Herbalife has been the center of a great deal of controversy for many years now. You’ll hear many mixed things from their distributors and customers about their health supplements, products and business model.
So what’s true and what’s not about this company?
It’s hard to even tell if this global nutrition company is an MLM or a pyramid scheme… isn’t it?
For years this weight loss company has been recruiting distributors, but do any of them actually make money, or is Herbalife itself the only one benefiting?
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Table of Contents
So What Is Herbalife?
Herbalife is basically a direct-selling company. In 2019, Herbalife’s global net sales amounting to approximately 4.88 billion U.S. dollars.
You won’t be able to find their protein shakes or nutritional supplements on the shelves of any stores.
The only way that you’ll be able to purchase these products is from an Herbalife distributor. You can learn more about the products on their website, and get the prices but you cannot purchase them.
That’s great for distributors.
With a network of 3.7 million “members” in about 90 countries Herbalife is a pretty big company.
How Does Herbalife Work?
As a member or distributor, you’ll buy Herbalife products in bulk. Then you could sell them or use them.
Or do both.
You can find a distributor on their website if you don’t know anyone.
How Do You Make Money?
Here’s where it gets interesting.
They pay based on a “multi-level marketing model,”
So what does this mean exactly?
Well, it means that your compensation doesn’t come from selling Herbalife products alone. You can get bonuses from the sales of new members that you recruit and that your recruits recruit as well. :
But you’ll need to sell an awful lot of Herbalife protein shakes to make any type of money. And don’t forget you have to buy the products first in order to sell them.
There lies the problem.
Basically, you’re limited to how much you can make based on how much you can purchase.
But not only that.
There’s a risk of buying too much product and not being able to sell it.
You’ll have 12 months to return the products that you haven’t opened from the time that you purchased them.
So what is their compensation plan?
See the image below.
Distributors aren’t making much from the sales of these products. Of course the more you sell the more you’ll make.
When you reach a certain number of volume points you’ll be able to move up to the next level where you’ll make a greater commission from your downline, but your retail commission doesn’t change.
You accumulate volume points when you or your downline order products. So the more you order or downline orders the more volume points that you get.
This will help you to move to the next level.
What Are Herbalife Products?
Herbalife Nutrition’s products include weight-loss and protein shakes. They have protein bars, teas, aloes, vitamins, and sports hydration, energy, and personal care products as well.
The product claims to change people’s lives.
This is claimed to be achieved by the products targeting your body’s cognitive weaknesses.
These cognitive weaknesses are one subject of debate with Herbalife.
Herbalife encourages social gatherings calling this group “nutrition clubs”. At these gatherings, members will try the shakes and discuss healthy lifestyles.
But are these gathers really just a way grow their business by making people around the world feel as if this is the only way to get healthy.
Herbalife claims that these nutrition clubs help people who would normally eat from a vending-machine and consume fast food. That they help show them healthy choices and support them with positive reinforcement.
But are Herbalife products overpriced?
Do People Lose Weight With Herbalife?
Herbalife meal replacement shakes do help you lose weight.
But are no different than the many other meal replacement shakes on the market today.
You’ll consume less calories by feeling fuller for longer.
You use these healthy shakes to replace one or two meals.
The research behind Herbalife weight loss products is certainly lacking for the product claims of it being able to prevent weight gain over several years.
Is Herbalife Legit?
Is Herbalife tricking people who don’t have the funds to buy products because they’re selling them a pipe dream?
MLM’s are often the center of great debate. But some are looked at as a scam more so than others.
While others teeter on being an illegal pyramid scheme.
So what is Herbalife?
It’s difficult to answer the question of whether or not Herbalife is legit, a scam or a pyramid scheme.
so, let’s first take a look at some of the drama that Herbalife has been part of over the past few years.
In 2012 when Herbalife’s president, Des Walsh was asked by hedge-fund manager, David Einhorn, “how many sales there were outside of the companies network”? And Mr. Walsh responded with this,
As you could imagine David Einhorn was enraged. And shortly after Bill Ackman, who is the head of the hedge fund Pershing Square bet $1 billion dollars against Herbalife. He shortened its stock in late 2012.
Herbalife CEO, Michael Johnson, decided to fight back. He called Ackman’s statements false and misleading.
Then Carl Icahn jumped in to call Ackman a liar and that his claims were complete bullshit.
The worst of it occurred in March when there was a front-page story in The New York Times. This story revealed about Ackman.
Ackman had been lobbying public officials and even contributed funds to anti-Herbalife advocacy groups. Herbalife officials said that this was a lie only for them to publically come out two days later admitting that they were being investigated by the Federal Trade Commission or FTC.
Ackman has even gone as far as to say that he is convinced that Herbalife is a global pyramid scheme. And believes it’s a criminal operation.”
