Herbalife Ltd. (HLF) Responds To LULAC Amid 'Concerns' – ValueWalk Premium
Herbalife

Herbalife Ltd. (HLF) Responds To LULAC Amid 'Concerns'

There has not been much news on the Herbalife Ltd (NYSE:HLF) front lately (by lately we mean more than 24 hours, but in this case it could be over a week or so of no news!). However, finally there is some news on the debate between Bill Ackman and the ‘controversial’ MLM company. The company issued a very lengthy response after LULAC reader ‘raised concerns’ about the company, which LULAC has opposed (see more here) due to allegations that Herbalife Ltd. (NYSE:HLF) ‘rips off’ latinos. The letter was not enough, as Herbalife took to its HerbalifeTruth twitter account and attacked LULAC on the micro blogging website. Below are a few tweets from HerbalifeTruth.

It would require far too much time (and likely bore readers) to embed each tweet, but if readers are interested just go over to HerbalifeTruth Below is the full letter fromHerbalife toLULAC.

Herbalife Ltd. (NYSE:HLF) in it’s letter, responds to the concerns raised by LULAC leader Brent Wilkes .

Herbalife Ltd. (HLF) Responds To LULAC  Amid 'Concerns'

Herbalife Responds To Concerns Raised By LULAC Leader

June 18, 2014

Brent A. Wilkes

National Executive Director LULAC
1133 19th Street, NW, Ste. 1000 Washington, DC 20036

Dear Mr. Wilkes,
I write to address your May 31, 2014 letter to LULAC’s membership regarding Herbalife.

We at Herbalife Ltd. (NYSE:HLF) are proud of our presence in the Latino community and the role we play in helping people achieve healthier lifestyles through education and the use of our healthy and nutritious products. We also are proud of the business opportunity Herbalife provides to those who choose to earn part-time or full-time income. Indeed, our strong support in the Latino community is directly related to the widespread popularity of our products and the business opportunity we make available to those who choose to pursue it.

Herbalife Ltd. (NYSE:HLF) executives and representatives have met with you on three separate occasions. We have explained to you our industry-leading policies and procedures designed to protect Herbalife Members and consumers, and have responded to the issues you have raised during those meetings and elsewhere. Yet, in your letter you continue to state as “evidence” what are in fact misconceptions and unfounded, inaccurate allegations.

Because Herbalife strongly supports the general mission of LULAC and is closely aligned with that mission – indeed, we work hard every day to empower all our Members – I write to respond to each of your 9 pieces of purported “evidence.” I note that much of the support for your claimed “evidence” is in fact inaccurate or based on data and sources that are a decade or more old. Rather than relying on such outdated and inaccurate sources, we hope that you will take the time to learn the true facts about Herbalife. We also encourage you to meet with our broad base of Members – over 550,000 in the United States alone – and hear from them regarding their overwhelmingly positive experiences with Herbalife. You will find that Herbalife is a responsible company that improves the lives of its customers, both Members and non-Members alike.

1. You suggest that Herbalife Ltd. (NYSE:HLF) recruits new Members through the use of “testimonials that regularly feature six and even seven figure incomes,” and that Herbalife lacks sufficient disclosures about “the average net income that they can expect to make – information that we consider essential to anyone who is considering becoming an Herbalife distributor.” 

The majority of new Members join Herbalife primarily for the ability to purchase products they intend to use themselves, not to earn money. For those Members that do join for the business opportunity, Herbalife’s disclosures are among the best, if not the best, in the industry. Our Statement of Average Gross Compensation goes above and beyond the level of disclosure you recommended in a prior letter to LULAC’s membership on October 18, 2013. All Members certify that they have read and understand the Statement before they join. The Statement expressly explains that the vast majority of Members join primarily to obtain a discount on products for their own use and that most Members receive no compensation directly from Herbalife.

The Statement also discloses that for “the 13.6% of Herbalife Members who are Sales Leaders with a downline, the average compensation received from the Company in 2013 was (USD) 5,381.” The Statement includes the caution: “There is no shortcut to riches, no guarantee of success.”

Herbalife membership is low risk, offering both an easy entry and easy exit. The costs to join are minimal – as little as $59.50 for a membership pack that contains product with retail value that exceeds the price of the pack. Our Gold Standard Guarantee (http://opportunity.herbalife.com/the-gold-standard), provides a 90-day money back guarantee for the full cost of the membership pack, as well as a 100% refund (including return shipping costs) on unsold product purchased within the past 12 months if membership is resigned or not renewed for any reason. Included in each product order is a brochure communicating our Gold Standard Guarantee as well as a hotline for reporting any concerns or issues.

