Herbalife
Founder. Mark Hughes
Herbalife International is a multi-level marketing company that sells nutrition, weight management and skin-care products. The company was founded in 1980, and it employs around 6,200 people worldwide. Herbalife reported net sales of US$4.072 billion in 2012, an 18% increase over 2011, and net income of $477.19 million, a 16% increase over 2011.Incorporated in the Cayman Islands, its corporate headquarters are in Los Angeles, California, United States.
The company distributes its products in 88 countries (as of December 2012) through a network of approximately 3.2 million independent distributors, some of whom earn profit on product sales and additional commission from a multi-level marketing (MLM) compensation structure.
The Commercial Court in Brussels, Belgium, has ruled the company to be an illegalpyramid scheme, a decision Herbalife is appealing. The company has been criticized by, among others, hedge fund manager Bill Ackman of Pershing Square Capital, who claimed that Herbalife operates a "sophisticated pyramid scheme" after taking a $1-billion short position in Herbalife stock. The company denies the allegations.
History
In February 1980, Mark Hughes began selling the original Herbalife weight management 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 Joanne, whose premature death he attributed to an eating disorder and an unhealthy approach to weight loss. His goal was to change the nutritional habits of the world.
His first product was a protein shake designed to help people manage their weight. He structured his company using a direct-selling, multi-level marketing model which attracted thousands of distributors (Herbalife Independent Distributors) who sold its products door-to-door or through word-of-mouth, without relying on 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 US$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 $850,000 without admitting wrongdoing.In 1986 Herbalife became a publicly traded company on the NASDAQ, and in 1996 Herbalife reached US$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 alcohol and doxepin, an anti-depressant. The company continued to grow after his death and in 2002 was acquired byJ.H. Whitney & Company and Golden Gate Capital for US$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 16 December 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 $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.
On April 9, 2013, the company's long-time auditor, KPMG, resigned after the KPMG executive who oversaw Herbalife audits admitted to providing insider information to a golfing buddy about at least five companies—including Herbalife and Skechers. No wrongdoing was alleged against Herbalife. The company hired PricewaterhouseCoopers as its auditor on May 21, 2013.
Charity
The Herbalife Family Foundation was created in 1994 by Herbalife founder Mark Hughes. The Herbalife Family Foundation creates partnerships with charities to help meet the nutritional needs of children at risk. At the same time, the foundation provides funds to organizations assisting victims of natural disasters. The Herbalife Family Foundation is a global non-profit organization working in communities around the world.
