Herbalife is arguably one of the best known supplement brands in the world. This MLM (multi level marketing) company sells products in 95 countries and has millions people working as independent distributors worldwide. Herbalife is obviously doing something right, but it has attracted a lot of criticism over their business model including a recent investigation and fine from the US Federal Trade Commission.
We take an in depth look at Herbalife to find out more.
Herbalife is focused on healthy living. The supplement range is all about health and fitness and targets weight loss, healthy nutrition for the family, nutritional supplements for the athlete, skin care and more. However the most popular range of products is unsurprisingly focused on weight loss and weight maintenance.
These come with a choice of weight loss plan that you can follow while taking the supplements and shakes. You can choose the three day trial pack, the Quickstart program that contains 3 Core products – Formula 1, 2 and 3 plus a herbal tea, the Advanced program – similar but with more products, and finally the Ultimate program that contains additional supplements.
Key to all the weight loss plans are the Core products. The principle Formula 1 supplement is a Shake which you are advised to take everyday either for breakfast or lunch. The shake is available in a variety of flavours such as chocolate, tropical fruit and cappuccino and contains “high quality protein from milk and soy, essential micronutrients and added botanicals and herbs.”
For enhanced weight loss results you are advised to take Formula 1 products – Shakes and protein bars – with Formula 2 Multi vitamin supplements. There is also a protein powder called Formula 3 that you add to your Formula 1 Shakes or simply sprinkle into food for added protein.
If you are following the Quickstart program you also get a herbal tea in your package.
Additional weight loss products include snacks, instant soups and supplements with a specialist function such as Cell Activator, Aloe Concentrate and a caffeine strong fat burner called Thermo Strong.
Herbalife has a wide and complex product range. It is hard to pick through the information to find the right one for you because this is not how it works. The idea is that you go through a Herbalife distributor who will offer you advice and sell you the products. If you like the supplements you can sign up as a Herbalife distributor yourself.
Herbalife has been going an impressively long time. The company was founded in 1980 by an entrepreneur called Mark Hughes who had the far reaching plan of changing the nutritional habits of the world. The first product was a weight loss shake and from the start the Herbalife company was set up using the Direct Selling (MLM) business model.
The successful business obviously did not make Mark Hughes happy. He died in 2000 from an overdose of alcohol and antidepressants but the company has continued to expand and flourish since then.
These days Herbalife is sold across the world with coverage in 95 countries with over 3.3 million people currently working as distributors for the company.
Herbalife is a well known name. The Company sponsors LA Galaxy – David Beckham once played in a shirt endorsed by the company. Cristiano Ronaldo and Lionel Messi are also sponsored by Herbalife, and across the world there is a network of sportspeople and football teams involved, including Spartak Moscow, Club San Luis in Mexico and even the Belgium national football team. Herbalife are the third largest MLM Company in the world.
The backbone of Herbalife is the vast network of distributors. They have a twofold purpose which is to sell Herbalife supplements and get other people to join as distributors.
Being a Herbalife distributor is touted as business opportunity. As the information says;
Working either full or part time to fit your schedule, you can build your own business and sell proven, high-quality products which are not available in the shops. The exclusivity of our products will help you to build a base of long-term customers, who will turn to you for tailored support and advice.
This all sounds good and millions of people have answered the call. However, there has been a lot of criticism levelled at the Herbalife business model.
According to business experts, Herbalife is a pyramid selling scheme, “causing enormous harm” to the people who sign up as sellers for the company. And although Herbalife distributors defend their position, it is important to note that in 2015 the top 1 percent of Herbalife 545,160 US members. made almost 90 percent of the earnings with the remaining 10% shared out between the rest. It seems that however hard you work, you are never going to get to the top.
A business is defined as a pyramid scheme when profits are derived from recruiting sales people rather than selling the products. These endless chains of salespeople, or downlines, are the lifeblood of any MLM business. New distributors pay to receive products and training packs but in a saturated market it can be impossible to make sales. When this happens the distributors’ only option is to sign up new people as distributors and the MLM turns into pyramid selling with only the people at the top of the pyramid making any money.
See our previous investigation into pyramid selling and diet pill marketing schemes.
Many business watchers and experts want to make Multi Level Marketing illegal because in truth the distinctions between MLM and Pyramid Selling can be hard to define. The Federal Trade Commission has been investigating Herbalife for more than two years on charges that the multilevel marketing company is in fact a pyramid scheme, an inherent fraud in which salespeople are primarily incentivised to recruit others into the scam. In July 2016 the company was been forced to pay a fine of $200 million.
With annual profits estimated at $4.5 billion a year, this fine seems unlikely to touch Herbalife. In addition Herbalife advisors are at the highest level of US politics. Democrats Madeleine Albright and Hilary Rosen are both Herbalife Advisors. The company seems untouchable.
Even the people involved in other MLM businesses are critical of the Herbalife business model. Charles Munger, The vice chairman of the US based MLM Pampered Chef, has been quoted as saying,
It’s a disgusting company that lures poor people into buying product with too much hope it’ll pay off.
Herbalife does not actually release any data on their retail sales. Instead, the company reveals almost three quarters of Herbalife distributors are customers who only signed up to get products at discount for themselves. Herbalife claim that many customers are not interested in developing a business.
Looking at the explanation on the Herbalife website about how “you can build your own business and sell proven, high-quality products which are not available in the shops” we find that hard to believe. UK consumer group Pyramid Scheme Alert is not convinced either.
“It’s a weak argument,” said spokesman Robert Fitzpatrick in an interview with the Daily Telegraph, who pointed out that Herbalife products were often available online for a knock-down price. “I fear the vast majority are just failed distributors,”
In view of all the controversy surrounding Herbalife, it is easy to lose sight of the fact that this is a supplement company selling weight loss products. Do they work? Maybe. Many customers (distributors) claim they have lost weight. Protein Shakes can be effective for some slimmers and there is an extensive supplement range that addresses numerous issues. But are Herbalife products any better than those available in the shops?
There are thousands of weight loss products on the market that you can just go out and buy in the conventional way. We just cannot see why you should want to bother with entering into rigmarole with Herbalife.
With Herbalife you cannot even access a price list. Instead you have to enter into a complicated deal with either the company or a distributor.
Here’s what the buying information says:
At Herbalife, we value the relationship our Members build with their customers. That is why we always recommend customers take advantage of the knowledge, support and encouragement of their personal Member. This relationship is the reason we do not publish a price list online. Your Member will work with you to competitively price your product choices.
“Competitively price your product choices?” Does this mean the prices are negotiable depending on your income and how much you are willing to spend? We are talking about buying a protein Shake here not shopping in a third world market for a carpet.
The conclusion is simple and unequivocal. Stay away from Herbalife. You will be extremely unlikely to make a living as a distributor for this company and even people who are involved with other MLM companies consider that Herbalife is a rip off for distributors and customers alike. Herbalife is a powerful company so is unlikely to be damaged by the FTC investigation.
In our opinion the supplements are nothing special and despite all the hype the products on sale from Herbalife are unproven and unbacked by any research or science. Herbalife is based on hype alone and a persuasive sales technique. Don’t get suckered into it!
Disclaimer: Our reviews and investigations are based on extensive research from the information publicly available to us and consumers at the time of first publishing the post. Information is based on our personal opinion and whilst we endeavour to ensure information is up-to-date, manufacturers do from time to time change their products and future research may disagree with our findings. If you feel any of the information is inaccurate, please contact us and we will review the information provided.