Welcome to my in-depth review of Herbalife, one of the most well-known names in the multi-level marketing (MLM) industry. Whether you’ve heard glowing endorsements or skeptical critiques, it’s clear that Herbalife generates strong opinions. This review aims to cut through the noise and provide you with a balanced, comprehensive look at the company.
Is Herbalife a golden opportunity or a potential pitfall? We’ll explore its business model, earnings potential, and the experiences of real distributors. By the end of this review, you’ll have a clearer understanding of whether Herbalife is the right fit for you. Let’s dive in and uncover the truth behind Herbalife.
Disclaimer: This Herbalife MLM review has been thoroughly researched with information and testimonials that are available online to anyone in the public. Any conclusions drawn from that information are my own opinions.
Herbalife MLM Overview
Product Name: Herbalife
Owner: Mark Hughes
Product Type: Nutrition MLM
Price: $94.10 for a starter kit, plus extra costs
Best For: Established Direct Sellers
Pros
- Access to High-Quality Products
- Discounts & Bonuses
- Supportive Community & Training
Cons
- High Initial Investment & Ongoing Costs
- Low Earnings for Most Distributors
- High Turnover Rate
- Confusing Compensation Plan
- Focus on Recruitment Over Sales
- Potential for Excessive Inventory
Quick Summary
Recommended? No, Herbalife isn't exactly a pyramid scheme, but it does closely resemble one.
Table of Contents
What Is Herbalife?
Herbalife is a direct-selling company that focuses on marketing nutritional supplements. It’s one of many online companies that claim to help you make money by selling marked-up items through a membership. Their marketing strategy revolves around becoming a “Jim Rohn marketer,” but the problem is that most participants fail to profit from promoting other products.
Network marketing as a business model is becoming saturated for the average person. In other words, if you’re not already a “Jim Rohn marketer,” it’s challenging to sell Herbalife products. However, there are some valuable income-generating resources and the potential for substantial earnings within Herbalife.
But the question remains: is Herbalife a pyramid scheme? To answer that question, let’s delve into the company’s brief history.
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Who Founded Herbalife?
In 1980, Mark Hughes (1956-2000) founded Herbalife Nutrition with the ambitious vision of transforming the dietary habits of individuals worldwide, one person at a time. He shared his vision for success enthusiastically and powerfully, resulting in the creation of a multibillion-dollar firm. This firm now has dedicated Independent Herbalife Participants in more than 90 countries around the world.
In 1994, Hughes established the Herbalife Nutrition Foundation (HNF) to improve the lives of children by assisting companies in providing healthy nutrition to vulnerable children. Today, the program helps provide proper nutrition to countless children globally. HNF also supports relief efforts and responds to natural disasters around the world.
Now, let’s address the main question: Is Herbalife a scam pyramid scheme or a legitimate MLM? Continue reading my Herbalife review to find out.
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Is Herbalife a Pyramid Scheme?
Before diving into whether Herbalife is a pyramid scheme, it’s crucial to understand what a pyramid scheme actually entails. This understanding will help you approach the review with the right mindset.
What is a Pyramid Scheme?
Pyramid schemes are designed to make quick profits for early investors, but their sustainability is short-lived. Despite presenting themselves as lucrative opportunities, they ultimately lead to disappointment as they dry up.
Not only are pyramid schemes a waste of time, but they also deplete your finances. It’s disheartening how they exploit your aspirations of wealth. Interestingly, numerous MLM companies operate in a similar manner.
So, does Herbalife’s MLM structure classify it as a pyramid scheme?
Does Herbalife Fit the Pyramid Scheme Mould?
Herbalife has often been questioned about being a pyramid scheme, but the company avoided that label by settling with the FTC for $200 million in 2016. Despite this, the company still faces its share of problems. One notable incident was John Oliver’s attempt to expose Herbalife as a pyramid scheme, claiming that the business model relied on making money from people who joined and earned a commission from their sales. Whether he was right or wrong remains a question.
The reality is stark: around 99% of participants in these make-money opportunities earn less than minimum wage. Despite reaching nearly $5 billion in sales in 2018, Herbalife’s legitimacy is still a matter of debate.
