Herbalife

Template:Short description Template:Use mdy dates Template:Infobox company Template:Coord 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 company has been alleged to have fraudulently operated a pyramid scheme; under an SEC agreement in 2016 the compensation and other benefits were restructured to include tying distributor rewards to verifiable sales.<ref name="reuters.com">Template:Cite web</ref><ref>Template:Cite news</ref> Some products sold by Herbalife have caused acute hepatitis.<ref>Template:Cite journal</ref> 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,<ref>Template:Cite news</ref> and 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.<ref>Template:Cite web</ref>

Herbalife has been accused of deceiving distributors about the amount of income they could expect to earn and that most of their income would be made from recruiting additional distributors instead of from selling merchandise. 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.<ref>Template:Cite news</ref>

History

In February 1980, Mark R. Hughes began selling the original Herbalife weight management 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 Joanne whose premature death he attributed to an eating disorder and an unhealthy approach to weight loss.<ref>Template:Cite news</ref> 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.<ref>Template:Cite web</ref>

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.

The Department of Justice of Canada filed criminal charges against the company in November 1984 for misleading medical claims in advertisements.<ref>Template:Cite web</ref><ref>Template:Cite news</ref> As a result of the complaints, the company modified its product claims and reformulated the product.<ref name="fundinguniverse.com">Template:Cite web</ref>

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.<ref>Template:Cite web</ref> 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.<ref>Template:Cite web</ref> The company settled the suit for $850,000 without admitting wrongdoing.<ref name="blmbg">Template:Cite news</ref>

In 1986, Herbalife became a publicly traded company on the NASDAQ and rebranded itself as Herbalife International. However, as a result of the negative publicity from the FDA lawsuit, the company posted a $3 million loss that year.<ref>Template:Cite news</ref><ref>Template:Cite news</ref>

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.<ref>Template:Cite news</ref>

The company launched a line of personal care products in 1995 which included fragrances and facial cleansing products.<ref>Template:Cite web</ref>

The company was sued in civil court by two former distributors in 1997 for withholding earned income.<ref>Template:Cite web</ref>

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 company 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.<ref name="fundinguniverse.com"/> On May 20, 2000, Mark Hughes died at age 44.<ref>Template:Cite news</ref> Following his death, the company was led by Christopher Pair until October 2001.<ref>Template:Cite news</ref>

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.<ref>Template:Cite news</ref> Concurrently, plant sources of ephedrine were removed from Herbalife products in 2002 after several U.S. states banned supplements containing such herbs.<ref name="ar2005" />Template:Rp<ref>Template:Cite news</ref>

In April 2003, Michael O. Johnson joined Herbalife as CEO following a 17-year career with The Walt Disney Company.<ref name="blmbg" />

On December 16, 2004, the company had an initial public offering on the NYSE of 14.5 million common shares at $14 per share,<ref>Template:Cite web</ref> netting the owners $1.3 billion.<ref>Template:Cite web</ref>

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.<ref>Template:Cite news</ref>

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.<ref>Template:Cite news</ref>

In August 2017, the company announced that it would repurchase up to $600 million of its stock.<ref>Template:Cite web</ref>

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.<ref>Template:Cite web</ref><ref>Template:Cite news</ref>

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.<ref name="LAT010919">Template:Cite news</ref>

In March 2020, John Agwunobi was appointed Chief Executive Officer.<ref>Template:Cite news</ref> Agwunobi departed from Herbalife in October 2022 and Michael O. Johnson was appointed Chairman and interim Chief Executive Officer.<ref>Template:Cite web</ref>

In May 2025, Stephan Gratziani was appointed Chief Executive Officer, becoming the first distributor since founder Mark Hughes to lead the company. Michael O. Johnson transitioned in the position of Executive Chairman.

