Is Herbalife a pyramid scheme or not? This is one of the most asked questions in the MLM industry. And in my Herbalife review, you will finally read everything you need to know about this direct marketing company.
Herbalife is a well-known multi-level marketing firm that specializes in marketing nutritional supplements. Founded in 1980, the company has gained recognition, partly thanks to Jim Rohn.
Now, the big question: is Herbalife a legitimate business or just another scam or pyramid scheme? Before I give you my verdict, allow me to introduce myself.
In this Herbalife review, I’ll provide you with an in-depth analysis of the company, discussing both its positive and negative aspects.
By the end, you’ll have a clear understanding of whether Herbalife falls into the pyramid scheme category or is a reputable MLM.
So, without further ado, let’s dive in and find out the truth about Herbalife. Are you ready?
Is Herbalife a Scam?
Is Herbalife a scam? Multi-level marketing companies like Herbalife often find themselves at the center of controversy.
Some MLMs are viewed as scams more than others, while some are considered borderline pyramid schemes or illegal scams.
But what exactly is Herbalife? It’s difficult to determine whether Herbalife is a scam, a rip-off, or a pyramid scheme.
So, let’s first take a look at some of the controversies that Herbalife has been involved in over the past few years.
Was Herbalife a Scam in 2012?
In 2012, Herbalife’s president, Des Walsh, was questioned by hedge-fund supervisor David Einhorn about the extent of sales beyond the firm’s network.
This encounter left Einhorn angered and subsequently led to Bill Ackman, the head of Pershing Square hedge fund, placing a $1 billion bet against Herbalife by shortening its stock in late 2012.
In response, Herbalife CEO Michael Johnson decided to fight back against Ackman’s claims, denouncing them as incorrect and misleading.
The situation escalated further when Carl Icahn entered the scene, labeling Ackman as a phony and dismissing his claims as baseless.
The turning point came in March when a front-page story in The New York Times exposed Ackman’s actions.
It was revealed that Ackman had not only been lobbying public officials but also providing funds to anti-Herbalife advocacy groups.
Herbalife officials initially denied these allegations, only to publically admit two days later that they were being investigated by the Federal Trade Commission (FTC).
Ackman continued to assert that Herbalife was a global pyramid scheme, even going as far as calling it a criminal operation.
Herbalife’s CFO, John DeSimone, countered this by expressing complete confidence in defending the company, stating that Ackman had crossed a moral boundary and exceeded the legitimate role of short sellers.
Eventually, in 2016, Herbalife was obligated to pay $200 million and restructure its US operations following a two-year investigation into “unjust and deceptive practices.”
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What Is Herbalife?
Herbalife is a direct-selling company that focuses on marketing nutritional supplements. It is one of many online companies that claim to help you make money by selling marked-up items through a membership.
Their marketing strategy revolves around becoming a “Jim Rohn marketer,” but the problem is that most participants fail to profit from promoting other products.
Network marketing as a business model is becoming saturated for the average person. In other words, if you’re not already a “Jim Rohn marketer,” it’s challenging to sell Herbalife products.
However, there are some valuable income-generating resources and the potential for substantial earnings within Herbalife.
But the question remains: is Herbalife a pyramid scheme? To answer that question, let’s delve into the company’s brief history.
Who Founded Herbalife?
In 1980, Mark Hughes (1956-2000) founded Herbalife Nutrition with the ambitious vision of transforming the dietary habits of individuals worldwide, one person at a time.
He shared his vision for success in an enthusiastic and powerful way, resulting in the creation of a multibillion-dollar firm. This firm now has dedicated Independent Herbalife Participants in more than 90 countries around the world.
In 1994, Hughes established the Herbalife Nutrition Foundation (HNF) with the aim of improving the lives of children by assisting companies in providing healthy nutrition to vulnerable children.
Today, the program helps provide proper nutrition to countless children globally. HNF also supports relief efforts and responds to natural disasters around the world.
Now, let’s address the main question: Is Herbalife a scam pyramid scheme or a legitimate MLM?
Continue reading my Herbalife review to find out.
Is Herbalife a Pyramid Scheme?
Before I provide my review on whether Herbalife is a pyramid scheme, it’s important to understand the nature of this scheme. By doing so, you will be able to approach my insights with the right mindset.
