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| {{Infobox Company | |||
| | company_name = Herbalife, Ltd. | |||
| | company_logo = ] | |||
| | company_type = Public ({{NYSE|HLF}}) | |||
| | foundation = ] (]) | |||
| | location = ] | |||
| | key_people = Michael O. Johnson, Chief Executive Officer <br /> | |||
| Brett R. Chapman, General Counsel and Corporate Secretary <br /> | |||
| Richard P. Goudis, Chief Financial Officer <br /> | |||
| Y. Steve Henig, Ph.D., Chief Scientific Officer | |||
| | industry = Nutrition & Skin Care products | |||
| | revenue = USD$2.4billion (2008)<ref></ref> | |||
| | products = Weight management, nutritional supplements, ] | |||
| | homepage = | |||
| }} | |||
| '''Herbalife International''' ({{nyse|HLF}}), is a global nutrition, weight-loss and skin-care company. The company was founded in 1980 and it employs around 3500 people worldwide. Herbalife reported global sales of ] 2.4 billion in 2008 and its corporate headquarters are in ], ].<ref></ref> | |||
| '''Herbalife International pyramid sceam''' | |||
| The company distributes its products in 72 countries through a network of 1.9 million independent distributors, who earn profit on product sales and additional commission from a ] (MLM) compensation structure.<ref name="report"></ref> | |||
| As one of the largest nutrition companies in the world Herbalife faces occasional legal challenges over the safety of its products. As of 2009, none of these have been upheld. | |||
| == History == | |||
| In February 1980, ] began selling the original '''Herbalife''' weight loss product from the trunk of his car. Hughes often stated that the genesis of his product and program stemmed from the weight loss concerns of his mother, whose death he attributed to an eating disorder and an unhealthy approach to weight loss. Adopting the multi-level marketing system for distribution and growth, the company attracted thousands of distributors who sold its products door-to-door or through ], shunning commercial distribution in retail stores. | |||
| The company's slogan, "Lose Weight Now, Ask Me How", became a marketing theme for distributors, featuring heavily on badges, flyers and posters. Early methods to recruit distributors included seminars, which would feature distributors giving health and weight loss testimonials on the Herbalife products and a keynote address by Hughes. By 1982 Herbalife had reached ] 2 million in sales and had expanded into Canada. | |||
| In 1985, the California Attorney General sued the company for making inflated claims about the efficacy of its products. The company settled the suit for USD 850,000 without admitting wrongdoing.<ref name="blmbg"> Bloomberg News report</ref> In 1986 Herbalife became a publicly traded company on the ], and in 1996 Herbalife reached USD 1 billion in annual sales. | |||
| Mark Hughes died at age 44.<ref name="mytobit">Copage EV. Mark R. Hughes, 44; Founded Nutrition Supplement Concern ''New York Times'', 23 May 2000. Section B, Page 11, Column 5.</ref> The Los Angeles County Coroner autopsy results ruled that the entrepreneur had died of an accidental overdose of large quantities of ] and the ] ] ]. The company continued to grow after his death and in 2002 was acquired by ] and ] for USD 685 million, who took the company private again.<ref></ref> | |||
| In April 2003, Michael O. Johnson joined Herbalife as CEO following a 17-year career with ], most recently as president of Walt Disney International.<ref name="blmbg"/> On ], ], the company had an initial public offering on the ] of 14,500,000 common shares at $14/share. 2004 net sales were reported as USD 1.3 billion. In April 2005, the company celebrated its 25th anniversary with a four-day event attended by 35,000 Herbalife Independent Distributors from around the world. In August 2005, Dr. Steve Henig joined the company as Chief Scientific Officer, responsible for product research and development. In 2008, President and COO Greg Probert resigned after it was reported that he had not completed the degree requirements for the MBA he claimed on his resume.<ref></ref> | |||
| == Business == | |||
