Herbalife Nutrition is one of the largest and most popular multi-level marketing companies in the world today. The company sells dietary and nutrition supplements through a global network of independent distributors. Many people promise big bucks by signing up to become a distributor with the company, but history shows that this is not always the case. In fact, Herbalife has been involved in multiple lawsuits over the years and has been fined by the Federal Trade Commission on more than one occasion.
History of Herbalife
Herbalife was started in 1979 by a man named Mark Hughes. Mark started the company as a one-man show by selling his weight loss product out of his car. His original intent was to provide a healthy approach to weight loss and change people’s nutrition habits. Mark’s passion for the company’s purpose began when his mother died an early death from what he claimed to be an unhealthy approach to losing weight.
Quickly after the company began, Mark decided to structure his company as a multi-level marketing (MLM) company. The company started to grow exponentially. In 1985, Herbalife was named the fastest growing private company in the United States by Inc. The company had grown from sales of $386,000 to $423 million over the course of five years, and it had grown a network of 700,000 independent distributors.
Looking at those numbers, one would think that Herbalife was skyrocketing to success. In some ways, that seemed to be the case. However, complaints and lawsuits started to come in, and the company has been dealing with the same ever since.
Herbalife Company Troubles
The first trouble for Herbalife Nutrition started in 1982 when complaints were received from the Food and Drug Administration about the contents of its products. Trouble continued from there with the Department of Justice of Canada filing criminal charges against the company for ads with misleading medical claims. The FDA was very concerned about vague and misleading product labels, and in some cases, active ingredients in the product were never mentioned.
Herbalife went public in 1986; however, the company lost $3 million that year due to the negative publicity from the FDA lawsuit. Fortunately, the company was able to rebound and began to expand its reach to countries outside the U.S. In 1997, the company started to experience more lawsuits and financial trouble. Herbalife was sued by two former distributors who claim that Herbalife withheld their earnings.
Trouble once again popped up in the 2000’s as the company ended up settling a lawsuit with shareholders after an attempt to take the company private once again. The company also came under investigation by the Federal Trade Commission and ended up paying a $200 million settlement to its distributors. In addition, many ingredients in their products started to become banned by certain states, so a large number of their products had to be reformulated.
Current Company Structure
Even though Herbalife has experienced many difficult times throughout its history, it is still considered one of the largest MLM’s in existence. Today, the company employs about 8,000 people worldwide and has a network of around 2.3 million distributors around the globe. Due to a settlement with the FTC in 2016, its MLM model is closely monitored and there are strict rules in place regarding compensation and sales from its distributors. In fact, 80% or more of its sales must come from outside their network, i.e. the sales must be made to real customers.
Today, Herbalife’s product line is quite extensive. They have expanded beyond simple diet supplements, and they now sell many lines of products. A quick browse through their product catalog reveals items in several categories including Healthy Weight, Specialized Nutrition, Energy & Fitness, and Skin and Hair Care.
In addition to physical products, they also promote other things (most of which are free) on their website. They showcase a collection of recipes which can be made with their supplements. The company also offers many tips and articles for healthy living. Advice can be found about weight management, fitness tips, and personal care articles.
Herbalife’s products seem to be high quality. A scan of internet reviews on Amazon for the most popular Herbalife products shows 4- and 5-star ratings for nearly every product on the list. This is quite impressive as compared to other MLM nutrition supplements on the market.
Company Marketing Practices
In past years, Herbalife received many complaints about deceptive marketing practices. Their founder was even referred to in the early days of the company as a “snake oil salesman.” However, in recent years, the company seems to be much more up-front and open about its products. Part of this could be a result of the lawsuits and fines imposed on the company.
Herbalife now seems to stress the importance of an overall health management strategy and not just the benefit of their product. Examples of this can be seen on their website and latest marketing materials. A quote from their website shows that they sell their product as a part of each individual’s overall health. “Our products, along with an educated and trained distributor, a balanced diet and exercise, provide consumers with a comprehensive and personalized solution to their nutrition and wellness goals.”
Making Money with Herbalife
So, if you are thinking about becoming a Herbalife distributor, you are probably wondering whether you can make any money with this company. According to the most recent data, the answer is yes. Data from Herbalife’s earning statements show that more than 50% of first year distributors earned more than $170 in a month. Compare that with the MLM average of about 1% of distributors making a profit, and you can see that Herbalife may not be a bad opportunity.
However, don’t expect to quit your day job any time soon. The same earnings statement referenced above shows that only about 420 of the 62,000 distributors who earn money in a typical month earned more than $14,270. On average, it took them 5 to 11 years to reach this level of income. So, while earning money selling Herbalife products is possible, it takes hard work and dedication to get to a worthwhile level of income.
Enrollment Process and Cost
If you have decided that you want to give it a shot, you’ll need to get signed up under an existing distributor. The existing distributor can be someone you already know, or Herbalife can connect you to a distributor to be your “upline.” The initial sign-up fee is $49.95 to purchase a distributor kit, and you must complete an application to receive your Herbalife Identification Number.
Signing up as a distributor gets you discounts on Herbalife products essentially letting you buy them at wholesale prices and resale them at retail prices. A brand-new distributor gets a 25% discount. So, you can purchase $100 worth of products for $75, and you would keep the difference of $25 as your profit. Many distributors, roughly 60%, sign up as distributors just to get the product discount and have no intentions of selling products for a profit.
The full compensation plan is somewhat complicated, but here are the general rules. This is where the MLM piece comes into play. As you recruit other distributors for your downline, you begin moving into higher tiers on the marketing plan. For example, you can move from distributor to qualified distributor to supervisor. As you move up, your discount increases, and you earn money on the difference between your discount and your downline’s discount. At the supervisor level you receive a 50% discount, so if your downline distributor receives a 25% discount, then you also receive a 25% commission on their sales.
Sales and Marketing Techniques
Many people are making money selling Herbalife products, so how are they doing it? The thing that seems to be working well is creating a social media presence and growing a large following there. Create useful and engaging content that people like to read so that they can get to know you and your products. Don’t constantly be in “sales” mode as people want to buy from someone they know, like, and trust.
Another thing that can work well is to create a challenge for your followers. It may be a weight loss challenge or something similar. This gets people engaged and wanting to try new things. Finally, you need to focus on both retail sales and recruiting. Focusing on just one or the other will not product the best results for you.
Herbalife Comparison to Other MLM’s
In the world of MLM’s, Herbalife seems like a good option. They are transparent with their compensation plan, and they do have distributors making quite a bit of money on their plan. They also require 80% of their revenue to come from retail sales which avoid the trap of the company operating as a pyramid scheme. If you think an MLM is not for you but still like the idea of selling health and wellness products, consider an affiliate marketing program.
As an example, the popular wellness store GNC runs an affiliate program where you can receive 12% of the sales made through your affiliate program. You can still create great content, build a following, and then have people purchase products from GNC through your link. GNC is a well-known and trusted brand, so you may not have to overcome as many objections when trying to sell their products.
Throughout its roughly 40-year lifespan, Herbalife has been subject to many lawsuits, investigations, and negative publicity. However, the company has survived it all and continues to make a profit. Its direct selling, or MLM, model has been revamped in order to protect its distributors and ensure that the company is not operating as a pyramid scheme. The company’s product line gets great reviews, and many of the company’s distributors do make some money. Overall, this seems to be a legitimate company with solid products where you can potentially earn money selling their products.