Is Herbalife a Pyramid Scheme in Disguise?
Herbalife’s reward framework sheds light on what John Oliver discussed regarding MLM firms. Some of these companies excel at concealing their inefficiencies while relying on big names for credibility. However, Herbalife’s true nature was exposed when it was declared a pyramid scheme by the Commercial Court in Brussels, Belgium. This ruling was based on their failure to disclose their retail consumer base, which is a common characteristic of pyramid schemes.
Pyramid schemes operate by encouraging recruits to make upfront payments with the promise of downstream earnings. Such manipulative tactics are both unethical and illegal. On the other hand, most multi-level marketing businesses require upfront payments for their products. This creates a grey area when differentiating between MLMs and pyramid schemes, where scams often hide within legitimate companies.
Despite offering actual products to distributors, Herbalife has yet to completely shake off the label of being a pyramid scheme.
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Can You Make Money With Herbalife?
Herbalife recruits have often received unrealistic advertising materials from top suppliers. For instance, video clips circulated featuring a member named Doran Andry, who claimed to make close to $100K a month marketing Herbalife products while driving a red Ferrari. This kind of high-income portrayal can be misleading.
When Herbalife disclosed its financials, it revealed that only 704 U.S. participants earned over $100,000 a year, not a month. In reality, the majority of their network marketing distributors earn less than a couple of hundred dollars.
Additionally, Herbalife’s nutrition clubs have gained significant traction but are expensive to join and primarily focus on recruitment rather than product sales. These clubs, designed to recruit low-income distributors, are found worldwide. While Herbalife reports a substantial increase in sales from these nutrition clubs, it remains unclear whether these claims hold true.
Ultimately, it’s crucial to note that Herbalife is not officially considered a pyramid scheme. However, making substantial money with Herbalife is challenging and often falls short of the lofty promises made by some of its promoters.
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Is There a Lawsuit Against Herbalife?
When trying to determine if Herbalife is a scam, investigating any ongoing lawsuits can be revealing. Unfortunately, Herbalife has faced numerous legal actions, including a recent one this year. Just when things seemed to be improving, they were reprimanded by Chinese authorities for the third time in four years, leading to a hefty $123 million settlement with the United States government. This incident followed a previous settlement where Herbalife had to pay $20 million to the SEC for misleading investors about its business model in China.
Additionally, an audio recording surfaced featuring Herbalife’s CEO, Rich Goudis, suggesting that an employee disregard expense account limitations in China. These are just a few of the recent allegations. However, it’s important to note that these issues do not necessarily imply that Herbalife is a scam. They do highlight that the company faces challenges, much like any other.
Why Was Herbalife Banned in the US?
Herbalife agreed to restructure its organization and pay a $200 million fine following accusations of being a pyramid scheme. This agreement was reached in 2016 with the Federal Trade Commission (FTC) of the United States. In November 2017, Ackman’s hedge fund closed its short position in Herbalife. Around the same time, Herbalife removed plant sources of ephedrine from its product line in response to state regulations.
In July 2016, Herbalife made further changes to its business model and settled with the FTC, resulting in a $200 million payment to its representatives. It’s important to note that this doesn’t make Herbalife a scam. Like any other company, they faced challenges, but their active efforts to address these issues demonstrate their legitimacy.
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Is Herbalife a Scam?
Is Herbalife a scam? Multi-level marketing companies like Herbalife often find themselves at the center of controversy. Some MLMs are viewed as scams more than others, while some are considered borderline pyramid schemes or illegal scams. But what exactly is Herbalife? It’s difficult to determine whether Herbalife is a scam, a rip-off, or a pyramid scheme.
So, let’s first take a look at some of the controversies that Herbalife has been involved in over the past few years.
Was Herbalife a Scam in 2012?
In 2012, Herbalife’s president, Des Walsh, was questioned by hedge-fund supervisor David Einhorn about the extent of sales beyond the firm’s network. This encounter left Einhorn angered and subsequently led to Bill Ackman, the head of Pershing Square hedge fund, placing a $1 billion bet against Herbalife by shorting its stock in late 2012.