| Herbalife is a ] (sometimes called MLM or network marketing) company. In addition to profits from product sales, Herbalife distributors can earn additional commissions from sales by their 'downline' distributors. Supporters of MLM contend this is a fair compensation system, whilst critics of MLM contend that it is similar to a ]<ref>{{cite news | |||
| | url = http://query.nytimes.com/gst/fullpage.html?res=9405E2D91739F933A05756C0A963948260 | |||
| | title = Herbalife Sets More Layoffs | |||
| | date = 1985-05-30 | |||
| | work = ] | |||
| }}</ref>. Critics also argue that the company does not make enough effort to curb abuses by individual distributors, though Herbalife has consistently denied such allegations.<ref></ref> Herbalife is a member of the ] in most countries in which it operates. | |||
| In its filings with the ], company management note problems with inappropriate business practices in the past, their subsequent long-lasting effects and the need to avoid any repetition. Herbalife's to the SEC describes a distributor network that is relatively easy to enter and exit by comparison to many other network marketing companies. Company management considers the number and retention of distributors a key parameter and tracks it closely in financial reports. Most recent figures show 41.5% of distributors were still active after twelve months, up from 39.7% a year before. As of December 2008, Herbalife has 1.9 million independent distributors in 70 countries. It refers to supervisors who qualified in 69 countries under its traditional marketing plan plus China sales employees collectively as ‘Sales Leaders’. The company had 456,858 Supervisors worldwide and 48,236 sales employees in China, for a total of 505,094 sales leaders.<ref name="report" /> In both global sales and number of distributors, it is one of the world's largest network marketing companies. According to the non-profit Consumer Awareness Institute Herbalife is the most successful multi-level marketing business from a distributor's perspective with 99.42% of distributors losing money, compared with Amway's 99.99%<ref></ref> | |||
| === Herbalife Family Foundation === | |||
| In 1994 company founder Mark Hughes started the Herbalife Family Foundation, a children's charity. The foundation receives donations from Herbalife itself as well as distributors and customers. The Herbalife Family Foundation has donated more than USD 6.5 million to children's causes worldwide, and it also supports disaster relief efforts.<ref name="hff"></ref> | |||
| The foundation's main focus is its Casa Herbalife program, in which it partners with existing children's charities. There are currently over 43 such Casa Herbalife programs around the world.<ref></ref> | |||
| === Sports sponsorships === | |||
| Herbalife sponsors a number of athletes, sports teams and sporting events around the world, including: | |||
| * The ] <ref></ref> | |||
| * ] (the American Youth Soccer Organisation) <ref></ref> | |||
| * The ] soccer team <ref></ref> | |||
| * IndyCar drivers Townsend Bell and E.J. Viso in the 2009 Indy 500<ref></ref> | |||
| * ] football club <ref> {{es icon}}</ref> | |||
| A complete list can be found at the website. | |||
| == Product range == | |||
| Herbalife's product range includes protein shakes, protein snacks, nutrition, energy and fitness supplements and personal care products.<ref></ref> The Formula 1 protein shake, a soy-based meal-replacement shake, is the company's number one product and was one of the first products sold by the company. The range also includes targeted products for ], ] and ]. Some products are ], ] or ], and Herbalife provides testimonials and advice from health professionals as part of their product marketing. | |||
| In its annual report (SEC Form 10-K) Herbalife declares that most of its products are manufactured by outside companies, except for a small amount of products manufactured in its own manufacturing facility in China. Major suppliers include ] (Nature’s Bounty), Fine Foods (Italy), PharmaChem Labs and JB Labs, which together account for more than 40% of its product purchases in 2006. <ref></ref> In 2007 the company launched a new product development process to "accelerate the introduction of new | |||
