







Understand?

Either way, I still stand behind my original Herbalife review, even though I feel there is a better way to kill your day job:

Herbalife was founded in 1980 by Mark Hughes, a man whose formal education ended in the ninth grade.  

Attaining tremendous success after just a few short years he was sued by several governmental agencies, which would not be the last of legal issues for the company.

Mr. Hughes is famous for three things:

  1. Founding Herbalife and making a fortune.
  2.  Famously replying to accusing senators: “If they’re such experts, then why are they fat?” (1) when the safety of his diet products was questioned.
  3. Dying at the young age of 44 from a toxic mix of alcohol and antidepressants.

Despite continuous legal troubles over the years, Herbalife has continued to thrive.

As you can see from the trends graph below, online interest in Herbalife hummed along predictably stable for eight years.  From 2004, when data was first collected, to 2012, interest was healthy with the occasional spike.

Then starting in 2012 interest began to rise continuously:

For most companies, this would be welcome evidence of increased exposure for their brand.  But for Herbalife, it’s very bad news.  You see, starting in 2011 things started to turn ugly for this company.  

That’s when tiny metal shards from a broken screen were found in their most popular product, Formula 1 (2).

The following year, hedge fund manager William A. Ackman made a bet against Herbalife stock, to the tune of a billion dollars.  His hedge fund will stand to lose billions unless Herbalife stock goes down significantly.

Mr. Ackerman has since proceeded to launch an all-out attack on the company, seemingly trying to bring it down.  Many are questioning his motives (3), which seem to be connected to his hedge fund’s vitality.

Products

Herbalife has made its billions selling nutrition and weight-loss products in more than 90 countries.  What makes these products sell in a market that’s so cutthroat competitive?

It’s a number of things.  The products are backed by science, supported by high-profile partnerships, and distributed by a well-trained sales force.  And 25 years in business means the products themselves can’t be all that bad.

From targeted nutrition lines (“children’s health” or “digestive health”) and weight management programs to “outer nutrition” (skin care), Herbalife covers a product range wide enough to catch anyone in its net.

Perhaps benefiting from its familiar brand name recognition, Herbalife has managed to capitalize on the growing self-care health movement, the long-term nutritional supplement craze that first brought them fame and fortune, and the nutrition-based form of weight-loss system people now prefer.

Selecting one product as a representative, let’s take Formula 1 Healthy Meal Nutritional Shake Mix.  This is part of the weight management line and claims to support metabolic function at the cellular level.

The nutritional label is impressively covered with reassuring “heart-smart” icons.  These denote the product’s high-protein soy ingredient, which delivers 25 grams of protein per serving.  Also included in the shake are 21 vitamins and minerals, herbs, fiber, and anti-oxidants.  To top it all off, the label mentions that clinical studies have shown this sort of meal replacement shake is effective for managing weight along with moderate exercise.

This randomly selected product more than passes the integrity and quality test for most consumers.  The ingredients are right in keeping with today’s nutritional trends and modern scientific knowledge.

Compensation Plan

Aside from the obvious brand recognition you get by choosing to go with Herbalife for your business opportunity, you also get a nice low buy-in to start.  Here are the two Herbalife Member Pack (HMP) options:

  1. Full HMP ($94.10 USD + tax & shipping) contains full-sized products.
  2. Mini HMP ($60.70 USD + tax & shipping) contains sample-sized products

Both HMPs also contain materials to get started as well as products.  Other highlights include:

  • no minimum purchases (no required Auto-Ship)
  • no sales/promo purchases required
  • 90-day money-back guarantee on your HMP
  • 100% refund on purchased but unsold product from the last 12 months if you quit

Members do not earn any compensation for recruiting.  They do earn commission on their downline sales, however.  The company gives full disclosure about Member earnings, citing that 89% join just to get product discounts rather than earn income.  As for huge income, 31 people in 2014 achieved rank where they were earning six figures (4).

Starting out as a Distributor, you get a 25% discount on products.  You may sell them for profit.  You must pass through three more levels and your discount increase.  Eventually you get royalty overrides.  Once you make it to Supervisor level, you begin earning downline commissions.

Once you’re a Supervisor, you get:

  • 50% discount
  • up to 5% commissions on downline sales on levels 1-3
  • downline commission rates up to 25% as you move up in ranks.

Recap

Herbalife has survived a lot: a founder’s death from pills doesn’t bode well for any company, much less a nutritional supplement company.  They’ve also weathered many storms regarding pyramid scheme accusations and the earlier-mentioned safety issues in 2011.

But the final blow could come soon, with William Ackerman’s $1 billion dollar bet that Herbalife will fail. He seems to be doing everything in his power to bring down the company. And since he’s insanely rich, that power is considerable.

It’s an interesting time to be watching this company, but for Herbalife’s sake let’s hope the public doesn’t forget the integrity of the products and the business opportunity as well.

Does that mean you should be gung-ho on distributorship with these guys?

Look, they’re doing some things right. I actually take a daily protein shake, and understand the value of supplementation.

So, if you like their products…great. Use them.

It’s not the best way to kill your day job. There are better ways.

Peddling shakes on your Facebook is played out. Trust me, your family and friends won’t envy you.

Just rarely works anymore, which is why MLM success rates are laughable.

It’s not Herbalife’s fault (or Advocare, Isagenix or Tru Vision‘s, for that matter)…

…it’s more of an industry plague.

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4 comments… add one
  • Prof. Dr. Amaresh Kumar

    Really I enjoyed my very first STS Session of Herbalife and got to know that it is world’s best Nutritional Supplements for the people to gain money along with the health. World’s good Sports Nutritional Supplements. In case any one need please contact me on my e-mail : dramaresh@sportslawindia.info or Call me on my cell : +91 8826010669.

    • Jeremy Page

      Oh boy. The comment spam. Another reason why I addressed the low barrier of entry phenomenon on my recent MLM post.

  • Wildher

    Good review, very clear and profesional. As Herbalife distributor thanks!!

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