Is Herbalife a Pyramid Scheme? Or a Good Business Model?

Herbalife is one of the most famous companies of its kind in the world.

I believe every person has heard about Herbalife and formed some kind of opinion about this company.

And there are many different opinions regarding Herbalife and its nutritional product; and still many valid and open questions like:

  • Is it possible to make tons of money with Herbalife?
  • Or is it another pyramid scheme?
  • Maybe it is just a regular MLM company?

In the following article, we are going to look at Herbalife as a potential business opportunity.

Maybe someone has reached out to you and offered you to become a member…
Have you already joined or not yet?

The idea of having your own team, and different sources of income is tempting, I understand.

But would you join the company if you find out that Herbalife is a Pyramid Scheme?
I doubt it.

I am sure you know that pyramid schemes are illegal in most countries.

And there is a simple reason for that.
Once the pyramid reaches a certain level, it is no more sustainable because involves more people than currently live on Earth.

But let’s focus on Herbalife, and whether or not you can make money as a member of this company.

Disclaimer
Please note, that I am not a member or an affiliate of Herbalife Nutrition. This review is based on research and information available online in the public domain.
Any recommendations and conclusions are only opinions and may not apply to all persons or situations.

Quick Overview

Company Name: Herbalife Nutrition Ltd.
Website: www.herbalife.com
Price to Join: $60 to Join + Price for the Products (about $100 to $200)
Founder: Mark R. Hughes
Do I recommend it? No! I don’t recommend any MLM company. The fact is that 99% of people involved in Multi-Leve Marketing do not make any money or they lose money.

What Is Herbalife?

Is Herbalife a Pyramid Scheme

Herbalife is an MLM (Multi-Level Marketing) company founded in February 1980, in Los Angeles, USA.
It is a global corporation that sells products that are supposed to supplement people’s diet by taking a drink, protein shake, or powder.

The company’s main focus is the development and sale of nutrition solutions.
It has more than 10,000 employees (These are direct employees and not distributors).

As of this writing, the company operates in 94 countries (in North America, Central, and South America, Europe, the Middle East, Africa, Asia Pacific, and China) and has a network of more than 4.5 million independent distributors and members (source Wiki).

Their business is now headquartered in George Town, Cayman Islands, but their original office in Los Angeles, California still exists.

That sounds all fine.
I mean being part of such a corporation is for many people a great idea. And on top of it, you can operate as an independent business owner.

But the reality is not so bright, and we are going to get to the drawbacks in a second.

A Quick Information About Herbalife Website

I am always curious about the date when the website was found and possibly the number of visitors the website gets.

So according to Whois.com, the website was registered in 1998.

Is Herbalife a Pyramid Scheme

That means they jumped online pretty soon. Good for them. There are many companies that missed that train and currently do not exist.

It has a lot of visitors and as of this writing (March 2021), it gets more than 345,000 visits per month

Is Herbalife a Pyramid Scheme

We see that majority of people come from the USA.

Is Herbalife a Pyramid Scheme

Then:

  • India
  • Mexico
  • Italy
  • and Russian Federation

Fair enough.

Herbalife News

As of this writing (March 14th, 2022), according to the Wall Street Journal, Herbalife has temporarily closed its operations in Russia.
Also, they stop shipping products to all 62 sales centers in Russian Federation.

It may affect more than 40,000 independent distributors that were actively promoting Herbalife’s products.
According to Herbalife, any profit coming from Russia goes to support the organizations helping Ukrainian refugees.

Founder(s) Of Herbalife

Is Herbalife a Pyramid Scheme

Mark R. Hughes founded Herbalife in February 1980, originally by selling products from his car that were based on “natural herbal ingredients”.
Five years later he became a millionaire.

He was born on January 1, 1956. When he was 14 his parents divorced and Mark stayed with his mum.
In the 9th grade, Mark dropped out of school, and as he says “he was a little delinquent”.

His mother suffered from emotional problems, was obese, and abused sleeping pills. Apparently, an accidental drug overdose was the main cause of her death when Mark was 19 years old.

So Mark’s childhood wasn’t ideal. Was it the main reason why he decided to build such an imperium and never looked back?

According to the research, Herbalife’s revenue in 2020 was a little over $5.5 billion (USD) and the net income exceeded $370 million.

How Does Herbalife Work?