| products", which involves company employees, outside consultants and testing products with distributors and customers.<ref name="report" /> In 2009 the company acquired a manufacturing facility in ] to "enhance its global product development and supply chain to better serve its independent distributors".<ref></ref> | |||
| === Clinical studies === | |||
| Three clinical studies have been completed on different formulations of Herbalife's Formula 1 protein shake product. All three studies showed that using Formula 1 meal replacements twice a day led to effective weight loss.<ref name="ucla">; Leo Treyzon, Steve Chen, Kurt Hong, Eric Yan, Catherine L Carpenter, Gail Thames, Susan Bowerman, He-Jing Wang, Robert Elashoff and Zhaoping Li; UCLA Center for Human Nutrition, Department of Medicine, David Geffen School of Medicine at UCLA, Los Angeles, USA | |||
| </ref><ref name="korea">; Belong Cho; The International Journal of Clinical Practice, February 2009</ref> | |||
| The studies in Germany and Korea were conducted by members of Herbalife's Nutrition Advisory Board, Drs. Marion Flechtner-Mors and Belong Cho, respectively. The results of the UCLA study were published in ] (August 2008),<ref name="ucla" /> Dr. Flechtner-Mors presented in October 2008 at the annual meeting of ] in Phoenix, Arizona and at the European Congress of Obesity in Geneva, Switzerland, and the Korean results appeared in ] (February 2009).<ref name="korea" /> | |||
| === Scientific advisory board === | |||
| Herbalife's Scientific Advisory Board is chaired by David Heber, M.D. Ph.D, F.A.C.P., F.A.C.N., who is professor of medicine and public health and the founding director of the Center for Human Nutrition in the Department of Medicine at UCLA. According to a , Dr. Heber joined the board at roughly the same time Herbalife made a $3 million donation to establish the Mark Hughes Cellular & Molecular Nutrition Laboratory at his Center for Human Nutrition, leading to criticism of Heber's actions as an inappropriate conflict of interest. | |||
| ], Ph.D., a Nobel Laureate in Medicine and Distinguished Professor of ] at the ], is also a member of Herbalife's Scientific Advisory Board. Ignarro worked with Herbalife to develop Niteworks, a dietary supplement designed to boost the body's own production of ], and later became a member of the company's Scientific Advisory Board. Ignarro endorsed this product in exchange for a ] agreement reported to have earned his consulting firm over $1 million in the first 12 months. Ignarro also promoted Niteworks' ingredients in the prestigious ], without disclosing his financial interest to the publication. After Ignarro's ties to Herbalife were revealed, the journal issued a correction to the article, citing Ignarro's undisclosed "]". UCLA conducted its own investigation and determined that Ignarro did not act improperly as all the research was done in ] and no research funds came from UCLA.{{Fact|date=October 2008}} Therefore, it was not legally necessary for him to disclose anything. Ignarro presents a one-hour Herbalife promotional video for Niteworks. | |||
| === Nutrition Advisory Board === | |||
| Herbalife states that its Nutrition Advisory Board consists of "leading experts in the fields of nutrition and health who help educate and train our independent Distributors on the principles of nutrition, physical activity and healthy lifestyle."<ref></ref> | |||
| *David Heber, M.D., Ph.D., F.A.C.P., F.A.C.N., Director of the Center for Human Nutrition at UCLA.<ref></ref> | |||
| *], Ph.D. | |||
| *Luigi Gratton, M.D., M.P.H., Vice President of Nutrition Education at Herbalife | |||
| *Alexey Borisov, M.D. | |||
| *Joaquim Caetano, M.D. | |||
| *Marco DeAngelis, M.D. | |||
| *Jorge Dominguez, M.D. | |||
| *Marion Flechtner-Mors, Ph.D. | |||
| *Julian Alvarez Garcia, M.D. | |||
| *Shih-Yi Huang, Ph.D. | |||
| *Linong Ji, M.D. | |||
| *Patricio Kenny, M.D. | |||
| *Rocio Medina, M.D. | |||
| *Anoop Misra, M.D. | |||
| *Alla Pogozheva, M.D. | |||
| *Ralph Rogers, M.D. | |||
| *Nikolaos Sitaras, M.D. | |||
| *Jean de la Tullaye, M.D. | |||
| *Nataniel Viuniski, M.D. | |||
| *Yoshio Yoshimoto, M.D. | |||
| == Controversies == | |||
| === Multi-level marketing === | |||
| * A 2004 settlement resolved a class action suit on behalf of 8700 former and current distributors that accused the company and distributors of "essentially running a pyramid scheme." A total of $6 million was to be paid out, with defendants not admitting guilt. | |||