Herbalife’s chief financial officer, John DeSimone, responded to this statement by saying, “I am 100 percent convinced Bill Ackman is wrong. I think he has gone beyond the legitimate role short sellers play and crossed an ethical boundary.”
Then in 2016 Herbalife was forced to pay $200 Million dollars for ‘unfair and deceptive practices’ and had to restructure its US operations. This was following a two-year investigation.
Oh, but it doesn’t stop there.
Why Is Herbalife So Bad?
Herbalife has been around for nearly two decades. And have been the subject of many is from being a scam, a pyramid scheme, trouble with the FTC, paying millions and having to restructure its United States operations.
The FTC Chairwoman, Edith Ramirez has said that Herbalife has sold people on a false promise by exaggerating their claims to become rich selling nutritional supplements.
And today Carl Ichan is selling back all of his Herbalife stocks back to them for $600 Million dollars.
Why would he do this after the big showdown he had with Bill Ackman a few years back?
Who Is Bill Ackman?
Bill Ackman the head of the hedge fund Pershing Square played a controversial role in many of Herbalife’s exposures to their potential misleadings.
Both Ackman and Herbalife spent 2 years battling each other.
It all started with Ackman betting $1 Billion dollars that the stock price for Herbalife would crash and talking about how Herbalife doesn’t offer their members a real way to make money.
This was the beginning of the outing of how Herbalife has been deceiving their recruits.
Herbalife claimed that Ackman said these things because Perishing Square investors would profit from Herbalife’s collapses on Wall Street.
Why Herbalife Is Banned In The US?
Herbalife agreed to “fundamentally restructure” its business and pay a $200 million fine as part of a 2016 settlement with the U.S. Federal Trade Commission (FTC) following accusations of it being a pyramid scheme. In November 2017, Ackman’s hedge fund closed out its short position in Herbalife.
Concurrently, plant sources of ephedrine were removed from Herbalife products in 2002 after several U.S. states banned supplements containing such herbs. In July 2016, Herbalife agreed to change its business model and pay $200 million to its distributors in a settlement with the FTC.
Is Herbalife An MLM?
Herbalife is an MLM, but for years they have been considered borderline Pyramid by the FTC. And a few people and have been the center of a great deal of controversy.
As with most MLMs Herbalife is structured to make money by signing people up.
But Herbalife borderlines being a scam because of the way that they present their company, the promises they make to people, and the amount of money you can actually make by joining them as a distributor.
You won’t make money selling their products, at least not anything that worthwhile.
Just look at what Sharon Shea, a former Herbalife distributor had to say,
Members are asked to get their friends involved and become distributors, but eventually, your efforts will dry up and there’s nobody left.
The compensation plan isn’t designed to make money, but rather the business is designed to keep you motivated to keep their members using their products and buying more.
You keep losing money while they continue to make it.
Why Is A Pyramid Scheme Illegal?
Pyramids are designed for early investors to make money, but only for a short period of time before they dry up.
They are designed to fail, but that’s not how they present themselves. They give you false expectations for something that they know will dry up.
These aren’t just a waste of your time, they are also a big waste of your money.
It’s sad how they prey on your hopes and dreams of getting.
And in my opinion, it seems like there are many MLM companies that borderline do the same, such as Herbalife does to their members.
Is Herbalife A Pyramid Scheme?
John Oliver exposed Herbalife as a Pyramid Scheme.
Claiming that the business model for this “MLM” company is that you make money off of the people that join and then making a commission from their sales.
And he isn’t wrong.
If you take a look at Herbalife’s incentive structure you can see exactly what he’s talking about.
Some MLM companies are really good at hiding the fact that they are not a good company.
They get big names to endorse them so that you believe they are worthy. All the while they are structured in plain sight for who they really are.
This is the definition of pyramid schemes.
The truth is that 89% of the Herbalife distributors will not earn a penny from the company.
Herbalife, has even been declared as an illegal scheme by Commercial Court in Brussels, Belgium. This was based on Herbalife’s inability to show it’s retail customer base.
Most pyramid cases are easy to spot. They are usually structured with a chain-letter-like arrangement. They ask for new recruits to pay cash upfront in the hopes of making money from your downstream recruits.
This is manipulative and against the law.
Sounds very similar to that of Herbalife, doesn’t it?
Generally, most multi-level marketing companies require up-front payments for products.
But if they are not a scam then you’d be compensated for your independent sales and these retail sales would be tracked.
There are a lot of gray areas when it comes to determining a MLM from a pyramid scheme. It’s in these gray areas that fraud is often camouflaged within established companies because they don’t dry up and they continue to commit fraud and remain in business.
That’s Herbalife’s structure. They’ve been in business for nearly 40 years.
They’ve adapted but haven’t really changed much.
Although after 2014 when they were forced to change the structure of the way that they pay their salespeople.