Is Herbalife a Pyramid Scheme

Anyone can become a part of this corporation by becoming either Customer or a Distributor.
However, it is necessary to sign up under a sponsor (your upline) using his or her ID when joining.

And that applies to both options, which are:

Herbalife Preferred Member (Customer) $34.95

It costs a one-time investment of $35 (or currency equivalent) and you automatically get a 25% discount on the products you will purchase.
As a Preferred Member or also called a customer, you are not paid for sharing Herbalife’s products.

In case you love the products and you want to purchase more, you can get a better deal, and the discount can reach up to 42%.

Herbalife Distributor $59.95

You can become a distributor right away or you can be the customer, first (as described above), and then become the distributor.
The one-time fee is $60.

As a distributor, if you purchase products for $300, you get a 25% discount, and you basically pay $225.
You can sell them for $300 and your profit is $75.

(Below, you will see how much such a distributor makes a month).

As with any other MLM company, also within Herbalife, you can climb the rankings by purchasing and selling more products.
Each product has its own Volume Points (VP) and the more VPs you have the higher the structure you can get.

500 Volume Points is the threshold, to becoming a Senior Consultant, and as an SC you are allowed to start “building your team”.
In other words start recruiting others (family members, friends, relatives…)

Then for each sale your downline makes, you get a 10% commission.

As you climb the ladder there are more ways how you are rewarded, but for the sake of time, you need to climb at least 5 levels up to have a decent living.

More details are to be found in their entire Herbalife Sales and Marketing Plan and Business Rules. It is a 142 pages document, and feel free to skim it through.

Herbalife Products

Is Herbalife a Pyramid Scheme

There are many personal care products Herbalife offers, and here are the main categories:

  • Skin And Hair Care
  • Energy and Fitness
  • Specialized Nutrition
  • Core Nutrition
  • Nutritional Supplement
  • Healthy Weight

Right off the bat, I would like to inform you that I am not an expert in Herbalife products.

I have come across some of them but I can’t make any objective analysis. For some it might be good, for others, it is just another average product.

As I have mentioned in the beginning, this article focuses on Herbalife as a possible business opportunity and whether or not you can make money.
And how to make money.

If you want to go through their catalog, check this link: Interactive Product Catalog.

I would like to mention only something interesting regarding their products.

Cell Activator

First of all, the term Cell Activator. Is it some kind of generally accepted term?

What Is a Cell Activator?

I was curious, so I google the term and look what Google finds:

Is Herbalife a Pyramid Scheme

(This is a compilation of the 1st 10 results in search engines. Youtube excluded).

I don’t know what you make of it, but to me, this is a purely Herbalife internal term.
In case you know more about the Cell Activator, please share the knowledge in the comment section below.

Anyways;
Research shows that the ingredients, themselves, used in this product are effective, but not the quantity.

This means, that they claim to have all these healthy ingredients, but unfortunately, the amount of each ingredient is very low.
So it is basically useless.

Herbalife Shake

Shake or another Herbalife product is made to help people lose weight.

But does it really work?

Just check how much sugar each product contains and then you can do the math.
Besides, there is not a single study proving that Herbalife product helps with weight reduction.

Again I have not tried the product, but based on the research I have done, I wouldn’t even try them.
That’s what we all should do – research first and then decide whether or not to use the product.
I made up my mind about them and I personally don’t recommend them.

I believe regular meals, with food from the local grocery store and/or market is perfectly fine.
On top of that make sure to exercise at least 3 times a day and you should be fine.

Here is one confession of a person that wanted to lose weight:

Is Herbalife a Pyramid Scheme

Also price-wise, I find them a little bit expensive.

Here is my recommendation:

If you are interested in those products, just go to Amazon and check if your favorite shake is available there. The chances that you get a much better deal are pretty high.

A lot of people involved in MLM companies have a hard time selling the product. So they go online and sell it to for example amazon, for even less than they acquired it.

This is obviously not allowed, since as a seller you are obliged to sell the product through official channels, that comply with the company terms and conditions.

But people are … desperate, so they sell it anyhow, just to get some money back.

How To Make Money With Herbalife?

Let’s take look at the video made by Herbalife where they explain how you can make money.

The video has been taken down for the public.
Not sure why.

Is Herbalife a Pyramid Scheme

Now it is set to “private”, so only the members can watch the video.

Anyways.
I had a chance to watch the video when it was still available.
In the first 55 seconds, it said how Adam joined Herbalife and he “retails them to his family, friends and close social circle”.