| * In a California class action suit, ''Minton v. Herbalife International, et al.'', the plaintiff is "challenging the marketing practices of certain Herbalife International independent distributors and Herbalife International under various state laws prohibiting "endless chain schemes", insufficient disclosure in assisted marketing plans, unfair and deceptive business practices, and fraud and deceit". <ref name="quarterly2006"></ref> | |||
| === Marketing practices === | |||
| In a West Virginia class action suit, ''Mey v. Herbalife International, Inc., et al.'', the plaintiffs allege that some "telemarketing practices of certain Herbalife International distributors violate the Telephone Consumer Protection Act, or TCPA, and seeks to hold Herbalife International vicariously liable for the practices of these distributors. More specifically, the plaintiffs' complaint alleges that several of Herbalife International's distributors used pre-recorded telephone messages and autodialers to contact prospective customers in violation of the TCPA's prohibition of such practices". | |||
| Herbalife managements insisted they have meritorious defences in both cases and that in the West Virginia case, any such distributor actions also went against Herbalife's own policies. Management also contends that any adverse legal outcomes Herbalife might suffer would not significantly affect their financial condition, particularly since they have already set aside an amount that they "believe represents the likely outcome of the resolution of these disputes".<ref name="quarterly2006" /> The case was resolved with Herbalife and its distributors paying $7 million into a fund for class members part of the suit.<ref></ref> Herbalife International did not acknowledge wrongdoing, or admit culpability for the actions of its distributors. | |||
| === Product controversies === | |||
| Some of the original Herbalife weight loss products contained the active ingredient ] or '']'', two herbs containing ] alkaloids. Herbalife stopped using ephedrine in its products in 2002 after several U.S. states banned supplements containing botanical sources of ephedrine alkaloids.<ref>{{Citation | last= Herbalife Ltd. | date= 2005-03-14 | title= Form 10-K | periodical= United States ] | pages= page 15 | url=http://www.sec.gov/Archives/edgar/data/1180262/000104746905006359/a2153305z10-k.htm#05WLA1071_1}}</ref><ref>{{cite news |first= D.|last= Evans|title= Herbalife, Other Ephedra Marketers Face Soaring Insurance Rates|publisher= ]|date= 2002-04-11}}</ref> The U.S. ] banned supplements containing ephedra in 2004.<ref>{{cite web|url=http://www.fda.gov/oc/initiatives/ephedra/february2004/|title=Sales of Supplements Containing Ephedrine Alkaloids (Ephedra) Prohibited|publisher=]}}</ref> | |||
| Scientific studies in 2007 by doctors at the University Hospital of Bern in Switzerland and the Liver Unit of the Hadassah-Hebrew University Medical Center in Israel found an association between consumption of Herbalife products and ].<ref></ref><ref></ref> In response, the Spanish Ministry of Health issued an alert asking for caution in consuming Herbalife products.<ref></ref> Herbalife has stated they are cooperating fully with Spanish authorities.<ref></ref> | |||
| In May 2008 the Fraud Discovery Institute, which claims to be a consumer watchdog organisation, reported that laboratory test results of Herbalife products showed lead levels in excess of limits established by law in California under ].<ref></ref><ref>, , </ref> The Fraud Discovery Institute was founded by fraudulent entrepreneur ], who served seven years in jail for stock fraud, <ref name=labiz></ref> and since disclosed that his company was profiting from the allegations by ] Herbalife stock.<ref name=herbrebuf/> Herbalife responded stating its products met federal FDA requirements<ref></ref><ref></ref> and released independent lab tests proving the products did not exceed Proposition 65 limits.<ref name=herbrebuf></ref><ref></ref> | |||