What Is Pyramid Scheme?
Pyramids are created with the intention of making quick profits for early investors, but their sustainability is short-lived. Despite presenting themselves as lucrative opportunities, they ultimately lead to disappointment as they dry up.
Not only are pyramid schemes a waste of time, but they also deplete your finances. It’s disheartening how they exploit your aspirations of wealth.
Interestingly, there are numerous MLM companies that operate in a similar manner.
So, is Herbalife MLM also classified as a pyramid scheme?
Does Herbalife Fit a Pyramid Scheme?
Herbalife is often questioned about being a pyramid scheme, but the company successfully avoided that label by settling with the FTC for $200 million in 2016. Despite this, the company still faces its share of problems.
One notable incident was John Oliver’s attempt to expose Herbalife as a pyramid scheme, claiming that the business model relied on making money from people who join and earn a commission from their sales.
However, whether he was right or wrong remains a question.
As shown in the image below, the reality is that around 99% of participants in these make-money opportunities earn less than minimum wage.
Despite reaching nearly $5 billion in sales in 2018, Herbalife’s legitimacy is still a matter of debate.
Is Herbalife a Pyramid Scheme in Disguise?
Herbalife’s reward framework sheds light on what John Oliver discussed regarding MLM firms.
Some of these companies excel at concealing their inefficiencies while relying on big names for credibility.
However, Herbalife’s true nature was exposed when it was declared a pyramid scheme by the Commercial Court in Brussels, Belgium.
This ruling was based on their failure to disclose their retail consumer base, which is a common characteristic of pyramid schemes.
Pyramid schemes operate by encouraging new recruits to make upfront payments with the promise of downstream earnings. Such manipulative tactics are both unethical and illegal.
On the other hand, most multi-level marketing businesses require upfront payments for their products.
This creates a grey area when differentiating between MLMs and pyramid schemes, where scams often hide within legitimate companies.
Unlike pyramid schemes, these companies continue to operate with fraudulent intentions. Despite offering actual products to distributors, Herbalife has yet to remove this label of being a pyramid scheme.
Can You Make Money With Herbalife Then?
Herbalife recruits have received unrealistic advertising materials from leading suppliers in the past.
For instance, there were video clips circulating featuring a member named Doran Andry who claimed to make close to $100K a month marketing Herbalife products while driving a red Ferrari.
However, when Herbalife disclosed its financials, it was revealed that only 704 U.S. participants earned over $100,000 a year, not a month.
In reality, the majority of their network marketing distributors earn less than a couple of hundred dollars.
Additionally, Herbalife’s nutrition clubs have gained significant development but are expensive to join and primarily focused on recruitment rather than how they are marketed.
These clubs, designed to hire low-income distributors, are found worldwide. While Herbalife reports a substantial increase in sales from these nutrition clubs, it remains unclear whether these claims are true or false.
Ultimately, it is important to note that Herbalife is not considered a pyramid scheme.
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Is There a Lawsuit Against Herbalife?
When determining if Herbalife is a scam, one of the easiest methods is to investigate any ongoing lawsuits. Unfortunately, Herbalife has faced numerous legal actions, including a recent one this year.
It appears that just when things seemed to be improving, they were once again reprimanded by Chinese authorities for the third time in four years, leading to a hefty $123 million settlement with the United States government.
This incident followed a previous settlement where Herbalife had to pay $20 million to the SEC for misleading investors with its business model in China.
Additionally, an audio recording surfaced featuring Herbalife’s CEO, Rich Goudis, suggesting an employee disregard expense account limitations in China. These are just a few of the recent allegations.
However, it is important to note that these issues do not necessarily imply that Herbalife is a scam.
They do highlight that the company faces challenges, much like any other.
Why Was Herbalife Baned in the US?
Herbalife agreed to restructure its organization and pay a $200 million fine following accusations of being a pyramid scheme. This agreement was reached in 2016 with the Federal Trade Commission (FTC) of the United States.
In November 2017, Ackman’s hedge fund closed its short position in Herbalife.
Around the same time, Herbalife removed plant sources of ephedrine from its product line in response to state regulations.