He has 5 customers, who purchase the products.

So let’s stop right here for a minute and imagine you selling this stuff to your family members.

  • First of all – they make it seem like it is a piece of cake to sell the products and at the same time recruit new members. (It is actually the most difficult part).
  • Second – Can you do that? I mean would it be OK to bother your closest ones?

Well, yeah, they might buy it because they know you.
But what are the chances that at least 50% of your potential team buys the products just out of pity?

Is this what a retail sale should look like?

And make no mistake – recruiting people that don’t believe the product is not a good idea.
They won’t make any sales.
Meaning you are stuck at the same level and obliged to keep buying the products.

The video goes on to show Adam being a Supervisor with 4,000 Volume Points. That allows him to get a 50% discount on the products.

50% discount on the product?
What’s the real price of that product?

Each member below the supervisor has to make a profit, so I am wondering what is the wholesale price for one product.
In other words, what is the final margin for one drink?

It must be more than 50%, right?

The sugar-coated video claim that in order to make real money you must build a successful organization of supervisors.

In order to become a supervisor, a person must climb 5 levels up.
What are the chances that you will “build” such a team?

Is Herbalife a Pyramid Scheme

This screenshot is from Herbalife’s marketing plan and it is shown in a nice “non-pyramid” scheme.

If you would like to watch an available video about “how to make money with Herbalife” here is one video from the Herbalife Herbaltopshop youtube channel:

But let’s be realistic and take a look at how much a regular fella makes.

How Much Do Herbalife Distributors Make?

Every MLM company has to have an income disclosure available.

Some MLMs do not have it, but the good news is that Herbalife is available.

According to their document, they make a little over $200 a month, BEFORE expenses.

Is Herbalife a Pyramid Scheme

With that being said, if we deduct:

  • the cost of the products
  • taxes
  • gas and other secondary costs

these people can easily lose money at the end of the month.

And please note that this is an official Herbalife document where the tendency is a little bit sugar coat the data.
That’s why they claim “before expenses” because the net income would be in negative figures.

How much does an ordinary Herbalife distributor make a month?
Nothing, he/she loses.

Is Herbalife Nutrition a Pyramid Scheme?

Is Herbalife a Pyramid Scheme

When you search for this query (or keyword) in Google, the first result you see is directly from the Herbalife website, saying that “Herbalife is not a pyramid scheme”.

Is it a reliable source of information?
Imagine going to a Nissan dealership and asking them whether the Nissan Pathfinder is a reliable car.

What would they tell you?

Of course, it is.

You are right, this might be a bad example since Pathfinder is considered a reliable vehicle.
But my point is that you don’t want to ask the manufacturer of product A, whether product A is good or not.

They sell that stuff, so of course, the answer will be always positive.

So Is It a Pyramid Scheme?

Is MLM the Same as a Pyramid Scheme

Technically Herbalife is not an illegal pyramid scheme and they won a battle in front of the court. It cost them $200 million.

So Herbalife wasn’t labeled as a pyramid scheme but it still operates as an MLM, and that business model I can’t recommend either.
You might know that MLM is not the same as a Pyramid scheme, but quite often it is difficult to distinguish these two “business models”.

I personally don’t recommend Herbalife as a company you want to make money with.

What Is Multi-Level Marketing Scheme?

I have explained in the article (the link above) what is the difference between MLM and Pyramid schemes.

Is Herbalife a Pyramid Scheme

So is Herbalife “just” an MLM scheme?
Yes, it is.

The majority of people that join MLM (and that includes Herbalife) lose money.

To be completely fair, it is not the system to blame, not entirely.

Let me digress a bit;

Think about the new year’s resolution.
A lot of people want to lose weight within let’s day valentine’s day.

Do they?
How many of your friends broke the resolution and said… naahh that’s not for me. I’ll do it next time.

The majority of people are like that. Now if such a person, like myself, joins the MLM the chances to succeed are very slim.

Now add to such attitude the following facts or challenges you will face when attempting to recruit new members:

  • Bothering your family members, and friends (very annoying in my opinion)
  • Facing rejections (frustrating)
  • Additional “investments” (time and money to connect with people)

I guess you get my point.

How About “Selling” Online?

But it is also possible to reach out to people online. You can create your Youtube channel or build your own website.
Again you need to find your audience, people that are interested in nutrition solutions.

