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These customers are encouraged to explore the possibilities of selling Herbalife
themselves. Further recruits are signed on by the company, whose goal is subsequently
to sell and recruit as well. Typically, this pattern of business has been associated
with the pyramid scheme. Some critics argue that in pyramid schemes, product sales
tend to be less important than the recruitment of other salespeople. Several have
explained that when more money is made from recruiting than from selling, it creates
an economic imbalance within the sales structure. As one critic put it, those at
the top of the scheme benefit monetarily from the efforts of those at the bottom.
Many critics find the promise of profit offered by the promotional pitch for Herbalife’s
distributor recruitment to be unrealistic.
Herbalife offers a range of wellness-related products from diet supplements to a
personal care range. Weight Management products include comprehensive diet programs,
formulas, proteins, enhancers and snacks. Herbalife’s Targeted Nutrition solutions
offer special products for heart problems, women, men, children, aged care, digestive
health, immune system enhancement and stress management. Their Energy & Fitness segment
offer teas, tablets and drink powders to boost an active fitness regime. Their Personal
Care range offers a variety of body and bath products to suit various skin types
and requirements; there is also a choice of fragrances.
The cost of Herbalife products has been reviewed to be substantially greater than
conventional mass-marketed brands in the same category. Some reviewers insist that
they difference can be justified due to the quality of ingredients used in the Herbalife
versions. Other reviews insist that it's not the case, especially when it comes to
generic multivitamin supplements and shampoo. Some distributors responding to these
criticisms suggest that the adverse effects of not purchasing Herbalife products
for purposes such as weight loss may be expensive.
Bill Ackman, who has an activist hedge fund called Pershing Square Capital Management, has invested considerable effort in investigating Herbalife. He has accused Herbalife of dishonesty and misleading practices, suggesting that it may be an intentional scam. Ackman’s contention with the Herbalife business model has two key points: firstly, the structure of the distributor network severely minimizes the chances of accumulating significant profits.; secondly, Ackman argues that the Herbalife products do not seem as important as the recruitment aspect: it has been suggested that they may be a ruse to lure new recruits into the pyramid sales structure and that's where the money truly lies.
What Is Herbalife?
Herbalife is an LA based company that sells weight, nutrition and skin care management
products with the help of multi-level marketing. Herbalife products have a presence
in 88 countries with a distributor network of approximately 3.2 million people. Some
of these independent distributors earn a combination of sales profits and commissions
from the company's compensation structure through multi-level marketing.
Herbalife has faced criticism on various fronts for being a pyramid scheme of sorts. Here's how it works: Herbalife products are sold by individual salespeople who are known as distributors. Apart from selling, their goals include recruiting other distributors into the company. Sales are significantly higher within personal networks, as many distributors have affirmed.
Ackman argues that the Herbalife statistics are exaggerated. He estimated a different
set of figures to the official company version that suggest the true core of the
business is, infact, the recruitment payout. While some skeptics suggest Ackman’s
motivations may not be entirely charitable, it is undeniable that Ackman’s publicized
views have generated significant debate on the business practices of Herbalife and
the perils of MLM-based business models. Ackman has a website devoted to the scrutiny
and criticism of the company.
User reviews of Herbalife products are varied. Most flavors of nutrition and weight management supplements tend to be criticized. However, reports of the benefits of the weight loss or bodybuilding products are mixed. Reviews of the company's marketing and distribution practices are equally mixed, with industry and consumer responses focusing on both statistics and criticisms. Individual reviewers tend to be largely critical. Some responses from mainstream media argue that Herbalifeis legitimate and ethical in its conduct but cede that the recruitment payouts are at the core of the business.