In July 2016, Herbalife made further changes to its business model and reached a settlement with the FTC, resulting in a $200 million payment to its representatives. It’s important to note that this doesn’t make Herbalife a scam. Like any other company, they faced challenges, but their active efforts to address these issues demonstrate their legitimacy.
Is Herbalife MLM?
Herbalife is a direct-selling MLM firm known for its international web sales of approximately 4.88 billion United States dollars in 2019.
So, how can you get a share of their success? Well, the trick is that their protein and dietary supplements are not available on store shelves.
The only way you can obtain these items is through a Herbalife supplier. Visit their website to learn more about the products and check the prices.
However, please note that you cannot make a direct purchase.
Joining Herbalife MLM is a terrific choice. With a network of 3.7 million “members” in around 90 countries, Herbalife is a substantial company.
This information helps you understand that Herbalife is not a scam. More about it is below in my Herbalife review.
Is Herbalife Legit MLM?
Herbalife is considered a legitimate MLM company.
However, it has faced scrutiny from the FTC, which has accused it of operating as a borderline pyramid scheme. There have also been controversies involving certain individuals associated with the company.
Like many MLMs, Herbalife operates by recruiting people to make money. However, there are concerns about how Herbalife presents itself and the actual income potential for its distributors.
The truth is that selling Herbalife products alone is unlikely to provide a sustainable income.
It is widely known that only a small percentage of people who join network marketing companies, such as Herbalife, are able to recoup their costs and make significant profits.
Some individuals have even claimed that Herbalife is a pyramid scheme. You can watch their testimonials in the video below…
From this video, it is evident that members are encouraged to involve their friends and become distributors. However, as your efforts dwindle, you may resort to modern tactics like online marketing.
It is important to note that the payment plan is not designed to generate profits for you. Instead, the purpose of this business is to motivate you to keep using their products and make additional purchases.
Consequently, the most likely outcome is that you will continue to lose money while they continue to profit.
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How Does Herbalife MLM Work?
To become a member or representative, you’ll need to purchase Herbalife products. Once you have the products, you can either sell them or use them to promote the company. The best route is to do both.
However, some people get confused and label Herbalife as a pyramid scheme.
Let’s debunk this misconception once and for all…
How Do You Make Money With Herbalife MLM?
Herbalife pay is based on a Multi-Level Marketing (MLM) model.
This means that your compensation is not solely derived from marketing Herbalife products. Instead, you can receive incentives from the sales of new members that you recruit, as well as from the sales generated by their recruits.
The diagram below illustrates this concept clearly…
To make any money with Herbalife protein shakes, you’ll need to market them extensively. However, there’s a catch. You have to purchase the products upfront before you can even sell them.
This creates a problem because your earning potential is limited by how much you can buy.
Moreover, there’s a risk of ending up with excessive inventory that you can’t sell. On the bright side, there’s a 12-month return policy for unopened items.
The fact that you have to “pay to play” is the main reason why Herbalife tends to be labeled as a pyramid scheme.
But before jumping to conclusions, let’s explore how much they actually pay…
What is Herbalife’s Compensation Plan?
The amount of money you earn as a Herbalife distributor depends on the number of products you sell. However, the truth is that distributors don’t earn much from these sales.
The objective is to sell products and earn volume points with each sale. When you accumulate a certain number of volume points, you can advance to the next level and earn a higher commission from your downline.
The key is that you earn volume points when you or your downline place orders. Therefore, the more you or your downline orders, the more volume points you accumulate.
Refer to the table below for a breakdown of the points you can earn based on your level and number of sales…
Unfortunately, Herbalife, like other MLMs, has a complex and bewildering compensation plan that seemingly aims to confuse. However, it’s essential to remember two earning methods:
- Sell Herbalife products to your niche market.
- Recruit promoters in your MLM network and earn bonuses.
Given these facts, one may question whether Herbalife is a pyramid scheme. While many people hold this belief, my forthcoming Herbalife review sheds light on the matter, revealing that labeling them as a pyramid scheme is unjustifiable.
In the end, we must acknowledge that the company sells real products, making it difficult to attach the pyramid scheme label to them.
How Much Does It Cost To Become A Herbalife Distributor?
