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Herbalife Nutrition Ltd.
Company typePublic company
Traded as
ISINKYG4412G1010 Edit this on Wikidata
IndustryMulti-level marketing
FoundedFebruary 1980; 44 years ago (1980-02) in
Los Angeles, California, U.S.
FounderMark R. Hughes
HeadquartersL.A. Live
Los Angeles, California, U.S.; legal domicile: Cayman Islands
Key peopleMichael O. Johnson (Chairman & CEO)
Products
RevenueUS$5.06 billion (2023)
Operating incomeUS$356 million (2023)
Net incomeUS$142 million (2023)
Total assetsUS$2.80 billion (2023)
Number of employees8,900+ (2023)
Websiteherbalife.com

33°51′26″N 118°17′31″W / 33.8572°N 118.2919°W / 33.8572; -118.2919 Herbalife Nutrition Ltd., also called Herbalife International, Inc. (with a U.S. subsidiary called Herbalife International of America) or simply Herbalife, is an American multinational multi-level marketing (MLM) corporation that develops and sells dietary supplements. The business is incorporated in the Cayman Islands, a tax haven, with its corporate headquarters located in Los Angeles, California.

The company was founded by Mark R. Hughes in 1980, and it employs an estimated 9,900 people worldwide. The company operates in 95 countries through a network of approximately 4.5 million independent distributors and members. In October 2022, previous CEO Michael O. Johnson was appointed as Chairman and interim Chief Executive Officer following the departure of John Agwunobi.

The company agreed to "fundamentally restructure" its business in the United States, and pay a $200 million fine as part of a 2016 settlement with the U.S. Federal Trade Commission (FTC) following these accusations.Cite error: A <ref> tag is missing the closing </ref> (see the help page). His first product was a protein shake designed to help people manage their weight. He structured his company using a direct-selling, multi-level marketing model. In 1982, Herbalife received complaints from the Food and Drug Administration for claims made about certain products and the inclusion of mandrake, poke root, and food-grade linseed oil in another.

By 1985, Herbalife was considered the fastest-growing private company in America by Inc. after its sales increased from $386 thousand to $423 million over the previous five years. That same year, the California Attorney General sued the company for making inflated claims about the efficacy of its products. The company suffered as a result of the lawsuit and was forced to lay off nearly 800 employees by May 1985. The company settled the suit for $850,000 without admitting wrongdoing. In 1986, Herbalife became a publicly traded company on the NASDAQ and rebranded itself as Herbalife International.

By 1988, the company had expanded its reach to Japan, Spain, New Zealand, Israel, and Mexico, and it increased its worldwide sales to $191 million in 1991. In 1993, the company underwent a secondary offering of five million shares. The company launched a line of personal care products in 1995 which included fragrances and facial cleansing products. The company was sued in civil court by two former distributors in 1997 for withholding earned income.

In 1999, Hughes attempted to take the company private after asserting that Wall Street was undervaluing the company. While the board approved the buyout offer, shareholders of the company filed a suit against the firm because they believed the share price they were offered was unfair. Hughes eventually abandoned his attempt to buy the company and settled the suit with shareholders. On May 20, 2000, Mark Hughes died at age 44. Following his death, the company was led by Christopher Pair until October 2001.

J.H. Whitney & Company and Golden Gate Capital

In 2002, the company was acquired for US$685 million by J.H. Whitney & Company and Golden Gate Capital. Concurrently, plant sources of ephedrine were removed from Herbalife products in 2002 after several U.S. states banned supplements containing such herbs. In April 2003, Michael O. Johnson joined Herbalife as CEO following a 17-year career with The Walt Disney Company. On December 16, 2004, the company had an initial public offering on the NYSE of 14.5 million common shares at $14 per share, netting the owners $1.3 billion.

On May 7, 2014, the company announced that it entered into a deal with Bank of America Merrill Lynch to repurchase $266 million of its stock.

The company announced in November 2016 that Chief Operating Officer Richard Goudis would take over the position of CEO in June 2017 and Johnson would transition to executive chairman. In August 2017, the company announced that it would repurchase up to $600 million of its stock. On April 25, 2018, Herbalife announced that it had changed its name from Herbalife Ltd. to Herbalife Nutrition Ltd. The company also announced that its shareholders had approved a two-for-one stock split. In January 2019, Herbalife announced that it was replacing Goudis after learning of comments he had made before taking over as CEO that were “contrary to the company’s expense-related policies and business practices” and inconsistent with the company's standards and culture”. Former CEO Johnson subsequently took over the role on an interim basis.

In March 2020, John Agwunobi was named as its next chief executive. Agwunobi departed Herbalife Nutrition in October 2022 and Michael O. Johnson was named Chairman and interim Chief Executive Officer.

Products

Herbalife Nutrition products

Herbalife Nutrition's products include weight-loss and protein shakes, as well as protein bars, teas, aloes, vitamins, and sports hydration, energy, and personal care products. The company's original product is the Formula 1 protein shake, a soy-based meal-replacement shake. The product debuted in 1980 and, as of 2015, was the company's best selling product accounting for nearly 30% of total sales.

Herbalife's products are produced at the company's five manufacturing facilities in the U.S. and China, as well as by third-party manufacturing partners. The company's production process is based on a "seed to feed" strategy, which the company initiated in the 2010s that allows it to trace where the ingredients in its nutritional products originated. Since 2013, the company has operated a botanical extraction facility in Changsha, Hunan Province, China. The facility produces botanical extracts, including teas, guarana, chamomile, broccoli, and bilberry, for use in many of the company's products. Before extracts are processed, they undergo a botanical identification program and are tested several times throughout the production process. The processed raw materials from the extraction facility are used at all of the company's branded manufacturing facilities as well as by its partners. As of 2015, 58% of the company's nutrition products were manufactured at Herbalife-owned facilities.

