Diet Herbalife Supplement
Herbalife International (NYSE: HLF), is a global nutrition, weight-loss and skin-care company. The company was founded in 1980 and it employs around 4,000 people worldwide. Herbalife reported global sales of USD 2.3 billion in 2009 and its corporate headquarters are in Los Angeles, USA.
The company distributes its products in 72 countries through a network of approximately two million independent distributors, some of whom earn profit on product sales and additional commission from a multi-level marketing (MLM) compensation structure.
Herbalife has faced occasional legal challenges over the safety of its products. As of 2009, none of these have been upheld.
History
In February 1980, Mark Hughes began selling the original Herbalife weight loss 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, whose death he attributed to an eating disorder and an unhealthy approach to weight loss. Adopting the multi-level marketing system for distribution and growth, the company attracted thousands of distributors who sold its products door-to-door or through word-of-mouth, shunning commercial distribution in retail stores.
The company's slogan, "Lose Weight Now, Ask Me How", became a marketing theme for distributors, featuring heavily on badges, flyers and posters. Early methods to recruit distributors included seminars, which would feature distributors giving health and weight loss testimonials on the Herbalife products and a keynote address by Hughes. By 1982 Herbalife had reached USD 2 million in sales and had expanded into Canada.
In 1985, the California Attorney General sued the company for making inflated claims about the efficacy of its products. The company settled the suit for USD 850,000 without admitting wrongdoing. In 1986 Herbalife became a publicly traded company on the NASDAQ, and in 1996 Herbalife reached USD 1 billion in annual sales.
Mark Hughes died at age 44. The Los Angeles County Coroner autopsy results ruled that the entrepreneur had died of an accidental overdose of large quantities of alcohol and the prescription anti-depressant Doxepin. The company continued to grow after his death and in 2002 was acquired by Whitney and Co LLC and Golden Gate Capital for USD 685 million, who took the company private again.
In April 2003, Michael O. Johnson joined Herbalife as CEO following a 17-year career with The Walt Disney Company, most recently as president of Walt Disney International. On December 16, 2004, the company had an initial public offering on the NYSE of 14,500,000 common shares at $14/share. 2004 net sales were reported as USD 1.3 billion. In April 2005, the company celebrated its 25th anniversary with a four-day event attended by 35,000 Herbalife Independent Distributors from around the world. In August 2005, Dr. Steve Henig joined the company as Chief Scientific Officer, responsible for product research and development. In 2008, President and COO Greg Probert resigned after it was reported that he had not completed the degree requirements for the MBA he claimed on his resume.
Business
Herbalife is a multi-level marketing (sometimes called MLM or network marketing) company. In addition to profits from product sales, Herbalife distributors can earn additional commissions from sales by their 'downline' distributors. Supporters of MLM contend this is a fair compensation system, whilst critics of MLM contend that it is similar to a pyramid scheme. Critics also argue that the company does not make enough effort to curb abuses by individual distributors, though Herbalife has consistently denied such allegations. Herbalife is a member of the Direct Selling Association in most countries in which it operates.
In its filings with the U.S. Securities and Exchange Commission (SEC), company management note problems with inappropriate business practices in the past, their subsequent long-lasting effects and the need to avoid any repetition. Company management considers the number and retention of distributors a key parameter and tracks it closely in financial reports. By January of each year, sales leaders are required to requalify. In February of each year, they remove from the rank of sales leaders those individuals who did not satisfy the sales leader qualification requirements during the preceding 12 months. For the latest 12-month requalification period ending January 2010, approximately 43.0 percent of the eligible sales leaders requalified, reflecting an improvement from 40.3 percent in 2008.
Herbalife Family Foundation
In 1994 company founder Mark Hughes started the Herbalife Family Foundation, a 501(c)(3), non-profit corporation, to improve children’s lives by helping organizations provide healthy nutrition to children at risk. Additionally, HFF often supports relief efforts in response to natural disasters. .
In 2005, HFF introduced its Casa Herbalife program to help provide healthy and nutritious meals by partnering with existing charities serving children. This program for children-at-risk is named after Casa Herbalife, an orphanage the foundation built in Brazil in 1998 and continues to support today. Today, 50 programs have been established on six continents.
HFF is supported by the Herbalife, its independent Distributors, employees, and friends. After the initial grant, the company promotes the involvement of local independent distributors and employees to directly support their local Casa Herbalife program through financial donations and volunteer activities.
Sports sponsorships
Herbalife sponsors a number of athletes, sports teams and sporting events around the world, including:
- Sergey Konyushok (Broke 7 Guinness Records at weight lifting)
- The LA Triathlon
- AYSO (the American Youth Soccer Organisation)
- The LA Galaxy soccer team
- IndyCar drivers Townsend Bell and E.J. Viso in the 2009 Indy 500
- Valencia CF football club
A complete list can be found at the Herbalife Sports Sponsorships website.
Product range
Herbalife's product range includes protein shakes, protein snacks, nutrition, energy and fitness supplements and personal care products. The Formula 1 protein shake, a soy-based meal-replacement shake, is the company's number one product and was one of the first products sold by the company. The range also includes targeted products for heart health, digestive health and skin care. Some products are vegetarian, kosher or halal, and Herbalife provides testimonials and advice from health professionals as part of their product marketing.
According to the 2009 10K, many of its weight management, nutritional and personal care products are manufactured for by third party manufacturing companies, with the exception of products distributed in and sourced from China, where they have their own manufacturing facility and several products are manufactured in its recently acquired manufacturing facility in Lake Forest, California. Herbalife is currently making modifications to its recently acquired manufacturing facility in order to increase capability and capacity, and upon completion of these modifications, expect to increase self manufacturing for our worldwide demand.
Clinical studies
Three clinical studies have been completed on different formulations of Herbalife's Formula 1 protein shake product. The results of the studies support the claims made by Herbalife advocates.
Scientific advisory board
Herbalife's Scientific Advisory Board is chaired by David Heber, M.D. Ph.D, F.A.C.P., F.A.C.N., who is professor of medicine and public health and the founding director of the Center for Human Nutrition in the Department of Medicine at UCLA. According to a 2004 Forbes article, Dr. Heber joined the board at roughly the same time Herbalife made a $3 million donation to establish the Mark Hughes Cellular & Molecular Nutrition Laboratory at his Center for Human Nutrition, leading to criticism of Heber's actions as an inappropriate conflict of interest.
Louis J. Ignarro, Ph.D., a Nobel Laureate in Medicine and Distinguished Professor of Pharmacology at the UCLA School of Medicine, is also a member of Herbalife's Scientific Advisory Board. Ignarro worked with Herbalife to develop Niteworks, a dietary supplement designed to boost the body's own production of nitric oxide, and later became a member of the company's Scientific Advisory Board. Ignarro endorsed this product in exchange for a royalty agreement reported to have earned his consulting firm over $1 million in the first 12 months. Ignarro also promoted Niteworks' ingredients in the prestigious Proceedings of the National Academy of Sciences, without disclosing his financial interest to the publication. After Ignarro's ties to Herbalife were revealed, the journal issued a correction to the article, citing Ignarro's undisclosed "conflict of interest". UCLA conducted its own investigation and determined that Ignarro did not act improperly as all the research was done in Italy and no research funds came from UCLA. Therefore, it was not legally necessary for him to disclose anything. Ignarro presents a one-hour Herbalife promotional video for Niteworks.
Nutrition Advisory Board
Herbalife states that its Nutrition Advisory Board consists of "leading experts in the fields of nutrition and health who help educate and train our independent Distributors on the principles of nutrition, physical activity and healthy lifestyle."
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