The cost to join as a Herbalife distributor is a one-time investment of $94.10. Once you pay the fee, you will receive a starter kit, training, and additional benefits. Moreover, joining provides you with the opportunity to start marketing their products.
Below is a list of items included in your starter kit…
Additionally, when joining, distributors enjoy a lifetime 25% discount on their orders, just like customers. Moreover, upon reaching the distributor rank of supervisor, you will receive a significant 50% discount on your orders.
As you progress in rank, you will also start earning higher commissions and bonuses.
What Are Herbalife’s Products?
Herbalife Nutrition offers a range of products, including weight loss and healthy protein shakes, protein bars, teas, aloes, vitamins, as well as sports hydration, energy, and individual treatment options.
How can you effectively market these products to make money?
In order to expand their organization and showcase the product, Herbalife encourages social gatherings known as “nourishment clubs”. During these events, members have the opportunity to try the drinks and discuss healthy lifestyles.
Herbalife claims that these nourishment clubs assist individuals who would typically opt for vending machine snacks or fast food. By providing them with healthy options and support during this lifestyle change, they aim to help people make healthier choices.
Do People Lost Weight With Herbalife?
Herbalife meal replacement shakes can indeed aid in weight loss, though this claim is currently under debate. To achieve optimal results, it is crucial to incorporate exercise and maintain a balanced diet consistently.
Ongoing research studies aim to validate the effectiveness of Herbalife’s fat-burning products in preventing weight gain over an extended period.
Ultimately, it is important to note that these products are of high quality and are endorsed by satisfied users. Additionally, by following their lead, there is also an opportunity to generate income.
Is Herbalife Worth The Trouble?
To get an idea of the potential earnings with MLM Herbalife, let’s examine the earnings of distributors in the US as an example.
So, what are people earning? According to Herbalife, approximately:
- 50% earned less than US$ 370 a year.
- 10% made just US$ 6,965 a year.
Only the top 1% earned more than US$108,802. It’s worth noting that less than 15% of Herbalife distributors in the United States made any money from them. This suggests that Herbalife had a total of 464,736 distributors (if 399,673 is 86% of them).
Based on these figures:
- 399,673 made nothing.
- 34,855 made less than US$ 370 a year (approximately ₤ 281).
- 6,971 made more than US$ 6,965 a year (approximately ₤ 5,303).
- 697 made greater than US$ 108,802 a year (around ₤ 82,846).
It is important to note that these are just profits. They do not consider any expenses incurred by suppliers, including their initial investment.
90% of representatives leave Herbalife every year
In 2005, Herbalife admitted to having a turnover rate of 90% among representatives who were not managers, and 60% among managers. The company further states that:
” We approximate that, of our over one million independent suppliers, we had about 201,000 supervisors after requalifications in February 2005.”
It is undeniable that one supplier drops out of Herbalife approximately every 16.7 seconds. Given this high turnover rate, Herbalife finds itself in constant need of recruiting new members to replace those who leave.
One must question why Herbalife does not reconsider its entire business model, instead of persistently recruiting new individuals into a clearly unsustainable framework, particularly when such a large proportion of representatives depart each year.
Perhaps this is because the model continues to work remarkably well for the privileged few at the top, while disregarding the 90% of non-supervisor suppliers who leave annually.
In my opinion, Herbalife MLM is burdensome and carries significant risks. It is simply not a suitable endeavor for me.
Alternative: On the other hand, if you’re looking for the best business model to earn passive income online as a beginner, there are other, more suitable, and cost-effective alternatives.
My top-rated course has helped me to go from earning $0 to $100’s per day!
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Herbalife Review – Conclusion
Is Herbalife a scam or a legit MLM? In my review, Herbalife is a legitimate multi-level marketing firm. Their primary focus is on product acquisition and recruiting new distributors.
However, let’s take a closer look…
While Herbalife and similar companies may appear to operate as multi-level marketing, they often blur the line between pyramid schemes and legitimate businesses.
There are numerous network marketing opportunities available, offering various business prospects for making money.
But in my opinion, Herbalife is not among them…
It raises concerns with its shady practices, abundance of complaints, low success rate, and overly complicated plan.
Thank you for reading my Herbalife review! What are your thoughts on Herbalife?