There are some Herbalife recruits that have received unrealistic promotional materials from top distributors in the past. Videos from a member named Doran Andry where he is seen driving a red Ferrari. He talks about how he’s making close to $100K a month selling Herbalife products.
This was a huge embellishment.
When Herbalife disclosed their financials after this video started circulating it was proven that this video was a lie.
The company said in 2013, that only 704 U.S. members made more than $100,000 A YEAR.
Not a month.
The truth is that a majority of their MLM distributors make less than a few hundred dollars.
And let’s not forget about member expenses.
Yes in order to remain active you need to purchase products.
But the part of Herbalife that gets most worked up is their nutrition club.
This club is not only expensive to attend, but it is designed to recruit.
But that’s not how they market it.
But they are designed to recruit low-income distributors.
These recruiting venues for Herbalife are all over the world. Herbalife reports that they have a substantial increase in sales from these nutrition clubs.
And they have been thought to be drug laundering in Mexico and Venezuela back in 2013 by third-party investigators. However, no truth came from these claims.
Is there A Lawsuit Against Herbalife?
They have had many lawsuits against them. With their most recent one being this year.
Just when you thought things were looking up for them.
They bribed Chinese officials for the third time within just four years.
This time it cost them $123 million dollars to settle these charges with the United States government.
This indictment and settlement came just a year after Herbalife was forced to pay the SEC $20 million for misleading investors with its China business model.
This came after Herbalife CEO Rich Goudis’s audio recording was revealed where he advised an employee to ignore expense account limits in China.
These are just some of the recent lawsuits.
Pros & Cons For Herbalife
Meal replacement shakes are easy and convenient.
The Herbalife diet is designed for busy people who want to lose weight without worrying about what to make for dinner.
It’s quick and easy to make the shake. All you have to do is mix 2 scoops of powder with 8 ounces of nonfat milk or put it in the blender with ice and fruit to make a smoothie.
Soy-based shakes may be good for your heart
Soy protein isolate is the main ingredient in most of the Herbalife meal replacement shakes.
This does limit who is able to take this product.
Research suggests that consuming 50 grams of soy protein per day helps to lower cholesterol levels and reduces your risk of heart disease.
Drinking two Herbalife meal replacement shakes a day will only give you 18 grams.
A soy-free, dairy-free formula is available
Many people have allergies to soy, so Herbalife offers a soy-free and dairy-free alternative.
These shakes are made from pea, rice, and sesame proteins. And they are GMO-free.
There’s no real way to make money
This company has been in trouble multiple times because they make big promosies that they are unable to deliver on. No matter how many sales members make the only way to earn an income is by recruiting people.
If you’re looking for a healthy alternative these shakes are not it
Herbalife meal replacement shakes contain highly processed ingredients.
Just look at some of these ingredients protein isolates, sugars, gums, fibers, synthetic vitamins, artificial flavors, and emulsifiers.
The sugar content alone makes this an unhealthy choice. With only two servings of a Herbalife shake, you’ll have 18 grams of added sugar.
The goal of a healthy diet is to eat less processed foods, and more high-quality proteins, fruits, vegetables, whole grains, and healthy fats.
Could make you hungry
Herbalife shakes are marketed as meal replacement shakes. But they lack the right amount of calories to be a meal.
So you’re left feeling hungry throughout the day.
You can add fruits, protein, and fat to help increase the calorie, fiber, and protein to help keep you satisfied.
It can get expensive
Herbalife isn’t cheap. You’ll pay $40 for 30 servings of Herbalife meal replacement mix.
And they recommended that you drink two shakes per day.
So you’ll need to buy two containers which ends up costing you $80 per month for just the shakes.
This isn’t including the supplements that they want you to take.
They justify this by saying that you’ll save money on groceries because it’s replacing your meals.
But if you need to add additional things to keep you full how much are you really saving?
Herbal supplements are said to cause liver damage
Several supplements contain a bunch of ingredients that aren’t regulated by the government.
So the effectiveness and quality is unknown.
There have been a bunch of reports that suggest Herbalife supplements have been the cause of liver damage.
Some Herbalife products have been said to be contaminated with an overgrowth of the bacteria B. subtilis.
This bacteria is also linked to liver damage.
Herbalife isn’t the only supplement that contains these ingredients. You can find them with many over-the-counter medications and supplements.
Herbalife MLM company borderlines as a scam. Their main goal is to get their distributors to continue purchasing products and getting new recruits.
This company has been into some shady things in its 40 years as a company.
They are structured to look like an MLM, but as with many MLM companies they teeter on the pyramid side working in the gray area where it’s difficult to classify them as one or the other.
However, a majority of people, members, distributors and organizations have come out to speak against Herbalife company.
But even giving Herbalife the benefit of the doubt for past mistakes, and being forced to change the way that they word their promises just this year they got themselves into trouble with the FTC.
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