That’s not so easy too, but if you want to know more, here are 5 steps everyone should know before creating a website:

5 things to know before creating a website

And that’s just the beginning.
The real money is in recruiting, so what are the chances that your team will grow?

Because you are asked to grow your team – your sponsor wants you to grow your team, because it is his team. And he also has sponsors… and so on.

The fact is that only a small portion of people can make it to the next level.
And again only those at the very top make the real money.

So how long does it take to the top levels?
A very long time (if at all).

How To Really Make Money (Online)?

Let’s assume that you are the person that sticks to his new habit and really is committed to losing weight and since January you have lost 2 figures pounds (or even kilograms).

I believe such a person can make it in any type of business, because of consistency and discipline.

OK. You don’t have to be that discipline to make it. Just patience, consistency, and the right tools can help you to become financially independent in a reasonable period of time (10 – 15 months).

The key is to choose a simple business model that has been proven over and over again.

What is the simplest business model?

To save you some time, here are a couple of simple business models:

  • A simple website generating revenue from affiliate marketing programs and ads
  • Youtube channel that is monetized and generates consistent income from ads.

Sure there are other options, like being a freelancer, whether your know how to create a nice-looking logo or you are a writer, you can offer your expertise on sites like

  • Fiverr
  • or Upwork.

But that is not a business.
You only trade your time for money.

Now let’s talk business.

Affiliate Marketing

Affiliate marketing is a business model where you sell other’s people products and/or services.

You have to objectively inform your audience about the advantages (and also drawbacks) and if they like the product, you redirect them to the merchant’s website.

For example:

You love hiking and you are passionate about outdoor stuff.

Based on your experience you offer great information on your website or Youtube, about hiking shoes, fast-drying t-shirts, backpacks, socks… and so on.

You can become also an Amazon affiliate or associate but the drawback is the commission and shorter cookie.
Amazon offers only 24 hours of cookies and about 5% commission.

The good news is that you are not obliged to be a partner with one Affiliate program only.

You can offer as many products as you want. Be a partner with as many affiliate programs as you want.

With Columbia Affiliate Program, you have a 21-day cookie and put in an o10% commission.

Is Herbalife a Pyramid Scheme

Are you interested in Affiliate Marketing?

The good thing is that you don’t need a huge budget, or at least, you don’t need a lot.
The only investment might be some online course or educational platform, where you learn how to create the website and how to drive organic traffic (that is free traffic).

But other than that you only need time and consistent effort.
You want to post on a regular basis, to show the Search engines that you have expertise in your chosen niche.

Affiliate Marketing is a very simple business model since you don’t need to:

  • ship anything
  • deal with customers
  • deal with suppliers

You simply create content and you can make money while you sleep.
Yes, it might sound like a great business model, and it is, but just please realize that it also takes some time and effort.

Once you have enough traffic you can have an additional source of income – from the Ads.

The same principle applies to YouTube channels.

Herbalife Pros

1) Well Established Company

Despite all the allegations, and deceptive techniques, one thing is for sure. Herbalife has been in this business for more than 4 decades.

The company operates worldwide and with a revenue of billions of dollars per year, it is very likely that the company will be around for at least another decade or two.

2) Distributor Can Return the Products

Unlike with many MLM Companies, as a Herbalife distributor, you can give back the product (if not open) and you will be refunded.

It must be done within a year, but it is still a good thing so you don’t have to build a new garage for all unsold products.

And even a customer (or Preferred Member) can return the product within 30 days if not satisfied.

Is Herbalife a Pyramid Scheme

3) No Need to Buy all the Sales Tools

Another good thing is that you don’t have to purchase marketing stuff, tools, sales tools, etc.

Let’s check some frequently asked questions about Herbalife and we wrap this review up.

As you expect there are more Cons than Pros;

Herbalife Cons

1) Lawsuits

There have been many lawsuits against Herbalife and many of them were due to deceptive marketing practices.
For example, in one case, distributors were told that they become rich once they join the so-called “Circle of Success”.
Of course, it was nonsense.

FTC goes after many MLM companies and Herbalife is one of the largest ones that has been already sued for being a Pyramid Scheme.

Even though that lawsuit was settled, it doesn’t mean that FTC doesn’t keep an eye on Herbalife.

2) Recruiting

There is no way the independent distributor can make living solely from selling the products.