Products

File:Herbalife Nutrition Products.jpg

Herbalife Nutrition products

Herbalife Nutrition's products include weight-loss and protein shakes,<ref>Template:Cite news</ref> as well as protein bars, teas, aloes, vitamins, and sports hydration, energy, and personal care products.<ref>Template:Cite web</ref> 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.<ref name=siege/>

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.<ref name=Goudis>Template:Cite web</ref><ref name=ar2009/>Template:Rp 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.<ref>Template:Cite web</ref> Since 2013, the company has operated a botanical extraction facility in Changsha, Hunan Province, China.<ref name=FoodPro>Template:Cite web</ref><ref>Template:Cite web</ref> The facility produces botanical extracts, including teas, guarana, chamomile, broccoli, and bilberry, for use in many of the company's products.<ref>Template:Cite web</ref> Before extracts are processed, they undergo a botanical identification program and are tested several times throughout the production process.<ref name=wdi/> 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.<ref name=siege>Template:Cite web</ref>

In China, the company's manufacturing sites are located in Suzhou and Nanjing.<ref name=wdi>Template:Cite web</ref> In the U.S., the company has manufacturing facilities in Lake Forest, California,<ref>Template:Cite news</ref> and Winston-Salem, North Carolina.<ref>Template:Cite news</ref><ref>Template:Cite web</ref>

Herbalife's claims of health benefits from its products have met scrutiny from the medical community, consumers, and government agencies.<ref>Template:Cite web</ref>

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

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.<ref>Template:Cite news</ref>

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.<ref name=FTCman>Template:Cite web</ref> The settlement also required that distributors are only able to earn one-third of their rewards based on recruitment.<ref name=ftcsettle>Template:Cite web</ref> 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.<ref name=inside>Template:Cite web</ref> Discount buyers are unable to earn rewards or sell products.<ref name=ftcsettle/> Herbalife Nutrition is also required to have its practices monitored by an outside party for seven years to ensure compliance.<ref name=FTCman/>

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.<ref name=ir>Template:Cite web</ref>

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".<ref name="quarterly2006">Template:Cite web</ref> 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.<ref name=ar2007/>Template:Rp

Liver disease inquiries

Hospitals in Israel, Spain, Switzerland, Iceland, Argentina, and the United States have reported liver damage in a number of patients who used Herbalife products.<ref name="Elinav Pinsker Safadi et al 2007"/><ref name="Schoepfer Engel Fattinger et al 2007"/><ref name="Manso López-Rivas Salgueiro et al 2011">Template:Cite journal</ref><ref name=":1">Template:Cite journal</ref><ref name=":2">Template:Cite journal</ref><ref name=":3">Template:Cite journal</ref><ref name=":4">Template:Cite journal</ref><ref name=":5">Template:Cite journal</ref><ref name=":6">Template:Cite journal</ref><ref name=":7">Template:Cite journal</ref><ref name=":8">Template:Cite journal</ref>Template:Overcite

In 2004, Israel's Health Minister began an investigation into Herbalife's products after four persons using Herbalife's products were found to have liver problems.<ref name="Elinav Pinsker Safadi et al 2007">Template:Cite journal</ref> The company was accused of selling products containing toxic ingredients such as quaqua, comfrey, and kraska.Template:Clarify The products were sent to Bio-Medical Research Design LTD (B.R.D), to a private U.S. laboratory, and to Israel's Forensic research laboratory. A study of the cases funded by the Israeli Ministry of Health concluded that there was a causative relationship.<ref name="Elinav Pinsker Safadi et al 2007"/> Herbalife's SEC 10-Q filings stated that the Israeli Ministry of Health did not establish a causal relationship between the product and liver ailments.<ref>Template:Cite web</ref> In 2009, an Israeli woman sued Herbalife International and Herbalife Israel, claiming that her liver damage resulted from the use of Herbalife products.<ref>Template:Cite web</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 hepatitis.<ref name="Elinav Pinsker Safadi et al 2007"/><ref name="Schoepfer Engel Fattinger et al 2007">Template:Cite journal</ref> In response, the Spanish Ministry of Health issued an alert asking for caution in consuming Herbalife products.<ref>Template:Cite news</ref> Herbalife stated they were cooperating fully with Spanish authorities,<ref>There's been no proven link to liver problems.Herbalife Responds to Spain's Ministry of Health Alert Template:Webarchive</ref> and after investigation, the agency determined no action was required and removed the alert.

