Herbalife

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Herbalife Ltd.

logo
legal form Limited
ISIN KYG4412G1010
founding February 1980
Seat Grand Cayman , Cayman Islands
management Richard P. Goudis, CEO ,
Michael O. Johnson, Chairman
Number of employees 8,300
sales $ 4.427 billion
Branch retail trade
Website www.herbalife.com
As of December 31, 2017

The Herbalife International Inc. legally established in the Cayman Islands and operating headquarters in Los Angeles is a company that diet products, cosmetics and documents by means of which a pyramid scheme resembling network marketing offers.

Herbalife was founded by Mark Hughes in February 1980 and started selling nutritional supplements in the United States. In 1982 the company had sales of $ 2 million and expanded into Canada . In 1986 Herbalife went public. Founder Mark Hughes died in 2000 at the age of 44.

Herbalife has been listed on the New York Stock Exchange since December 15, 2004 under the symbol HLF . Herbalife's annual sales in 2010 were $ 2.7 billion. In 2011 sales rose to 3.455 billion euros, in 2012 to 4.072 billion euros and in 2013 to 4.825 billion euros.

Business activities

Herbalife sells weight loss, nutrition and personal care products through a network of independent distributors. Herbalife is a multi-level marketing company; customers register as members for a small registration fee in order to be able to purchase the products at wholesale prices. If these members bring others into the network, they can receive commissions on the purchases made by these new customers.

Herbalife divides its products into five groups: Weight Management; Nutritional supplement; Energy, exercise and fitness; Cosmetics and body care; as well as literature, advertising and miscellaneous.

As of December 2014, Herbalife promoted and sold more than 150 products in 91 countries.

Products

Herbalife sells weight management products, nutritional supplements, and personal care products . As a provider in the areas of “health, health care, complete nutrition with all micronutrients, combating obesity, muscle building and antiaging”, the company positions itself on the market for wellness products. The products are marketed as "internal nutrition" (nutrient-rich meal replacements, dietary supplements) and "external nutrition" (cosmetics).

Herbalife products bear the Mark Hughes Cellular & Molecular Nutrition Laboratory seal at the Center for Human Nutrition at the University of California, Los Angeles . This university division is sponsored by Herbalife and is intended to a. deal with the confirmation of a positive value for industrial successors to soy proteins , including Herbalife, for human consumption.

distribution

Herbalife's sales system consists of more than 2.2 million independent consultants worldwide (with an annual turnover of EUR 3.455 billion, i.e. approx. EUR 1570 turnover / year / consultant, as of 2011), who are organized in a multi-level marketing system. However, only a small part of them are really active as resellers and reach the minimum turnover in order to even be included on the lowest level of the marketing plan (supervisor), while the majority only buy the products for their own use. At the end of June 2007, 368,062 people were at the supervisor level or higher. The company is present in over 90 countries. The largest sales markets are the USA and Mexico, each accounting for almost 20 percent of total sales.

As with other structured distributors, Herbalife's distribution system is based on the fact that the customers themselves become the sellers of the products. For the sales of the reseller, not only does he himself receive a commission , but also the person who previously recruited him. For such a structure to work, the product margin must be high. The salespeople are independent and only responsible for themselves in their work and time commitment.

Since Herbalife products are consumable products, long-term users are the main target group. The aim of the business is long-term use by customers, which, according to the company, is also due to the fact that a result or result of use can usually only occur after a longer period of use. The first task of a Herbalife partner is accordingly to build up a personal customer base. The reseller wins new prospects for the products; Individual or group presentations should turn interested parties into buyers. In practice there are very different customer bases. According to Herbalife, a number of 20 to 50 deliveries per month is realistic with a corresponding investment of time and a group of regular customers.

Buyers of Herbalife products receive a money-back guarantee on the purchased products. The sales partner himself is a commission agent and can, on the basis of the laws applicable in German-speaking countries for commission sales, return the products that have not been sold to Herbalife. A financial risk due to a lack of sales arises if the sales partner does not adhere to the return solution specified by the manufacturer.