In response, Herbalife CEO Michael Johnson decided to fight back against Ackman’s claims, denouncing them as incorrect and misleading. The situation escalated further when Carl Icahn entered the scene, labeling Ackman as a phoney and dismissing his claims as baseless.
The turning point came in March when a front-page story in The New York Times exposed Ackman’s actions. It was revealed that Ackman had not only been lobbying public officials but also providing funds to anti-Herbalife advocacy groups. Herbalife officials initially denied these allegations, only to publicly admit two days later that they were being investigated by the Federal Trade Commission (FTC).
Ackman continued to assert that Herbalife was a global pyramid scheme, even going as far as calling it a criminal operation. Herbalife’s CFO, John DeSimone, countered this by expressing complete confidence in defending the company, stating that Ackman had crossed a moral boundary and exceeded the legitimate role of short sellers.
Eventually, in 2016, Herbalife was obligated to pay $200 million and restructure its US operations following a two-year investigation into “unjust and deceptive practices.”
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Turn Your Passion into Profits
Is Herbalife an MLM?
Herbalife is a direct-selling MLM firm known for its international web sales of approximately $4.88 billion in 2019. So, how can you get a share of their success? The trick is that their protein and dietary supplements are not available on store shelves. The only way you can obtain these items is through a Herbalife supplier. Visit their website to learn more about the products and check the prices. However, please note that you cannot make a direct purchase.
Joining Herbalife MLM can be seen as a terrific choice for some. With a network of 3.7 million “members” in around 90 countries, Herbalife is a substantial company. This information helps you understand that Herbalife is not necessarily a scam. More about it is below in my Herbalife review.
Is Herbalife a Legit MLM?
Herbalife is considered a legitimate MLM company. However, it has faced scrutiny from the FTC, which has accused it of operating as a borderline pyramid scheme. There have also been controversies involving certain individuals associated with the company. Like many MLMs, Herbalife operates by recruiting people to make money. However, there are concerns about how Herbalife presents itself and the actual income potential for its distributors.
The truth is that selling Herbalife products alone is unlikely to provide a sustainable income. It is widely known that only a small percentage of people who join network marketing companies, such as Herbalife, can recoup their costs and make significant profits. Some individuals have even claimed that Herbalife is a pyramid scheme. You can watch their testimonials in the video below:
From this video, it is evident that members are encouraged to involve their friends and become distributors. However, as your efforts dwindle, you may resort to modern tactics like online marketing. It is important to note that the payment plan is not designed to generate profits for you. Instead, the purpose of this business is to motivate you to keep using their products and make additional purchases. Consequently, the most likely outcome is that you will continue to lose money while they continue to profit.
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How Does Herbalife MLM Work?
To become a member or representative, you’ll need to purchase Herbalife products. Once you have the products, you can either sell them or use them to promote the company. The best route is to do both. However, some people get confused and label Herbalife as a pyramid scheme. Let’s debunk this misconception once and for all.
How Do You Make Money With Herbalife MLM?
Herbalife’s pay structure is based on a Multi-Level Marketing (MLM) model. This means that your compensation is not solely derived from marketing Herbalife products. Instead, you can receive incentives from the sales of new members that you recruit, as well as from the sales generated by their recruits.
To make any money with Herbalife protein shakes, you’ll need to market them extensively. However, there’s a catch. You have to purchase the products upfront before you can even sell them. This creates a problem because your earning potential is limited by how much you can buy. Moreover, there’s a risk of ending up with excessive inventory that you can’t sell. On the bright side, there’s a 12-month return policy for unopened items.
The fact that you have to “pay to play” is the main reason why Herbalife tends to be labelled as a pyramid scheme. But before jumping to conclusions, let’s explore how much they pay.
What is Herbalife’s Compensation Plan?
The amount of money you earn as a Herbalife distributor depends on the number of products you sell. However, the truth is that distributors don’t earn much from these sales. The objective is to sell products and earn volume points with each sale. When you accumulate a certain number of volume points, you can advance to the next level and earn a higher commission from your downline.
