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Is HerbaLife an MLM Scam?

By Edited Dec 27, 2015 0 2

Most people have heard of HerbaLife by now, the company that sells vitamins, nutritional supplements, weight loss products, power bars, herbs, health shakes, and the like. HerbaLife does not operate like a traditional company, where it has a brick-and-mortar store that sells its products. Also, HerbaLife does not distribute its products through local health or grocery stores.

Instead, HerbaLife relies on private distributors (sales people) in order to sell its products. These distributors are recruited from within; distributors already working for HerbaLife will seek out potential new hires and train them. This additional effort pays off for the existing distributors because they make a commission from the sales of their new hires. When those new hires train new distributors later on, their sponsor makes a commission from the sales of the new hires as well. Thus, a pyramid-based earnings platform is set in place, with the distributor who is placed highest on this pyramid earning the most residual income. Such an earnings schematic is also known as multi-level-marketing (MLM), wherein the main objective of the business is not so much the sale of its product to end users, but rather the recruitment of others into the organization.

HerbaLife was founded in 1980 by the charismatic Mark Hughes. This same Mark Hughes would later be found dead at age 44, the cause of his death uncertain but highly rumored to be a drug overdose. In his wake, Mark would leave a company that has now grown to over 1.8 million distributors in over 66 countries. HerbaLife is even listed on the New York Stock Exchange under the ticker HLF. The company reports gross annual sales in excess of $3.5 billion.

Some HerbaLife distributors claim that new recruits can make some rather amazing earnings by selling HerbaLife products. For example, HerbaLife signs and placards along many roads will advertise that one can make over $1,500/week for part-time work, and over $5,500/week for full-time work. However, is this really possible?

What HerbaLife does not state is that only the top 1% of its distributors make 85% of the gross sales. Most of these top distributors are from the "first generation" of distributors- in essence, those people who were with the company in its starting days. The remaining 99% of HerbaLife distributors joined the company much later on. These remaining 99% of HerbaLife distributors make the company's remaining 15% gross sales.

Crunching the numbers, that means that, of the 1,782,000 (which is 99% of 1.8 million) HerbaLife distributors in existence, and the $525,000,000 (which is 15% of $3.5 billion) in gross sales allotted to them, one obtains a gross annual sale amount of $294 per distributor.

Yes, that's $294.

Of course, that $294 is not net profit earnings either. The distributor has to buy HerbaLife product, for starters. There is also the initial $220 fee that it costs to sign up for the HerbaLife program, which consists of an enrollment fee, introductory product packs, and some personal use products.

Some people might argue that many new distributors are not enthusiastic or lack the ingenuity to make the HerbaLife program work for them. In some instances, that may indeed be the case. However, the numerous reports from ex-HerbaLife distributors about not being able to contact their sponsors, not getting sufficient support, or not getting their money back from the company cannot all be lies. Inputting the keyword "HerbaLife" into the Google search engine brings up "scam" as the first keyword suggestion. While HerbaLife does encourage its distributors to attend regular meetings in order to become better "trained", most of this training is actually a pep rally to invigorate the members who have rapidly become cynical and/or disillusioned with HerbaLife's promise of earnings and career advancement.

Even if HerbaLife was a completely clean and legitimate business, there are still other problems with this company:

Market Saturation. HerbaLife may have had a unique product brand when it first started, but vitamins and nutritional supplements can be found in every grocery store now. There is simply no reason why the average consumer would purchase HerbaLife products over other commercially available health products, especially when those other health products are priced 30% less than the HerbaLife products.

Greed. HerbaLife distributors will go out of their way to recruit others, leading to the criticism that HerbaLife is more interested in MLM pyramid scheme recruitment than in selling health supplements. But when every new recruit means more residual income for his or her sponsor, as well as more money for HerbaLife itself, how can the distributors be blamed?

Scandal. There is the well-known fact that HerbaLife has had numerous problems with regulatory agencies such as the FDA, to the point of being openly sued. The company has also been sued for negligence regarding the deaths of several customers taking HerbaLife products. Couple this bad press with HerbaLife's founder dying under mysterious circumstances and one has a recipe for toxic PR.

In conclusion, although HerbaLife has until now skirted the law and so remains a "legitimate" business, potential distributors should be wary of investing in this company.



Jun 10, 2010 8:04am
people are so desperate to find a simple way to lose weight, they endanger their health, and your article proves the dangers. Great article!
Aug 2, 2010 9:29am
Amusing Herbalife video:

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