There are various levels of authorization in the Herbalife compensation system. Based on the classification in this system, the discount is determined when the reseller purchases the product. In order to achieve “supervisor status”, the reseller must achieve 4,000 “volume points” within 12 months. These "volume points" are an internal accounting unit for sales by Herbalife dealers and roughly correspond to the respective national currencies. A “consultant” with what is known as “supervisor status”, who has already bought goods worth 4,000 “volume points”, receives a 50 percent discount as a result.

The number of resellers is not restricted by Herbalife specifications, either region or country. The Internet is also used as a sales platform, with several dealers often joining forces.

The American FTC filed a lawsuit in 2014 on suspicion of a pyramid scheme in the distribution of Herbalife products. In 2016, Herbalife and the FTC reached a settlement. Thereafter, Herbalife pledges to repay $ 200 million to buyers and subscribers in its distribution system who were recruited with false promises of quick earnings. However, according to the FTC investigations, half of the product sellers only achieved average revenues of less than $ 5 a month. The few salespeople who made higher incomes did so not by selling the products but by recruiting new employees. Herbalife also committed to converting its distribution system. In the future, the company will have to differentiate between pure end customers and sellers; end customers will no longer be allowed to resell the products. Two thirds of Herbalife's payments to sellers must be demonstrably based on the sale of products. At the same time, Herbalife agreed to pay $ 3 million with the Illinois Attorney's Office , which is investigating the company separately. Herbalife viewed the deal as a success. The FTC spokeswoman denied this, pointing out that although the company could not demonstrate a pyramid scheme, the investigation revealed that its business practices were very problematic.

Nutrition Advisory Board (advisory body for nutritional issues)

Herbalife states that the Nutrition Advisory Board (NAB) is comprised of leading nutrition and health experts who train distributors and provide them with information on the basics of nutrition, physical activity and a healthy lifestyle. The chair is David Heber, professor of medicine and health care at the University of California, Los Angeles. He joined the NAB around the same time Herbalife donated $ 3 million to establish the Mark Hughes Cellular and Molecular Nutrition Laboratory at the Center for Human Nutrition at the University of California (UCLA).

criticism

Overpriced products

In a test of various formula diet products by the magazine Ökotest (2/2002), Herbalife is one of the most expensive products. As a result, some consumer associations have tested Herbalife products as overpriced and, like almost all formula diets, not recommended.

Role of founder Mark Hughes

A business biography of founder Mark Hughes can be found on most Herbalife websites. From his biography - when he was 18 years old, he saw his mother die of harmful weight loss - his motivation to help all overweight people through the development and sale of Herbalife products is derived. The image of the man whose mission it was to "improve people's lives through healthy eating" (Herbalife original sound) does not fit the personal tragedy that the forensic report of Mark Hughes' autopsy suggests: Mark Hughes died when CEO of Herbalife on May 21, 2000 at the age of just 44 years after several days of excessive alcohol (4-day-binge) with existing alcohol dependence, with a blood alcohol level of 2.1 per mille and a toxic concentration of antidepressants .

Illegal Business Practices

On November 23, 2011, Herbalife Belgium was convicted by the Brussels Commercial Court as an illegal pyramid scheme. The plaintiff was the Belgian consumer protection association Test-Aankoop , which objected to several sales practices of the company, including a. that product customers are forced to be advertised as consultants in order to be able to purchase the products at reasonable prices. The Brussels commercial court announced in its judgment that the herbalife system is in contradiction to Belgian law. Under the threat of a fine, the commercial court ordered Herbalife to adjust the business practices complained of within two months. A Belgian appeals court overturned the judgment in 2013. The judges found that the business model was not a pyramid scheme and that it did not violate European consumer protection law.

When the company made a payment of US $ 200 million to the American consumer protection agency, the Federal Trade Commission, for so-called "misrepresentations", the latter stopped investigating the company in July 2016. The agency expects the company to restructure its business model and make salespeople profit from selling the products and no longer recruiting other salespeople.

Health consequences

The German Nutrition Society came to the conclusion that the solution to weight problems could not be found in diet products alone, but rather in long-term changes in eating habits towards a low-fat and high-carbohydrate balanced mixed diet, paired with sufficient exercise.