Feel free to share them in the comments section below…
Herbalife Pros:
- A long-standing company (40 years in business)
- Good quality dietary and weight-loss products
- Some people reported success with their MLM
Herbalife Cons:
- You have to purchase to products you plan to sell up-front
- Herbalife is known as an illegal pyramid scheme
- Their products and scheme are expensive
- MLMs have a very – very low success rate
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If you need any help or you have a question, feel free to contact me.
And feel free to share this Herbalife pyramid scheme review to help others as well!
All the best, Ivan. Founder, and CEO @freeaffiliatemarketingbusiness.com
Oh I’m so glad to see that you did a reveiw over Herbalife! I have often wondered if its something someone who has done their research would recommend. I actually have bought Herbalife products fro distributors that live around my area, and their products actually taste pretty good. That being said, starting a business with them just does not seem like a good indeavor. The MLM schemes are just not that great since the success rate is so low.
Thanks for sharing your review of Herbalife MLM and your experience with their products.
Very interesting review of the Herbalife MLM company. It is detailed, to say the least! I do not think you missed a single point that someone would like to know before deciding whether or not to sign up with Herbalife. You certainly answered all my questions. Interesting that they are not allowed to operate in the US and that Belgium has banned them as a pyramid scheme.
I agree the grey area between MLM and the pyramid scheme is vast and hard to navigate, let alone define.
I also agree that the model of not selling products in stores or even on their website is a great one for those who wish to sign up and sell for Herballife. However, you make a great point that once the people you know who may sign up as an Herbalife seller dries up, you have to resort to good old online marketing to sell products anyway!
The financials show it just would not be lucrative to join Herbalife. I think it makes more sense to just get a good foundation in online marketing and find a great product to sell. Thanks.
You’re welcome and thanks for sharing your review of Herbalife MLM. It’s really up to a person whether or not you should chase this business. My personal opinion is that MLMs are hard, shady, and better to be avoided.
I have seen a lot of so called herbalife distributors but i find it difficult to be convinved that you can mske a living with it. Thank you for this review, you shed light on my path. Although its legit but a pyramid scheme. I stick to my affiliate marketing. Affiliate marketing is a better way to make income and build a sustainable businesd
I’m on the same page. Affiliate marketing is a much better way to start earning some income online!
Nice review! I totally agree with your conclusion that Herbalife is a MLM business model. I attended one of their seminars many years ago when I was looking for a side gig to make extra money.
The whole thing felt like a scam, the speaker made it look like we will all become millionaires if we join the Herbalife team. The funny thing is that at the end of the seminar, they push you to buy their protein powder and many people did, but I didn’t.
Few years later, I discovered Wealthy Affiliate and Authority Hacker. Joining these two was one of the best decisions I took.
Thanks for sharing your review of Herbalife!
Good evening all!
Hope to find you well.
I have become a Herbalife Independent Member in 2019 and have taken their products since as part of my diet every single day!
I just wanted to point out that when someone becomes a member, they get a retail online page where other people can shop from. So nowadays (at least since 2019) no one has to spend a penny in stock to then re-sell. Everything goes straight from the warehouse to any place the buyer would like!
Kind regards,
Jo
Thanks for sharing your review of Herbalife!
While I appreciate your review and explanation of the Herbalife MLM, I remember it from childhood when my grandmother used to make us drink the stuff because it was “good for us.” And although I never tried to dispute that fact and I never did research on it since I was not even in my teens yet, the taste was Absolutely Horrendous! And for that reason alone I never would have looked at them as a valid choice.
Thanks for sharing your review of Herbalife!
This reminds me of MaryKay but for nutritional supplements. And yes I agree it isn’t a pyramid scheme at all but that still doesn’t mean that it is a good thing to invest your time and money into doing. And of course Herbalife’s main intrests are to make money for the top people in the business.
Thanks for sharing your comment, Georgia!
Although I agree that Herbalife is not a pyramid scheme, I have to agree with you and would not recommend it to others. There are much better quality natural products that can be found out there at a lower price, and as you mentioned MLMs in general have low success rates for individuals and there are much better business models available to pursue. As you also mentioned even if a person is interested in MLMs there are better ones out there without all these drawbacks and past baggage.
