Herbalife facts for kids
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| Public company | |
| Traded as |
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| Industry | Multi-level marketing |
| Founded | February 1980 in Los Angeles, California, U.S. |
| Founder | Mark R. Hughes |
| Headquarters | L.A. Live Los Angeles, California, U.S.; legal domicile: Cayman Islands |
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Key people
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Michael O. Johnson (Chairman & CEO) |
| Products |
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| Revenue | US$5.06 billion (2023) |
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Operating income
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US$356 million (2023) |
| US$142 million (2023) | |
| Total assets | US$2.80 billion (2023) |
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Number of employees
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8,900+ (2023) |
Herbalife Nutrition Ltd. is a global company that makes and sells dietary supplements. These include things like protein shakes, vitamins, and products for sports nutrition and personal care. The company uses a special way of selling called multi-level marketing (MLM). This means people sell products directly to customers and can also earn money by inviting others to become sellers too.
Herbalife was started by Mark R. Hughes in 1980. Today, it has over 8,900 employees around the world. The company operates in 95 countries with about 4.5 million independent sellers and members. Its main office is in Los Angeles, California, U.S., but its legal home is in the Cayman Islands.
In 2016, the company reached an agreement with the U.S. Federal Trade Commission (FTC). Herbalife agreed to change how it does business in the United States and paid a $200 million fine. This happened after questions were raised about how the company's sellers earned money.
Contents
Company History
In February 1980, Mark R. Hughes started selling his first Herbalife product from his car. It was a protein shake designed to help people manage their weight. Hughes said he was inspired to create his products because his mother died too young, partly due to unhealthy weight loss methods. He set up his company using a direct-selling and multi-level marketing model.
In 1982, the Food and Drug Administration (FDA) had some concerns about claims made for certain Herbalife products. The company later changed its product claims and how some products were made. By 1985, Herbalife was growing very fast. However, the Attorney General of California also had concerns about some product claims. The company settled this case for $850,000 without admitting any wrongdoing.
In 1986, Herbalife became a public company, which means its shares could be bought and sold on the stock market. By 1988, the company had grown and was selling products in countries like Japan, Spain, and Mexico. In 1995, Herbalife launched new products for personal care, such as fragrances and facial cleansers.
Mark Hughes, the founder, passed away in May 2000 at the age of 44. After his death, the company continued to grow and change.
New Ownership and Leadership
In 2002, Herbalife was bought by two investment companies, J.H. Whitney & Company and Golden Gate Capital, for $685 million. Around this time, certain plant ingredients were removed from Herbalife products in the U.S. because some states banned supplements containing them.
In April 2003, Michael O. Johnson became the CEO of Herbalife. He had worked at The Walt Disney Company for 17 years before joining Herbalife. In December 2004, Herbalife became a public company again, with its shares listed on the NYSE.
In November 2016, Richard Goudis was announced as the new CEO, taking over from Michael O. Johnson in June 2017. Johnson then became the executive chairman. In April 2018, the company officially changed its name from Herbalife Ltd. to Herbalife Nutrition Ltd. In January 2019, Goudis left the company, and Michael O. Johnson returned as interim CEO. In March 2020, John Agwunobi became the new chief executive. However, he left in October 2022, and Michael O. Johnson again became Chairman and interim CEO.
Products
Herbalife Nutrition makes many different products. These include shakes for weight management and protein, as well as protein bars, teas, aloe drinks, vitamins, and products for sports hydration, energy, and personal care. The company's very first product, launched in 1980, was the Formula 1 protein shake. This soy-based shake is designed to be a meal replacement. As of 2015, it was still the company's most popular product, making up almost 30% of all sales.
Herbalife's products are made in the company's five factories in the U.S. and China. They also work with other companies to produce some items. Herbalife uses a "seed to feed" approach, which means they can track where the ingredients in their products come from. Since 2013, they have a special facility in China that extracts plant ingredients like tea, guarana, and chamomile for use in their products. Before these extracts are used, they are carefully checked and tested many times.
The company has factories in Suzhou and Nanjing in China, and in Lake Forest, California and Winston-Salem, North Carolina in the U.S.
Some health organizations and government agencies have looked closely at the health claims made by Herbalife for its products. In 2008, a lawsuit claimed that some Herbalife products had higher levels of lead than allowed by California law. Herbalife did its own tests and found that the lead levels were not high enough to require special warnings.
How the Business Works
Herbalife Nutrition is a multi-level marketing (MLM) company. In this business model, people become "distributors" or "members." They can buy products at a discount and sell them to others. They can also earn money by inviting new people to join as distributors.
After a 2016 agreement with the FTC, Herbalife had to make some changes to its business in the U.S. Now, the company needs to show that at least 80% of its sales are made to people who are not part of its network of sellers. Sellers must provide receipts to prove they have real customers. Also, only one-third of a seller's rewards can come from recruiting new sellers. In the U.S., people can now join just to buy products at a discount without becoming a seller. An independent group also watches Herbalife's business for seven years to make sure they follow the rules.