The key is that you earn volume points when you or your downline place orders. Therefore, the more you or your downline orders, the more volume points you accumulate.
Unfortunately, Herbalife, like other MLMs, has a complex and bewildering compensation plan that seemingly aims to confuse. However, it’s essential to remember two primary earning methods:
- Sell Herbalife products to your niche market.
- Recruit promoters in your MLM network and earn bonuses.
Given these facts, one may question whether Herbalife is a pyramid scheme. While many people hold this belief, my forthcoming Herbalife review sheds light on the matter, revealing that labelling them as a pyramid scheme is unjustifiable. In the end, we must acknowledge that the company sells real products, making it difficult to attach the pyramid scheme label to them.
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How Much Does It Cost To Become A Herbalife Distributor?
The cost to join as a Herbalife distributor is a one-time investment of $94.10. Once you pay the fee, you will receive a starter kit, training, and additional benefits. Moreover, joining provides you with the opportunity to start marketing their products.
Here’s what you get in your starter kit:
- Herbalife products for personal use
- Marketing materials and brochures
- Training and educational resources
- Online support and access to the distributor portal
Additionally, when joining, distributors enjoy a lifetime 25% discount on their orders, just like customers. Upon reaching the distributor rank of supervisor, you will receive a significant 50% discount on your orders. As you progress in rank, you will also start earning higher commissions and bonuses.
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What Are Herbalife’s Products?
Herbalife Nutrition offers a range of products, including weight loss and healthy protein shakes, protein bars, teas, aloes, and vitamins, as well as sports hydration, energy, and personal care options.
How Can You Effectively Market These Products to Make Money?
To expand their organization and showcase the product, Herbalife encourages social gatherings known as “nutrition clubs.” During these events, members have the opportunity to try the drinks and discuss healthy lifestyles. Herbalife claims that these nutrition clubs assist individuals who would typically opt for vending machine snacks or fast food.
By providing them with healthy options and support during this lifestyle change, they aim to help people make healthier choices.
Do People Lose Weight With Herbalife?
Herbalife meal replacement shakes can indeed aid in weight loss, though this claim is currently under debate. To achieve optimal results, it is crucial to incorporate exercise and maintain a balanced diet consistently. Ongoing research studies aim to validate the effectiveness of Herbalife’s fat-burning products in preventing weight gain over an extended period.
Ultimately, it is important to note that these products are of high quality and are endorsed by satisfied users. Additionally, by following their lead, there is also an opportunity to generate income.
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Is Herbalife Worth The Trouble?
To understand the potential earnings with Herbalife MLM, let’s examine the earnings of distributors in the US as an example.
According to Herbalife, approximately:
- 50% earned less than $370 a year.
- 10% made just $6,965 a year.
- Only the top 1% earned more than $108,802.
It’s worth noting that less than 15% of Herbalife distributors in the United States made any money from them. This suggests that Herbalife had a total of 464,736 distributors, with 399,673 (86%) of them making nothing. Based on these figures:
- 399,673 made nothing.
- 34,855 made less than $370 a year.
- 6,971 made more than $6,965 a year.
- 697 made more than $108,802 a year.
It is important to note that these are just profits and do not consider any expenses incurred by distributors, including their initial investment.
High Turnover Rate
Herbalife has a high turnover rate among its representatives:
- 90% of representatives leave Herbalife every year.
- In 2005, Herbalife admitted to having a turnover rate of 90% among representatives who were not managers, and 60% among managers.
The company further states:
“We estimate that, of our over one million independent suppliers, we had about 201,000 managers after requalifications in February 2005.”
It is undeniable that one supplier drops out of Herbalife approximately every 16.7 seconds. Given this high turnover rate, Herbalife finds itself in constant need of recruiting new members to replace those who leave.
One must question why Herbalife does not reconsider its entire business model instead of persistently recruiting new individuals into a clearly unsustainable framework. The high turnover rate suggests that the model works remarkably well for the privileged few at the top while disregarding the 90% of non-supervisor suppliers who leave annually.