Thanks for sharing your review!
Herbalife has been around for more than forty years, which basically makes them a legitimate company, even though it is based on the multilevel marketing (MLM) business model. MLM is a legitimate business model, although I think it is outdated. I worked for a MLM company, and know how difficult it is to make money if you are not continuously recruiting new team members and building your downline.
Herbalife is the same. They have been involved in several law cases and is bordering on a pyramid scheme in disguise. I would avoid joining Herbalife as a distributor and rather explore affiliate marketing as a viable way to earn passive income.
Thanks for sharing your review of Herbalife MLM!
I heard about this MLM company, they one of the biggest and long lasted mLM companies, but still I don’t even participate no what kind of reputation they have, good or bad.
Moreover, you have pay monthly fee and buy products to stay a member, it is better to build a website and as an affiliate rather than build a network upline and downline.
After I found affiliate marketing I never go back to network marketing again, it was the biggest mistake of my life i joined MLM.
Thanks for your post to educate people.
I share your experience!
I love whey protein powders, but I hate the high costs. When I heard about HebaLife, I was a bit skeptical at first. But after checking out their terms and conditions, I thought this could be the way to get more protein into my diet without breaking my bank account.
Thanks for your comment, Peter!
I have always wondered what the benefits are for joining a program like HerbaLife. I can see how it has been so successful, as it fits in with the top niches of wealth, health and relationships.
I love using whey protein powders, but I could not justify the monthly cost, on top of the food costs.
These guys have a great marketing campaign, and that is obvious when you see the people who endorse them publicly. Like I would never have thought I would see Cristian Ronaldo promoting HebaLife.
What do you think the original owner would think of his creation if he was still alive? Do you think this was his vision?
I guess I don’t see why not, as the brad has become huge over the past 10 years or so.
Interesting to see how they compare to say Atkins, when Robert Adkins died around the same time, and that brand looked like it was going to take off.
I’m not sure what he would be thinking right now. But I’m sure he would be proud. Anyway, thanks for your comment on my review!
I really do not have any question because I am familiar with this business model.
One thing I do not like about it is that you have to recruit people as a part of making money and they encourage you to do this from the very beginning when you are STILL learning how to sell off of the model that they provide you.
Another thing is that you have to buy the products yourself. It is not like affiliate marketing or drop shipping where you do not have to spend any money on products. Many people starting out struggle to have the extra money to make a life change and would rather not have to figure out how to own a huge inventory.
Moreover, they want you to sell to friends and family. I think mixing your business life with your very close personal life is a recipe for disaster. They don’t want you to bring in one or two close friends/relatives as business partners. They want you chase and run down any and everybody you can find and a lot of people I know just are not interested but you depend on this tactic to make more money.
Furthermore, I think they lack good training on how to implement their business model. You only know to buy the product, form social gatherings (which can be a task to do over and over again), and sell to the same people that you are trying to recruit.
Finally, I do not think it is pretty at all that 99 percent of people that enter this type of business are not very successful. That is a huge red flag.
I think you did a great job giving all the details and shedding the proper light on a company of this nature. Just because it is not a scam doesn’t mean it is not a bad idea for most people.
Thanks for sharing your review of Herbalife MLM, Tavis!
Hi Ivan,
Thanks for this review- very informative and thorough. It seems to me that this company is basically a waste of time. There are other options out there- like affiliate marketing, as you said- that are way more promising. Why spend time on this company when most people don’t succeed with it? It’s not worth a person’s precious time, in my opinion.
I have been working with wealthy affiliates, and although affiliate marketing does take time and effort, I have found that so far they deliver what they promise.
Moreover, you learn a lot through their platform, even the free version. I knew nothing about technology and they taught me a lot. Well worth it for the educational aspect alone.
All the best to you and your business,
Beth
You’re welcome, Beth!
Herbalife has been around for over 40 years and has had to pay out hundreds of millions of dollars for bad business practices.
They had to make that money in order to pay it out. This means that people believe their products do work.
I’m not a fan of the MLM business model because it is very difficult to get others to join as well as sell the products.
If you can do both then you are in the minority who actually make money.
I prefer your recommended method of Affiliate Marketing.