Herbalife Ltd. (NYSE:HLF) has always prohibited improper or inappropriate testimonials or income claims. Over the last 12 months, we have implemented several enhancements as additional steps to ensure testimonials are in compliance with the law. These enhancements include requiring all Member income claims and representations to include a disclaimer, upgrading the Member packets with additional disclosures, offering training to Members on claims and testimonials, and increasing headcount and resources to monitor income claims made on the web, at live events, or in Nutrition Clubs.

Importantly, independent third party research has confirmed that Herbalife’s disclosures, training programs, compliance efforts and consumer protection policies are effective. New participants have realistic expectations when joining Herbalife: In one survey, 73% of former Members reported they joined primarily for a discount on products they intended to use themselves, while 23% were interested primarily in part-time income and only 4% were interested primarily in full-time income. Former Members surveyed are overwhelmingly satisfied with their Herbalife experience, with 63% reporting that they would recommend Herbalife’s direct selling opportunity to a friend or family member, and 87% saying they would recommend Herbalife’s products to a friend or family member.

2. You claim that Herbalife “apparently targets low income, often undocumented, Latinos” because between 60 to 83% of Herbalife’s 525,000 U.S. distributors are Latino—4 to 5 times their representation in the U.S. population. 

Herbalife Ltd. (NYSE:HLF) does not “target” any community in the predatory sense you imply. Herbalife is proud of the diversity of our membership. We welcome everyone regardless of age, race, ethnicity, national origin, language ability, disability, gender, religious beliefs, sexual orientation, veteran status, or any classification protected by federal, state or local law. Indeed, one of our company values is to make all of our communities stronger and healthier. We do this by providing quality products aimed at tackling difficult problems facing too many communities today, like obesity and diets that are poor in nutritional value. The strength of Herbalife within the Latino community is entirely organic; a result of overwhelmingly positive product experiences over several decades, both in the United Stated and in Latin America.

We want to empower all of our Members and their customers to live healthier lives and, if they choose, to take advantage of the direct selling business opportunity that a multilevel marketing business model, like that also used by Amway, Avon or Mary Kay, can offer. Herbalife’s model rewards an entrepreneurial spirit and supports the development of successful Members, all while providing low risk and easy entry and exit for the business opportunity. An objective review of our performance shows this model effectively serves our Members and non-Members and is appropriately well-regarded in the Latino community. For example:

  • In addition to the profits made by individual Members from their own sales of our products, Herbalife paid approximately $180 million in commissions and bonuses to 33,602 self-identified Spanish-speaking Members in 2012.
  • Among Latino Members who operate Nutrition Clubs, 85% report that they break even or make a profit.
  • Among Latino consumers of Herbalife products, 85% rate Herbalife Ltd. (NYSE:HLF)’s product quality as good, very good or excellent.

We take pride in the support we receive from within the diverse communities we serve and from the leaders of those communities. As part of our continuing efforts to protect our Spanish-speaking Members and their customers, the Gold Standard Guarantee is also available in Spanish. (http://oportunidad.herbalife.com/es/estandar-de-oro). In fact, whether they are interested in the discount-purchasing opportunity or in the direct selling business opportunity, all new Members are required to review and acknowledge their understanding of the Gold Standard Guarantee. For Spanish-speaking Members, the Gold Standard Guarantee acknowledgment in the application process is also in Spanish. If you know of people with specific complaints, we request once again that you convey those specifics to us so that we can investigate immediately and take remedial action wherever appropriate. Individuals can also call our complaints hotline at 1-866-866-4744. We have processes in place to deter inappropriate conduct and will take action if we find violations of these policies and protections.

3. You suggest that “[o]nly 1 out of every 10,000 new distributors appears to make anything close” to the income “regularly” touted through Herbalife testimonials, and only do so by becoming “recruiting machines.” 

The vast majority of Herbalife’s Members (73%) join primarily to obtain a discount on products for their own use. In other words, most new Members do not expect to earn a paycheck from Herbalife Ltd. (NYSE:HLF), and receive precisely the value they do expect and pay for – a great, high-quality product at a discounted price. Most of the rest of our Members expect only part-time income. They too receive the value of the product they purchase to enjoy themselves, and also have a low-cost opportunity to earn supplemental income.

No one is paid anything merely for sponsoring new Members, so we do not compensate any “recruiting machines.” Rather, compensation is paid to Members solely based on product sales to their downline Members for their own consumption or to sell to others. This multi- level compensation opportunity is detailed in Herbalife’s Sales & Marketing Plan, which is available to all Members as part of the membership pack, and online at www.MyHerbalife.com.