Each year, sales leaders in Herbalife need to meet certain sales goals to keep their rank. If they don't, they are removed from that rank. For example, in 2019, about 67.9% of eligible sales leaders met the requirements.
Health Concerns
Hospitals in several countries, including Israel, Spain, and the United States, have reported cases of liver problems in some patients who used Herbalife products.
In 2004, Israel's Health Minister started looking into Herbalife's products after four people using them had liver issues. Studies were done, and one study funded by the Israeli Ministry of Health suggested a link. However, Herbalife stated that the Israeli Ministry of Health did not confirm a direct cause-and-effect relationship between the products and liver problems.
In 2007, some scientific studies also looked at a possible link between Herbalife products and liver inflammation (hepatitis). Because of this, the Spanish Ministry of Health advised caution when using Herbalife products. Herbalife worked with Spanish authorities, and after an investigation, the warning was removed. In 2009, a group of scientists in Spain also concluded that they could not find a direct link between liver problems and Herbalife's supplements. They thought the cases might be due to changes in metabolism from strict dieting without proper supervision.
A study in 2013 looked at past cases of liver damage linked to Herbalife products. It found that a direct link was "probable" in only one case, and "unlikely" or "excluded" in others.
Pyramid Scheme Questions
Some people have questioned if Herbalife's business model is like a pyramid scheme. In a pyramid scheme, people make money mainly by recruiting new members, rather than by selling actual products to customers. Herbalife has always said that it is not a pyramid scheme.
In 2004, a lawsuit was settled where former sellers accused the company of running a pyramid scheme. Herbalife paid $6 million without admitting guilt. In 2011, a court in Belgium ruled that Herbalife was an illegal pyramid scheme, but this decision was later overturned by an appeals court in 2013.
In 2012, a well-known investor named Bill Ackman said that he believed Herbalife was a "sophisticated pyramid scheme." He argued that most sellers lose money and that the company made it seem easier to earn a lot of money than it actually was. Ackman made a large financial bet against the company, expecting its stock price to drop. However, in 2017, Ackman closed his bet against Herbalife after its stock price went up.
FTC Investigation and Settlement
In March 2014, the Federal Trade Commission (FTC) in the U.S. started an investigation into Herbalife. Herbalife said it welcomed the investigation and would cooperate fully.
In July 2016, Herbalife reached an agreement with the FTC. As part of this settlement, Herbalife agreed to change its business model and pay $200 million. The FTC stated that it was "virtually impossible to make money selling Herbalife products" for most people. The lawsuit claimed that Herbalife misled people into thinking they could earn a lot of money from selling products or recruiting others. The company's business model was seen as unfair because it encouraged sellers to buy products and recruit others to advance, rather than focusing on actual customer demand.
As of early 2019, the company was also being investigated by the United States Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) regarding its business practices in China. In September 2019, Herbalife agreed to pay $20 million to the SEC to settle charges that it made false statements about its business in China between 2012 and 2018.
In 2019, the DOJ accused two Herbalife employees of trying to bribe Chinese officials to get sales permits and influence investigations. They were also accused of offering bribes to a Chinese media company. In response, Herbalife agreed to pay $123 million to the DOJ and SEC in August 2020 to resolve these issues.
Sports Sponsorships
Herbalife has sponsored many sports teams and athletes around the world.
- Since 2007, they have sponsored the France men's national volleyball team and the Major League Soccer club LA Galaxy.
- They have sponsored famous soccer player Cristiano Ronaldo since 2013.
- Between 2010 and 2013, they sponsored FC Barcelona and Lionel Messi.
- Since 2012, they have sponsored the basketball club Herbalife Gran Canaria.
- In July 2020, Herbalife also sponsored the Guangzhou Charge of the Overwatch League.
- The Women's Basketball Super League in Turkey was named 'Herbalife Nutrition Women's Basketball Super League' for three years starting in 2019.
- In 2021, the company partnered with the LA Galaxy for an augmented reality fan experience.
- They also have a multi-year sponsorship with Jonathan Dos Santos of the LA Galaxy.
- During the 2020 Summer Olympics, Herbalife Nutrition sponsored the Olympic Committee of Israel and the Indian Olympic Association.
- In 2023, Herbalife became an official partner of the Indian Premier League.
Media Coverage
In April 2016, a documentary film called Betting on Zero was released. It looked at the claims made by investor Bill Ackman that Herbalife was a pyramid scheme. The film also shared personal stories from some of Herbalife's sellers who said they lost their savings.
In 2016, the TV show Last Week Tonight with John Oliver had a segment about multi-level marketing, focusing on Herbalife. The show strongly criticized the company, saying its structure looked like a pyramid scheme and referring to the FTC report. The show also mentioned concerns about Herbalife's impact on Latino communities and questions about the health benefits of its products.
The 2018 book When The Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle by Scott Wapner talks about Bill Ackman's financial bet against Herbalife and his disagreements with another investor, Carl Icahn.
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