In January 2009, the Scientific Committee of the Spanish Agency for Food Safety and Nutrition (AESAN) reached the same conclusion. After reviewing cases implicating Herbalife products in Spain, Switzerland, Israel, Finland, France, Italy, Iceland and Portugal, the 12-member scientific panel issued a report concluding: "The analyses of these cases and information regarding their circumstances have not allowed us to establish a causal relationship" between liver anomalies and Herbalife's dietary supplements. The panel attributed the cases to metabolic changes from overzealous and unsupervised dieting.<ref>Template:Cite web</ref>

A July 2013 peer-reviewed study published in the World Journal of Hepatology reexamined known cases of hepatotoxicity that had previously been linked to consumption of Herbalife products and concluded that using "the liver specific Council for International Organizations of Medical Sciences scale, causality was probable in 1 case, unlikely and excluded in the other cases. Thus, causality levels were much lower than hitherto proposed".<ref>Template:Cite journal</ref> In a separate review published less than a year earlier, the same author described the relationship between Herbalife products and reported hepatotoxicity cases as "highly probable".<ref>Template:Cite journal</ref>

In 2019, the Journal of Clinical and Experimental Hepatology published a paper titled "Slimming to the Death: Herbalife-Associated Fatal Acute Liver Failure-Heavy Metals, Toxic Compounds, Bacterial Contaminants and Psychotropic Agents in Products Sold in India". This paper examined the connection between Herbalife slimming products and a case of fatal acute liver failure in one patient in India. In December 2020, the journal retracted the aforementioned article, contrary to the COPE guidelines, which advise that the original paper should remain available but prominently marked as retracted.<ref>Template:Cite web</ref><ref>Template:Cite journalTemplate:Retracted</ref> According to one of the co-authors of the paper, this retraction happened because Herbalife engaged DSK Legal,<ref>Template:Cite web</ref> a New Delhi–based law firm, to consistently issue legal threats to the journal's editor-in-chief.<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

Pyramid scheme allegations

Critics of the company's structure have contended that it has operated as a pyramid scheme.<ref>Template:Cite news</ref><ref> Template:Cite news</ref> They have also argued that the company does not sufficiently work to curb abuses by individual distributors, though Herbalife Nutrition has consistently denied the allegations.<ref>Template:Cite web</ref>

A 2004 settlement resolved a class-action suit on behalf of 8,700 former and current distributors who 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 November 2011, the Commercial Court in Brussels, Belgium, ruled that Herbalife was an illegal pyramid scheme.<ref name="bryssel-court">Template:Cite web</ref> The company filed an appeal on March 8, 2012.<ref>Template:Cite web</ref> On December 3, 2013, a Belgian appeals court found for Herbalife, reversing the lower court's finding.<ref>Template:Cite news</ref>

On May 1, 2012, a short seller, David Einhorn, asked questions about the company's business and sales models during the Q1 earnings call, setting off suspicions that Einhorn had a short position.<ref>Template:Cite web</ref><ref>Template:Cite news</ref> These suspicions were proved correct in January 2013 when at an investor meeting Einhorn revealed that he had profited through a short position against the company. Einhorn said the short had been closed before the end of 2012.<ref>Template:Cite news</ref>

Bill Ackman

On December 20, 2012, Bill Ackman (of Pershing Square Capital) presented a series of arguments outlining why his firm believed that Herbalife operated a "sophisticated pyramid scheme" and contended that its stock would hit zero.<ref name="The Wall Street Journal">Template:Cite news</ref><ref name="Guardian221212">Template:Cite news</ref> Ackman alleged after a year-long investigation that the majority of distributors lose money, that the chance of making the testimonial-implied headline income is approximately one in five thousand, and that the company materially overstates its distributors' retail sales and understates their recruiting rewards.<ref>Template:Cite web</ref><ref name=cnbc.com>Template:Cite news</ref>

According to a number of financial commentators, Ackman bet roughly $1 billion against the company;<ref>John Hempton, "Bill Ackman enters the city of Stalingrad," Template:Webarchive, Bronte Capital, December 28, 2012</ref> soon after remarks to the press, the price of the stock decreased such that Ackman would have made $300 million if he had closed his short position then.<ref name=salmon>Felix Salmon, "What's Ackman's Herbalife game?" Reuters Blogs, December 31, 2012</ref><ref name="cnbc.com"/><ref>Template:Cite web</ref> In March 2015, federal prosecutors and the FBI revealed that they were investigating whether or not individuals paid by Ackman and otherwise had made false statements about Herbalife's business model to regulators and others in order to lower the company's stock price and influence authorities to conduct an investigation.<ref>Template:Cite news</ref><ref>Template:Cite news</ref>

