Ah, HerbaLife: long ago, I remember following cars that had bumper stickers saying things like "Lose weight Now, ask me How!" and "Work from Home and Make $1500 a Week!" Before long, I started seeing utility and streetlight poles crusted over with flyers advertising the same thing. Curious, I called the 1-800 number listed. After getting through the automated message promising me a "once in a lifetime opportunity" to make money and get healthy, I left my name and phone number. The woman who called me the following day later was peppy and upbeat, and went on and on about how the products I had called about would make me healthier and wealthier.

Eventually, the woman asked me what vitamins and supplements I was currently taking. When I told her I didn’t take any nutritional supplements, I could almost see her crestfallen face. But she recovered pretty quickly, inquiring if I worked out. When I said that I did, she mentioned the protein shake mixes that the company offered, and how they would help me immensely.

After some 20 minutes of our "chat", I inquired about what company she represented. She did not say immediately, but after some coaxing, I heard "HerbaLife" mentioned.

For those of you who may not know, HerbaLife is a vitamin and nutritional supplements company that was founded in 1980 by Mr. Mark Hughes. Mark Hughes was a charismatic, ambitious man, who also died under some mysterious circumstances at the age of 44 (the consensus report is a probable drug overdose). However, while he was alive, Mark built up HerbaLife from a little-known vitamin company into the over $3.5 billion (as of 2007) industry it is today. HerbaLife is even traded on the New York Stock Exchange (NYSE: HLF).

HerbaLife is pretty amazing: the company claims to have over 1.8 million distributors spanning 66 countries. Many of these distributors are fiercely loyal to the company, to the point of zealotry. And yet, there are also others out there who are not so happy or content. Many of these "malcontents" are former HerbaLife distributors. A current friend of mine, who prefers to remain anonymous, sold HerbaLife products for over a year before quitting. From his experiences, and from my own personal research, I have learned a few key facts about HerbaLife and its business practices. Knowledge of this company’s business practices should make anyone considering this business a little leery. 

First of all, as the name inplies, HerbaLife sells various nutritional and vitamin supplements, such as protein shakes, herbs, power bars, weight loss supplements, and so on. One can buy the products directly from a seller (distributor), either by contacting a known seller or looking on places like Ebay. However, one is encouraged to not just purchase certain products, but to become a distributor too. Why?

HerbaLife operates as a multi-level marketing (MLM) corporation. This means that consumers are encouraged to become distributors of the HerbaLife products. These distributors are then further encouraged to encourage others to become distributors under them. If a distributor encourages enough consumers to become distributors, the original distributor’s income increases exponentially. Why? Because a portion of the sub-distributors’ income will be kicked up towards the original recruiting distributor. It’s a classic MLM income-generating plan.

Going from consumer to distributor runs about $220. This money is used to pay for an enrollment fee, some introductory products to sell, and also some products for the distributor’s own personal use. As a right of passage, would-be distributors are expected to consume the HerbaLife products as well as to sell them.

HerbaLife promises to generate some rather unbelievable earnings from product sales. As I mentioned earlier, there are ads out there claiming that one can earn as much as $1,500/week for part-time work! Other ads say that full-time work for HerbaLife will make you $5,500/week.

I don’t know about you, but claims of such vast riches make me instantly shake my head and wonder, if this is the case, why does anyone even bother going to work for $11/hour? And also, where are all these HerbaLife millionaires hiding? I’ve never seen such a millionaire, or heard of one being interviewed on a business- or finance-related TV show. I’ve also never read of a single such millionaire on any business web site, blog, or news feed. 

My curiosity regarding HerbaLife’s claims of vast wealth made me dig further into the company’s business structure. Here is what I discovered:

When it comes to HerbaLife’s distributors, only 1% make 85% of the company’s gross sales (which translates to profits). The remaining 99% make the leftover 15% of gross sales. So, if you have 1,782,000 distributors (99% of 1.8 million) earning about half a billion dollars (that’s $525,000,000, which is 15% of $3.5 billion), you get a result of $294 in annual sales/distributor!. And keep in mind that gross sales is not equivalent to net profit, because there are costs that need to be subtracted first.

There are also the time and additional monetary investments that must be made in order to run a successful business. HerbaLife distributors usually attend weekly to twice-weekly "pep-talk" meetings with HerbaLife officers in order to learn marketing strategies and to buy additional products (whether to sell or to use). This is a lot of time and effort (not to mention cash) for the promise of being in the top 15% of distributors.

However, the biggest problems with HerbaLife do not even lie there. As far as I see it, HerbaLife’s main issues lie with its products and business practices. Here are 3 of the biggest problems I see with HerbaLife:

1. Market over-saturation. Honestly, are vitamin supplements really that new and innovative? People have been taking supplements for the last few millenia!  Every store carries vitamin supplements, and often at a much better price than what HerbaLife offers. Even if HerbaLife products are somewhat better than the generics, I’m sure your local health food store carries nutritional supplements that will blow away those offered by HerbaLife.

2. Greed. The distributor that I talked with long ago when considering HerbaLife for a side busines had the classic snake-oil salesman/saleswoman  taint of corporate greed. But, how can you blame her? HerbaLife distributors know that at least half of their income rides on new recruits taking the HerbaLife plunge. Even my statement that I did not take supplements did not deter her from pressing on with her quest. Never mind the fact that I may not be suited to selling products I can’t stomach, or that I might not be good at selling things overall. No, the HerbaLife recruitment machine must roll on.

In light of such recruitment tactics, one has to wonder just how much of the $3.5 billion in gross sales that HerbaLife generates come from product sales and not  from distributor enrollments. Given enough distributor enrollments, all of HerbaLife could be just a vast pyramid scheme of distributors selling distributors, not products.

3. Bad publicity. HerbaLife has been the focus of many press reports and TV programs focusing on scams. Many ex-distributors, and even current distributors, are not happy with the company and its tactics. Many more distributors are sweating to unload their unwanted HerbaLife products on Ebay or Craiglist (as an example, I checked Ebay today and input the word HerbaLife- over 2,800 listings came up). For a simple vitamin company, HerbaLife sure seems to have a lot of people angry and unhappy with it.

In light of such information, it is difficult to fathom why people would get sucked into selling HerbaLife products. And yet, whenever I have posted articles about HerbaLife, I’ve received many vicious comments attacking me for being an untalented ex-distributor who didn’t "try" hard enough. First off all, I was never a distributor, and second, I’ve sold lots of products in my lifetime, from candy to software to gelato machines. But, as I like to say, even bad press is better than no press.