There is also evidence that Herbalife weight loss products can cause fulminant liver failure that can result in a liver transplant and be fatal. There are documented reports of over 20 patients with liver damage using Herbalife products, in one case resulting in death. If liver damage is suspected or a pre-existing liver disease worsens, use should therefore be stopped immediately. Against the background of the possible risk, it should be noted that the recognized medical database PubMed does not contain any studies on a positive effect of the preparations.

Web links

Individual evidence

  1. ↑ a b Herbalive 2017 Annual Report . accessed on October 2, 2018
  2. ↑ Principal Executive Office, cf. Herbalife: Annual Report 2014 . (PDF) p. 1; accessed on September 30, 2015
  3. ↑ Herbalife International Inc .: Annual Report 2013. (PDF) (No longer available online.) Formerly in the original ; Retrieved June 9, 2014 .  ( Page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice. @1@ 2Template: Dead Link / ir.herbalife.com  
  4. ↑ Stuart Pfeifer: Herbalife analyst lowers target price, citing foreign currency woes (English) . January 22, 2015. Accessed February 10, 2016. 
  5. ↑ Icahn challenges Ackman with 13% Herbalife stake (English) , CNN Money. February 14, 2013. Retrieved February 10, 2016. 
  6. ↑ a b Herbalife Ltd (HLF.N) (English) , Reuters. Retrieved February 10, 2016. 
  7. ↑ SEC-Filing 10-K, certified Herbalife Annual Report (PDF)
  8. ↑ company.herbalife.com
  9. ↑ Stipulation To Entry Of Order For Permanent Injunction And Monetary Judgment . (PDF) Case No. 2: 16-cv-05217, US District Court for the Central District of California, text of the settlement on the FTC website
  10. ^ Lesley Fair: It's no longer business as usual at Herbalife: An inside look at the $ 200 million FTC settlement . In: FTC Business Blog, July 15, 2016
  11. ↑ Herbalife agrees to $ 200M FTC settlement , Nathan Bomey, Kevin McCoy, USA Today , July 17, 2016
  12. ↑ z. E.g .: Formula diets. What should you think of Herbalife products? In: Konsument , issue 11/2003; Retrieved June 7, 2012.
  13. ^ Death and Denial at Herbalife . ( Memento of the original from September 8, 2012 in the web archive archive.today ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. Matthew Heller: The Untold Story of Mark Hughes' public image, Secret Vice and Tragic Destiny . In: Los Angeles Times , February 18, 2001 @1@ 2Template: Webachiv / IABot / www.rickross.com
  14. ↑ Original report by the Belgian consumer protection organization Test-Aankoop ( Memento of the original from July 15, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. dated November 16, 2011. Retrieved September 7, 2012. @1@ 2Template: Webachiv / IABot / www.test-aankoop.be
  15. ^ Translation of the original report into German . Retrieved September 7, 2012.
  16. ↑ Herbalife Wins Dismissal of Belgian 'Pyramid Scheme' Suit. In: bloomberg.com. December 6, 2013, accessed January 20, 2017 .
  17. ↑ This statement costs $ 200 million: "Herbalife is not a pyramid scheme" - stock is rising strongly. In: finanzmarktwelt.de. July 15, 2016. Retrieved January 20, 2017 .
  18. ↑ The business with the extra pounds . In: DGE-aktuell , 12/2002, German Society for Nutrition e. V.
  19. ^ Association between consumption of Herbalife nutritional supplements and acute hepatotoxicity . In: Journal of Hepatology , 2007, 47, pp. 444-446.
  20. ↑ Herbal does not mean innocous. Ten cases of severe hepatotoxity associated with Herbalife products . In: Journal of Hepatology , 2007, 47, pp. 521-526, PMID 17692989 , PMID 17692988
  21. ↑ Jürg Reichen: Herbalife products as the cause of fulminant liver failure . ( Memento from October 18, 2010 in the Internet Archive ; PDF) In: Visceral Medicine of the University of Bern, p. 11
  22. ↑ Lifrarskaði tengdur notkun á Herbalife . In: Læknablaðið , March 2010, pp. 167–172.
  23. ↑ arznei-telegramm , 2008, 39, No. 1