| On 10 May 2008 a suit was filed on behalf of a woman who developed lead-related liver complaints that she claimed were a reaction to a combination of Herbalife products.<ref name=labiz/><ref></ref> The suit was filed by lawyer Christopher Grell, cofounder of the Dietary Supplement Safety Committee and an associate of Barry Minkow.<ref name=labiz /> On 17 June 2008, the suit was expanded to add distributors who had supplied the woman with the Herbalife products, with Grell launching a website to offer persons who believe they were harmed by Herbalife products the chance of redress.<ref></ref> In August 2008, Minkow retracted all accusations against Herbalife and removed any mention of the company from his web site.<ref></ref> | |||
| === Crazy Fox commercials === | |||
| As of April 2008, a series of commercials featuring a large red animated fox advertising home-based business opportunities have been running on US television. The advertisements typically feature a series of testimonials from actors playing individuals who have made sums of money between $5,000 USD and $15,000 USD per month as a result of participating in an undescribed business program. The adverts direct viewers to a website that allows them to purchase a "success kit". The kit also provides no information about how the business opportunity works. | |||
| These adverts have been found to be run by independent Herbalife distributors, as a method of recruiting new 'downline' distributors.<ref></ref> While it is not illegal, critics of this type of advertising prefer advertisers to be up front about their company associations. | |||
| == In popular culture == | |||
| === Ugly Betty parody === | |||
| Herbalife is parodied in comedy '']'' from the first episode. In the ], informally known as "I Am Not Going To Sell Herbalux", Betty's sister Hilda is seen to be a distributor for a company called Herbalux with a logo similar to Herbalife's. Herbalux is the name of a real-life Polish company that specializes in alternative medicine, and has no connection to Herbalife.<ref name="Herbalux"></ref> | |||
| In ] when Betty opts to sell Herbalux products due to financial pressure, she wears a tag saying "10 pounds in 10 days", similar to the "Lose Weight Now, Ask Me How" badges often used as a marketing tool by Herbalife distributors. | |||
| In ], a Spanish-language program with a similar storyline to Ugly Betty, the lead character Lety used actual Herbalife products as she underwent an onscreen "physical transformation" in six episodes of the show.<ref></ref> It is believed this product placement in the Spanish show is in response to the Herbalux parody in Ugly Betty. | |||
| == See also == | |||
| * ] | |||
| * ] | |||
| ==References== | |||
| {{reflist|2}} | |||
| ;Notes | |||
| {{refbegin}} | |||
| *{{cite web | title= Nutritional Supplement Seller Feeling Much More Fit These Days| work= Investor’s Business Daily | url= http://www.investors.com/editorial/IBDArticles.asp?artsec=7&issue=20060616| accessdate=2006-07-06}} | |||
| *{{cite web | title= NYSE Group, Inc. Herbalife Ltd | work= NYSE Group, Inc | url= http://www.nyse.com/about/listed/hlf.html | accessdate=2006-03-14}} | |||
| *{{cite web | title= Sales of Supplements Containing Ephedrine Alkaloids (Ephedra) Prohibited | work= Food and Drug Administration Home Page | url= http://www.fda.gov/oc/initiatives/ephedra/february2004/ | accessdate= 2006-03-14}} | |||
| *{{cite press release | publisher = Herbalife | date = ] | title = AEG and Herbalife Announce Amgen Tour of California Sponsorship; Agreement Extends Herbalife Partnership as the Official Nutrition Company for Professional Bicycle Race | url = http://ir.herbalife.com/ReleaseDetail.cfm?ReleaseID=183568&PrevSect=PR | accessdate=2006-03-14 }} | |||
| *{{cite news | first=Eileen | last=Gunn | title= Racing to the top? Try the triathlon | date=February 27, 2006 | publisher= U.S. News & World Report | url = http://www.usnews.com/usnews/biztech/articles/060227/27eetriathlon.htm | accessdate=2006-03-14 }} | |||
| {{refend}} | |||
| ==External links== | |||
| <!--- WARNING TO ALL - Please do not add your MLM club/system/spam links to specific MLMs/distributors or directories in this section, or it WILL be deleted. Anon IP's, you have been warned---> | |||
| * {{official|http://www.herbalife.com/}} | |||
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Revision as of 17:01, 17 November 2009
Herbalife International pyramid sceam