In November 2017, Ackman closed out his short position after Herbalife shares increased by 51 percent over the year, and replaced it with a less aggressive put option.<ref name="CNBC">Template:Cite news</ref><ref name=fortune2017>Template:Cite web</ref> In March 2018, The Wall Street Journal reported that Ackman had "largely exited" his bet against the company,<ref>Template:Cite news</ref> while others reported that the bet against Herbalife had cost his company hundreds of millions of dollars and damaged the confidence of investors in his hedge fund.<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

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.<ref>Template:Cite news</ref> 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.<ref>Template:Cite news</ref>

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.Template:What?<ref>Template:Cite web</ref><ref name="La Roche-FTC">Template:Cite news</ref><ref name=McCrum-FTC>Template:Cite news</ref><ref name=Vardi-FTC>Template:Cite news</ref><ref>Template:Cite news</ref>

In July 2016, Herbalife agreed to change its business model and pay $200 million in a settlement with the FTC.<ref name="reuters.com"/><ref>Template:Cite web</ref><ref>Template:Cite news</ref><ref>Template:Cite web</ref> 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."<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

The lawsuit alleged that Herbalife deceived consumers into believing they could earn substantial income from the business opportunity or big money from the retail sale of the company's products. In addition, the complaint charged that one of the fundamental principles of Herbalife's business model—incentivizing distributors to buy products and to recruit others to join and buy products so they could advance in the company's marketing program, rather than in response to actual consumer demand—is an unfair practice in violation of the FTC Act.<ref>Template:Cite web</ref>

The company remains under investigation as of early 2019 both by the United States Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) for corruption in China.<ref>Template:Cite web</ref>

On September 27, 2019, the SEC announced that Herbalife has agreed to pay $20 million to settle charges of making false and misleading statements about its business model and operations in China between 2012 and 2018. The company did not admit or deny the charges but agreed to the settlement terms.<ref>Template:Cite web</ref><ref>Template:Cite web</ref><ref>Template:Cite web</ref>

U.S. Department of Justice investigation of bribery in China

In 2019, the DOJ charged two of Herbalife's employees with conspiracy in violation of the Foreign Corrupt Practices Act (FCPA). They were accused of bribing Chinese officials in order to procure sales permits and to influence an investigation into Herbalife. They were also accused of offering bribes to China Economic Net in order to influence their media coverage.<ref name="WSJ111519">Template:Cite news</ref> In response, Herbalife committed $40 million to resolve the issues, and began negotiations with both the DOJ and SEC.<ref>Template:Cite news</ref> In August 2020, Herbalife agreed to pay $123 million to the DOJ and the U.S. Securities and Exchange Commission.<ref>Template:Cite news</ref>

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.<ref>Template:Cite news</ref> They sponsored FC Barcelona and Lionel Messi between 2010 and 2013.<ref>Template:Cite news</ref> Herbalife has also sponsored the basketball club Herbalife Gran Canaria since 2012.<ref>Template:Cite web</ref>Template:Primary inline In July 2020, Herbalife also sponsored the Guangzhou Charge of the Overwatch League.<ref>Template:Cite web</ref> 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.<ref>Template:Cite web</ref>

During the 2020 Summer Olympics, Herbalife Nutrition was a sponsor of the Olympic Committee of Israel and the Indian Olympic Association.<ref>Template:Cite web</ref><ref>Template:Cite web</ref> In 2023, Herbalife became a sponsor of the Indian Premier League.<ref>Template:Cite news</ref>

In 2023, the company became the main shirt sponsor of the Western Sydney Wanderers FC women's football team.Template:Cn

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.<ref>Template:Cite news</ref> 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".<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

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,<ref>Template:Cite web</ref> and overstatement of its products' health benefits.<ref>Template:Cite web</ref> One reviewer wrote that it appeared to be largely based on Betting on Zero, and caused no immediate change in Herbalife's stock prices.<ref>Template:Cite web</ref>

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 Carl Icahn.<ref>Template:Cite web</ref> In the book, Wapner characterizes Ackman's decision to bet against Herbalife as dangerous, because it anticipated that the government would shut Herbalife down.<ref>Template:Cite web</ref>

External links

• Template:Commons category-inline
• Official website

• Company profile by MarketWatch