4. You suggest that “the company’s own Statement of Average Gross

Compensation Paid by Herbalife to U.S. Members in 2013” is problematic because Herbalife discloses “that 88% of Herbalife’s distributors earned no payments from Herbalife in 2013, and only 0.47% received more than $25,000 for the entire year gross.” 

As the Statement conspicuously discloses (and again as you fail to acknowledge), 73% of new Members joined primarily to obtain a discount on products for their own use. Additionally, third-party, independent research conducted by two leading research companies demonstrates that Herbalife has

Comments (27)

  • murc229

    Value Walk is not honestly covering the Herbalife story. IMHO VW will make money from helping to damage HLF

    June 19, 2014 at 5:33 pm
    • tex2

      In what way will VW make money from helping tell the truth about HLF?

      June 21, 2014 at 1:13 am
  • David K.S. Tan

    Brent Ashley Wilkes:
    1) isn’t even Latino;
    2) Doesn’t understand factual data;
    3) Is in love with Billy & doesn’t care about facts

    June 19, 2014 at 10:24 pm
    • tex2

      David K.S. Tan:
      1) isn’t even ethical or moral;
      2. Doesn’t understand factual data;
      3) Is in love with Mikey & doesn’t care about facts
      4) LOL

      June 21, 2014 at 10:33 am
      • David K.S. Tan

        1) tex2, aka Scott “Tiny” Johnson, is a Conspiracy Nut who blames others for his problems. LOL
        2) He lost $100k with Amway because he is Greedy. LOL!
        3) Only Tools get Scammed. That’s why it’s called the Amway Tool Scam. LOL!!!

        June 21, 2014 at 11:36 pm
        • tex2

          1. Why shouldn’t I blame liars for ripping off me and many others?
          2. I lost money because I didn’t know they were liars.
          3. Tools can’t be scammed, people get scammed by liars, such as YOU. LOL

          June 22, 2014 at 1:55 am
  • tex2

    Herbalife operates very similar to Amway, the world’s largest MLM scam: http://www.stoptheamwaytoolscam.wordpress.com

    June 19, 2014 at 10:43 pm
  • MasterElwood

    tex2. still funny…

    June 20, 2014 at 7:34 am
  • Dawn

    I owned and operated a nutrition club for over 2 years, I moved on because HLF provided NO support or protection from the overwhelming amount of other HLF Distributors who are hungry to “steal” from you, have no ethics and would allow a club to open across the street. All HLF is interested in is a club on every corner, it drives their sales up, providing daily consumption, resulting in reorders from the club to replace inventory. At HLF meetings, the leaders would promote, “nutrition clubs” going as far as walking around the room and to every table saying the key to your growth “nutrition clubs”. They did not care how you got the club open, where you opened it or if you were profitable. I am not a disgruntled club owner, I was successful and sold the club to move on to become a Certified Holistic Health Coach, not selling products to Coach clients to live a healthier lifestyle.

    June 20, 2014 at 11:46 am
    • socran

      You are selling your services as coach, same as selling a product. Get serious please.

      June 20, 2014 at 7:25 pm
      • tex2

        She’s no longer selling a scam. Get serious please.

        June 21, 2014 at 1:11 am
      • Dawn

        My services are individualized programs based on my clients needs not a one size fits all, here are the products and make them work for everyone, that does not work. My goal as a certified coach is to help the client make lifestyle changes so they can learn to manage their health and not rely on a protein shake forever.

        June 21, 2014 at 9:40 am
    • tex2

      Dawn, are most of the club customers also distributors, or external customers?

      June 21, 2014 at 1:10 am
      • Dawn

        That really depends on the club. My club had more members than distributors. My club served 70 members a day, I was told they felt more comfortable in my club because it was a place they could come to and not be given a hard sell. If my members wanted to become a distributor for the discount then I signed them up. I realized early on that I was not going to do this as a business, there are many flaws in the model, unethical business practices from all levels of the marketing plan.

        June 21, 2014 at 9:53 am
        • tex2

          Thanks, what are some examples of the unethical business practices, in addition to the saturation of clubs in a given area and the other distributors who “steal” from you? Also, does “steal” mean they take away your customers and distributors from you? Thanks.

          Did you know of other clubs that had mostly distributors, and very few external customers, buy at the club?