In China, the company's manufacturing sites are located in Suzhou and Nanjing. In the U.S., the company has manufacturing facilities in Lake Forest, California and Winston-Salem, North Carolina.

Herbalife's claims of health benefits from its products have met scrutiny from the medical community, consumers, and government agencies.

In 2008, Herbalife was sued after laboratory tests indicated that levels of lead in several Herbalife products were in excess of California state law and could lead to liver problems over an extended period of time. The company commissioned its own lab testing and found that those products did not contain high enough amounts of lead to require special labeling.

Business model

Herbalife Nutrition is a multi-level marketing company. A 2010 article in the Los Angeles Business Journal claimed that Herbalife Nutrition was one of the most profitable companies in Los Angeles County and directly benefited from its business model.

As a result of the 2016 FTC settlement, the company is required to prove that at least 80 percent of its sales are made to individuals outside of its distributor network. Distributors are responsible for providing receipts for sales and proving they have legitimate customers. The settlement also required that distributors are only able to earn one-third of their rewards based on recruitment. In the U.S., the company now differentiates between individuals who join as a member to buy discounted products and those who join as a distributor seeking a business opportunity. Discount buyers are unable to earn rewards or sell products. Herbalife Nutrition is also required to have its practices monitored by an outside party for seven years to ensure compliance.

In the past, company management considered the number and retention of distributors a key parameter and tracked it closely in financial reports. By January of each year, sales leaders are required to requalify. In February of each year, individuals who did not satisfy the sales leader qualification requirements during the preceding 12 months are removed from that rank. For the latest 12-month requalification period ending January 2019, approximately 67.9 percent of the eligible sales leaders requalified.

In a California class action suit (Minton v. Herbalife International, et al.) filed on February 17, 2005, the plaintiff challenged "the marketing practices of certain Herbalife International independent distributors under various state laws". In a West Virginia class action suit (Mey v. Herbalife International, Inc., et al.) filed on July 16, 2003, the plaintiffs alleged that some of Herbalife International's distributors used pre-recorded telephone messages and autodialers to contact prospective customers in violation of the Telephone Consumer Protection Act. The case was resolved with Herbalife and its distributors paying $7 million into a fund for class members part of the suit.

FTC investigation

Based on information from a Freedom of Information Act (FOIA) request, the New York Post reported on February 4, 2013, that Herbalife was subject to a pending probe from the Federal Trade Commission (FTC). The FTC released 729 pages containing 192 complaints received over a 7-year period in regards to the New York Post's FOIA request. The FTC stated that the wording it used in its response to the FOIA request was incorrect; the FTC could not confirm or deny an investigation into Herbalife.

In March 2014, the FTC opened an investigation into Herbalife in response to calls from consumer groups and members in both houses of the United States Congress. Herbalife responded to the probe by saying it "welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC. We are confident that Herbalife is in compliance with all applicable laws and regulations". However, in the press conference, Herbalife was declared not necessarily not a pyramid scheme.

In July 2016, Herbalife agreed to change its business model and pay $200 million in a settlement with the FTC. Partial refund checks were mailed to roughly 350,000 Herbalife distributors in January 2017. The FTC said in a press release about the settlement "it's virtually impossible to make money selling Herbalife products."

Sports sponsorships

Herbalife has sponsored France's national volleyball team and the Major League Soccer club LA Galaxy since 2007 and has sponsored Cristiano Ronaldo since 2013. They sponsored FC Barcelona and Lionel Messi between 2010 and 2013. Herbalife has also sponsored the basketball club Herbalife Gran Canaria since 2012. In July 2020, Herbalife also sponsored the Guangzhou Charge of the Overwatch League. In addition to these team and player sponsorships, Turkish Women's Basketball Super League has been named 'Herbalife Nutrition Women's Basketball Super League' for three years starting the 2019-2020 regular season.

In 2021, the company announced a partnership with the LA Galaxy on an augmented reality fan experience. It also has a multi-year sponsorship with Jonathan Dos Santos of the LA Galaxy. During the 2020 Summer Olympics, Herbalife Nutrition was a sponsor of the Olympic Committee of Israel and the Indian Olympic Association. In 2023, Herbalife became an official partner of the Indian Premier League.

Media

In April 2016, a documentary directed by Ted Braun, titled Betting on Zero, premiered at the Tribeca Film Festival. It explored the allegation from Bill Ackman that Herbalife was a pyramid scheme and personal stories of its distributors who lost their life savings. Hilary Rosen, a Democratic lobbyist and an adviser to Herbalife, questioned Tribeca's credibility after claiming that the film was "bought and paid" for by Ackman "to make good on his stock bet".

In 2016, a Last Week Tonight with John Oliver segment on multi-level marketing focused on Herbalife; it strongly condemned the company for its structure resembling a pyramid scheme and cited the FTC report, which implied the company had been operating illegitimately. Oliver criticized Herbalife for its exploitation of Latino communities, and overstatement of its products' health benefits. One reviewer wrote that it appeared to be largely based on Betting on Zero, and caused no immediate change in Herbalife's stock prices.

The 2018 book When The Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle by Scott Wapner discusses Ackman's short of the company and his battle with Icahn. In the book, Wapner characterizes Ackman's decision to bet against Herbalife as dangerous, because it anticipated that the government would shut Herbalife down.

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