In my opinion, Herbalife MLM is burdensome and carries significant risks. It is simply not a suitable endeavour for me. While some people may find success within the system, the odds are stacked heavily against the average distributor. The high turnover rate and the low percentage of distributors making a substantial income highlight the challenges inherent in this business model.
Turn Your Passion into Profits
What I Like About Herbalife
Herbalife has been a prominent name in the nutritional supplement industry for decades. While it faces its share of controversies, there are several aspects of the company and its business model that can be genuinely appealing. Here are a few key points that stand out positively about Herbalife.
#1 Access to High-Quality Products
Herbalife offers a wide range of high-quality nutritional products, including weight loss shakes, protein bars, teas, vitamins, and sports hydration products. These products are backed by satisfied user testimonials and ongoing research, providing value both for personal use and for marketing to potential customers.
#2 Discounts and Bonuses
As a Herbalife distributor, you enjoy significant discounts on products. Starting with a 25% discount on all orders, you can eventually qualify for a 50% discount upon reaching the rank of supervisor. Additionally, Herbalife offers various bonuses and commissions for those who successfully recruit and build a downline, providing an opportunity for increased earnings as you advance in rank.
#3 Supportive Community and Training
Herbalife provides comprehensive training and support to its distributors. The starter kit includes marketing materials, educational resources, and access to an online support network. The nutrition clubs and social gatherings foster a sense of community, allowing distributors to share experiences, tips, and motivation to succeed in their business endeavours.
What I Didn't Like About Herbalife
Now, you should be aware of the things that concerned us about joining Herbalife:
#1 High Initial Investment and Ongoing Costs
Joining Herbalife requires an upfront investment of $94.10 for the starter kit. Additionally, distributors must continually purchase products to maintain their status and earn commissions. This can lead to significant out-of-pocket expenses, especially if sales are slow.
#2 Low Earnings for Most Distributors
The earnings potential for the majority of Herbalife distributors is relatively low. According to Herbalife’s own data, a substantial percentage of distributors earn less than $370 annually, with only a small fraction making substantial incomes. This makes it challenging for most to achieve financial success.
#3 High Turnover Rate
Herbalife has a high turnover rate, with 90% of representatives leaving the company each year. This high attrition rate indicates that many people find it difficult to sustain their involvement and achieve their business goals, leading to constant recruitment to replace departing members.
#4 Complex and Confusing Compensation Plan
Herbalife’s compensation plan is intricate and can be confusing for new distributors. Understanding the various levels, volume points, and commission structures requires time and effort, which can be overwhelming for those new to MLM models.
#5 Focus on Recruitment Over Sales
The business model heavily emphasises the recruitment of new members to build a downline, often overshadowing the actual product sales. This recruitment-centric approach can lead to ethical concerns and reinforces the perception of Herbalife as a pyramid scheme.
#6 Potential for Excessive Inventory
Distributors are required to purchase products upfront, which can result in excess inventory if they are unable to sell the products. Despite the 12-month return policy for unopened items, the risk of accumulating unsold stock remains a significant financial burden for many distributors.
Herbalife MLM Review: Conclusion
Is Herbalife a scam or a legit MLM? In my review, Herbalife is a legitimate multi-level marketing firm. Their primary focus is on product acquisition and recruiting new distributors. However, let’s take a closer look…
While Herbalife and similar companies may appear to operate as multi-level marketing, they often blur the line between pyramid schemes and legitimate businesses. There are numerous network marketing opportunities available, offering various business prospects for making money. But in my opinion, Herbalife is not among them.
It raises concerns with its shady practices, an abundance of complaints, low success rate, and overly complicated plan. Those are all major reasons why I don’t recommend Herbalife MLM. Although it offers a lucrative compensation plan, the chances that an average person without any MLM experience will see success are close to zero. In other words, most people who join are just funding those at the top of the “pyramid.”
Thank you for reading my Herbalife review! What are your thoughts on Herbalife? Feel free to share them in the comments section below.
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Thanks for reading my Herbalife MLM Review! If you have any questions, or any experiences to share then please write them in the comments below. ;).