          June 21, 2014 at 10:31 am
          • Dawn

            What I experienced was the constant unethical business practices to sign up distributors, even when they were already working with a distributor or already signed up! One of my distributors signed up for a work from home opportunity, an on-line HLF website business owned by upper level distributors, when she discovered her “kit” she paid $400 for was HLF and explained she was already a distributor, they said she could sign her husband up! I experienced daily unethical practices and was always in a looking over your shoulder state. I decided I was not going to play the game. The various practices were too many to list here. I have had a 20 year career with various fortune 500 companies as an account executive and competition is healthy but deceptive practices are not. What I concluded was, I was not involved with HLF from the days of connecting with potential customers via telemarketing, networking or posting notes all over town. The nutrition clubs became game changers and other club owners/long term distributors thought there wasn’t enough of the pie to go around so they wanted theirs and yours. The clubs grew fast which is what HLF wanted and promoted. Many club owners are not business savvy, they do not know how to run a business and HLF offered (at least during my time as a club owner) no training or published business practices.
            I don’t believe there are many clubs that have mostly distributors buying from them. Those distributors would order for themselves because they want points to climb the pyramid. Hope this helps.

            June 22, 2014 at 1:33 pm
          • tex2

            Thanks, it would really help to describe all of the unethical behavior you experienced and observed. The only way for these scams to go away is to “out” their bad behaviors. Did you also spend money on meetings, CDs, books, websites, voice mail, etc., provided by your upline?

            June 22, 2014 at 2:44 pm
          • Dawn

            I chose to leave the business and move on to get away from the toxic environment. I tried to bring the behaviors to the attention of senior upline, HLF corporate and basically fell upon deaf ears. There is no policing at all of the unethical tactics and I took the high road rather than stay and fight. I feel now that there are investigations going on and they will have to change and monitor the ethics of it’s distributors. I don’t have a dog in this fight anymore and have seen a big difference in my quality of life since moving on. I did spend money on meetings, websites and cd’s. The issue I have with HLF is they charge $79.99 per year annual fee….for what? they do nothing for you to justify this fee! As well, if you want to see your monthly up-line volume, you have to pay a monthly fee $8.95 to see the reports with that information……why? I have noticed some policy changes, specifically, in shipping. They used to charge a ridiculous amount for handling, I was told it was to pay the warehouse workers! That is now rolled into the still overpriced shipping charges. They also seem to be doing some training for nutrition clubs but that business needs to be scrutinized, the rules to me seem to fall under a franchise, HLF would not want that to happen, poof…..goes their cash cow.

            June 24, 2014 at 9:35 am
          • tex2

            Thanks again. Your description of being ignored by the company sounds very similar to what I experienced at Amway. How much did the various meetings, websites, and CDs cost, and how often were they recommended? Did the upline make statements similar to “The tools are optional, but so is success?” When you say you had to pay to see your monthly upline volume, was this the volume of people in YOUR upline?

            June 24, 2014 at 10:07 am
          • Dawn

            The meetings and materials were optional, however, there was the pressure that the successful distributors attended meetings, purchased the materials. The meetings cost different amounts, it depended where it was held and what kind it was. You had to purchase a ticket, which was $25-$225 and pay all associated travel costs. Looking back what bothers me the most is the presenters who were usually Chairman’s Club level, always said that “if they could do it so can you” well, I did not know until recently, many of them mentioned in just released reports, got their fortunes from the now shut down websites (off shoot on-line businesses ) such as the work from home scams. Yes, the reports to view your own upline volume from Supervisor up could only be viewed if you purchased the BizWorks monthly paid subscription, this is still how it is today. So, if 1 million distributors pay the fee, HLF takes in $9 million a month, the rich keep getting richer…..

            June 24, 2014 at 1:10 pm
          • tex2

            Dawn, this is absolutely amazing. You wouldn’t believe how close HLF operates like Amway. Have you by chance visited my blog? There’s a link below. Do you have links to the “just released reports” you mentioned? Why would you be interested in your uplines’ volume? I would think you would be more interested in your downline, to look for trends, etc. And in Amway, it was made very clear to everyone that your uplines’ business is both literally and figuratively none of your business. Thanks again, you probably don’t know how valuable your information has been to save millions of people from being ripped off as we were.

            June 24, 2014 at 1:56 pm
          • Dawn

            I will look at your blog and try to pull up the reports about the websites that were shut down. As for the volume reports, perhaps I didn’t explain correctly, i do mean my line, my Supervisors and their Distributors. If you can find a marketing plan diagram on-line it will make more sense. Once you become a Supervisor, you then earn $ on your Distributors. Once one of my Distributors reaches Supervisor, I no longer see their volume or their downline until the end of the month is over with ( which does no good then ) or unless I subscribe and pay for the report. I am sure Amway is watching for the fallout of the investigations into HLF since they may have to change business too.

            June 24, 2014 at 2:10 pm
          • tex2

            Okay, the downline makes more sense from my Amway experience. Amway is DEFINITELY keeping an eye on HLF!

            June 24, 2014 at 2:16 pm

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