In this Herbalife review we’ll investigate whether Herbalife is a pyramid scam, and answer the question ‘is Herbalife a scam or legit’?
Herbalife is a multi level marketing (MLM) company in the nutrition niche.
There are two main ways you can earn money in the typical MLM model:
- By selling a product that is not sold in retail stores. In order to obtain the product you must order through a consultant, or on a consultant’s website, and
- By receiving commissions from the sales of your downline (i.e. people you recruit into your network)
What this means is you need to able to sell high volumes of products to people. If you genuinely want to be successful in a MLM company, you want to be recruiting new distributors who are also selling a lot of products. In the latter scenario, as well as selling products, you need to be able to sell the ‘lifestyle opportunity’ as well.
Let’s take a look at Herbalife.
Some basic information about Herbalife:
Herbalife Nutrition is a global nutrition company.
- Website: https://www.herbalife.com
- In operation since: 1980
- Price to join: Minimum $94.10
- Recommended: Yes, but only if you like MLMs
My Herbalife review will take you through the following sections:
- What is Herbalife and how does Herbalife work?
- How do you get paid with Herbalife?
- Is Herbalife legit?
- My recommended way of making money online
What is Herbalife and how does Herbalife Work?
To become a Herbalife Distributor, you need to sign up under an existing distributor who will be your upline. If you don’t know anyone already in Herbalife, you will be matched with an existing Distributor.
To get started as a Distributor, you also need to purchase a starter kit. You can purchase either the International Business Pack ($94.10), or International Business Pack – Super Starter ($124.10). Herbalife are not particularly forthcoming about what you actually get in these kits.
There are no other required purchases.
As a Herbalife Distributor, you can earn money in two ways:
- You can sell Herbalife Nutrition products to make a retail profit.
- You can recruit others who want to consume or sell Herbalife Nutrition products.
You can also buy Herbalife Nutrition products at a discount for your own or household use. However if you just want to join for discounted products, you’re better off becoming a preferred member for $34.95.
Their product line covers:
- Core products – Formula 1 Nutritional Shake Mix, Formula 2 Multivitamin Complex, and Formula 3 Cell Activator
- Healthy weight products – protein drinks, snacks, enhancers, and healthy weight programs
- Specialised nutrition products – for heart health, women’s and men’s health, healthy aging, digestive health, immune health, stress management, children’s health
- Energy and fitness products – fitness drinks, guarana products, Liftoff (a product with caffeine and vitamins), Herbalife 24 range of products, and green tea
- A range of skin care and hair care products
They also have a website (which is pretty good!) that has independent distributor success stories, together with health and wellness articles:
The Herbalife Compensation Plan
Herbalife, like several other MLMs I have come across, don’t seem to be forthcoming with their compensation plan. I was able to find some older compensation plans published by people other than Herbalife, but all I can find on the Herbalife website is a one pager that has some information but I can’t help but feel there is more information that isn’t being shared.
The document says that “you can earn money by selling Herbalife Nutrition products that you buy at a discount. Your initial discount is approximately 25%. The more you sell, the higher your discount, up to a maximum of 50%.”
An example they provide is for their Formula 1 product:
You will notice that the distributor price doesn’t include shipping and tax. Hmm. So the potential profit I’m assuming will be less than what they’ve quoted there.
For more information, here is the reference document.
Is Herbalife a Pyramid Scam?
Interesting question! It is a question that was battled out over five years between Bill Ackman, head of hedge fund Pershing Square Capital Management, and Herbalife.
It started in 2012 when Ackman attacked Herbalife with a 342-slide presentation where he said Herbalife was a “predatory pyramid scheme destined to fail.”
According to Ackman, participants in the Herbalife scheme, the distributors, “obtain their monetary benefits primarily from recruitment rather than the sale of goods and services to consumer”. He went on to say “Herbalife inflates the suggested retail price (SRP) of its products and overstates ‘Retail Sales’ in its public filings to conceal the fact that Recruitment Rewards earned by distributors are substantially greater than the Retail Profit they generate.”
The Federal Trade Commission did fine Herbalife $200 million after their own investigation. The FTC never officially called the company a pyramid scheme, however they did place new restrictions on sales that affected only 20% of revenues.
For the full 2018 Forbes article, read more here.
Is Herbalife A Scam or Legit? It’s LEGIT! But…
MLM is a legitimate business model and Herbalife is no different. It does pretty close to the wind though. They aren’t the first to be investigated for being a pyramid scheme, and they won’t be the last. Whilst the MLM isn’t for everyone, you can earn money. It is all about moving as much product as possible for maximum income, and recruiting others to do the same.
I maintain that there are some people who succeed in the MLM model, but the vast majority FAIL.
And whilst that’s true for all MLM business models, not just Herbalife, there are still some red flags in my view specifically relating to Herbalife.
Herbalife has an A- rating with the BBB:
You will note that there is currently an alert on the business. This relates to a Settlement Agreement that has been formally brought by the Security and Exchange Commission. Herbalife agreed to pay $20 million to settle charges that it made false and misleading statements about its China business model in numerous U.S. regulatory filings over a six-year period.
Is Herbalife Worth Your Time and Effort?
It’s important to know a few statistics about MLMs.
Jon Taylor PhD, in “The Case For (and Against) Multi-level Marketing” published by the FTC, researched MLMs and his research found:
- In the first year of operation, a minimum of 50% of representatives drop-out.
- After five years of operation, a minimum of 90% of representatives have left the company.
- By year 10, only those at or near the top have not dropped out – approximately 95% of representatives have dropped out by then.
It appears that Herbalife follows this same pattern.
Let’s take a closer look at the (limited) published information on their website relating to income disclosure.
Here is the Herbalife income distribution statement for 2018 relating to the U.S.:
Could this be anymore vague?!
So, of the first year distributors (they don’t tell us the total number of first years), we can see that ‘about 20,000’ earned at least something. They only tell that us that 50% (‘about 10,000’) earned more than $170 in a ‘typical’ month. That means that same number earned less than $170 in a typical month. So what does that mean exactly? That they earnt $100? $80? $50? Your guess is as good as mine.
Even the top 10% only earn $900 or more (this only equates to $10,800 per year). It is worth noting that the figures quoted above do NOT include any expenses.
I don’t know about you, but these quoted figures don’t inspire me with confidence.
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Have you had any experience with Herbalife or with other MLMs? What did you think?
If you have any comments or questions please leave them below, and I’m always happy to help you out.