Herbalife Review — Is it a scam?

Herbalife is an MLM company that specializes in nutrition and weight management products. An entrepreneur named Mark Hughes founded it in 1980.

Headquartered in sunny Los Angeles, California, it’s one of the largest MLM companies in the world with a market value of approximately $5.49 billion and posted revenues of around $4.5 billion in 2015.

Herbalife employs thousands of independent distributors from all around the globe to promote their products.

Products

Herbalife’s products fall into the categories of weight management, basic & targeted nutrition, energy & fitness, and personal care products.

Their most popular products, or their “core products”, are Formula 1 (Meal-replacement shake mix), Formula 2 (Multivitamin complex) and their Formula 3 “Cell Activator”. These supplements all complement each other and are to be used at the core of your Herbalife program.

The Formula 1 nutritional shake mix comes in 14 different flavors including French vanilla, mint chocolate, and cookies ‘n cream.

Each serving contains “up to 21 vitamins and minerals and essential nutrients” and 9g of protein. The Formula 2 product includes “21 essential micronutrients including antioxidant Vitamins A, C, and E, and it promotes healthy bones, skin and hair. The Formula 3 Cell Activator helps to regenerate antioxidant activity within the cells and will help support the body’s absorption of micronutrients.

In their weight management offerings, they essentially bundle complimentary products that they feel best cater to specific needs.

They sell a “Quickstart Program” that includes Formulas 1, 2, and 3 as well as a caffeinated Herbal Tea Concentrate. Their “Advanced Program” has everything the quickstart program has but with products called “Cell-U-Loss” (supports fluid balance) and “Total Control” (stimulates metabolism) as well.

They also have targeted nutrition products in areas like Men’s & Women’s Health, Digestive Health, and Stress Management among others. Most of these products are different assortments of pills that each target different things.

However, its worth noting that the targeted nutrition products feature a disclaimer saying that the claims they make about efficacy of their products have not been evaluated by the Food & Drug Administration (FDA).

FDA approval is a powerful stamp to help market products, but this certainly raises questions about whether these products are legitimate.

Herbalife also sells what they call an “H³O Fitness Drink” which provides “rapid hydration, immediate energy and Vitamins C and E antioxidants to optimize workouts”.

Again, however, the FDA has not evaluated this product.

For competitive athletes, they have a product line called “Herbalife24” with options such as “Rebuild Strength”, “Prepare”, and “Restore”.

In skin care, Herbalife sells a number of different cleansers and moisturizers that all target different needs. They offer a “Clearify Acne Kit” that combines products (moisturizer, cleanser, mask, etc.) that all supposedly work together to combat acne.

Herbalife structures their product pages quite well. They neatly and plainly outline the benefits and ingredients that each product contains, and give customers details on how to use the products for best results.

The products seem to sell well and display positive results, but lack of FDA examination poses question marks. It’s important psychologically for customers to see that stamp of approval, and this may prevent Herbalife from gaining new customers in the future.

Compensation Plan

The Herbalife Sales & Marketing Plan offers “Independent Herbalife Members” the opportunity to make money and earn other rewards.

The quickest and most rewarding way to earn higher income is to recruit a big network beneath you called your “downline”.

Herbalife offers income potential from 7 different avenues: Wholesale Profit (commissions), Retail Profit, Royalty Overrides, Monthly Production Bonus, Vacation Promotions, the “Annual Mark Hughes Bonus”, and promotions.

Herbalife requires their representatives to actually purchase the product and sell it at their own expense. Wholesale discounts range from 25% to 50%, and you are expected to sell these products at retail prices to your customers.

Wholesale profit (commission) is the difference between the discounted price you pay and the price paid by your downline. You can earn 7% and 25% commission on the “earn base” value of these orders.

As your production improves over time, you will progress up the chain of command and have the potential for higher earnings.

Herbalife has been under its fair share of scrutiny in the past over claims of it being a pyramid scheme and defrauding thousands of wholesalers. Pershing Square Capital’s Bill Ackman very publicly came out a few years ago criticizing the structure of the company’s business model.

Herbalife makes their money by selling products to distributors, while it’s up to the distributors to get the products in the hands of the end user.

They also have minimum purchase requirements to maintain the specific levels that help you to earn more in the organization. Because of this, it’s clear that Herbalife maximizes its profit from bringing on as many wholesalers as possible.

Wholesalers who perform the best are the ones who are able to build the biggest network beneath them.

It seems to market itself more towards recruiting new wholesalers rather than gaining new end user customers, and they put a lot of their effort into selling people on the dream of financial freedom.

This model encourages Herbalife to perform better in the area of recruitment rather than making the best possible product, and that doesn’t seem like a sustainable model.

The company needs to have more of a stake in the sales of their products to end customers to encourage constant product enhancement. It’s fair to question Herbalife management’s intentions for future growth.  

Recap

Herbalife is an established company with the financial flexibility and resources to support future growth.

Although they seem to sell quality products, it’s difficult to imagine their current model sustaining them into the future.

Be sure to research the opportunity thoroughly and understand the model before signing on and investing in inventory.

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