The real money is in recruiting and the more people you recruit the more money you make.

Is Young Living A Scam

And that’s not all.
You must climb the rankings to make a decent living and only the top few members really make $100,000s or even millions per year.

3) Compensation plan is too complicated

I don’t know if you had a chance to check Herbalife’s compensation plan. If not be aware that it is more than a 140-page long document, which is not easy to understand.

And it is done so on purpose.

Remember that if a person is confused, it is very easy to trick him.

4) Saturated Niche

The nutrition supplements market is very competitive and there are tons of companies.

Many of them do not operate as MLM and therefore they can afford to sell their product cheaper compared to Herbalife or any other similar MLM company.

5) Overpriced Products

The new distributor has a difficult time selling these products in bulk.
They may be successful the first time, but people (potential buyers) realize that there are other very similar products for much less. And it makes sense.

An almost identical product you can buy in your local store because it goes from the manufacturer directly to the store.

There are two entities making a profit:

  • Manufacturers
  • Seller (Store)

Whereas within Herbalife, you know how many levels there are and each one of them has to have some percentage from the sales.

And that applies to any MLM, therefore it is extremely difficult to make living.

That’s why a lot of independent distributors sell the products online (Amazon, eBay) just to get back at least some of the “investments”. Despite the fact, that it is against Herbalife policy.

Before we wrap up, let’s check some of the most common questions regarding Herbalife.

Herbalife FAQ

1) Is there a scientific study proving the benefits of their products?

No, there is no study showing the advantages of their products. In fact, the amount of ingredients that are supposed to be beneficial inside the Herbalife product is lower than any other similar product.

2) Are Herbalife products expensive?

Yes, they are very expensive and you can find similar products for half of the price.
If you insist on the Herbalife brand go to Amazon or eBay and you have a good chance to get the Herbalife stuff for less money.

3) Does Herbalife have an understandable compensation plan?

The simple answer is, no.

The thing is that Herbalife has its own compensation plan explaining how you can make money and how you can “build” your team.

But probably even the person who created the compensation plan has a hard time understanding what it says.
Let alone a person like myself.

Herbalife Sales and Marketing Plan and Business rules is a 142 pages document.
Who reads that stuff?

And this is quite a common thing in any MLM company.

4) Is it possible to make money with Herbalife?

In theory yes.

But from a practical point of view, it is very difficult.

According to their income disclosure, it is obvious that the majority of people that joined Herbalife lose money and that applies to members that have been active for more than 2 years.

Even the top 10% earn a little over $3,000 a month – again before expenses.

5) Any lawsuits against Herbalife?

Yes, there are, in fact, many of them. Let’s mention only the recent ones.

But Herbalife also “won” one battle, and in the summer of 2016 Herbalife reached a settlement with the FTC to pay a $200 million fine (according to Barrons.com).
Besides that fine, Herbalife had to change the compensation structure, and the company is also required to demonstrate that its product sales are legit.  

Herbalife has a ton of money to defend itself in court, and even a $200 million fine did not shake apart the company.
In fact, their product still sells.

6) Is Herbalife Approved by the FDA?

No, and the truth is that manufacturers and distributors do not need FDA approval to sell their dietary supplements. 

I have contacted the FDA and asked specifically about Herbalife products and the answer is dietary supplements are regulated by the FDA as food, not as drugs.

Here is a full answer from FDA with a link to a post about Dietary Supplements on the FDA website:

Manufacturers and distributors do not need FDA approval to sell their dietary supplements. This means that FDA does not keep a list of manufacturers, distributors, or the dietary supplement products they sell.

If you want more detailed information than the label tells you about a specific product, you may contact the manufacturer of that brand directly.

The name and address of the manufacturer or distributor can be found on the label of the dietary supplement.

For additional information on FDA’s regulation of Dietary Supplements please visit the FDA website.”

Screenshot of the original email:

Is Herbalife a Pyramid Scheme

7) Is Herbalife a Con?

Herbalife is not an outright con or Scam.

However, it has been considered a borderline Pyramid Scheme by the FTC, for a long time.

With that being said, the vast majority don’t make any significant income within Herbalife and most people lose money.

8) How much is Herbalife company worth?

Herbalife in 2020 was worth almost $3.1 billion (Total Assets).

For 2020 the Herbalife revenue was $5.54 billion. For the same year, the company’s income was $372.6 million.
(source: Wiki)

9) Who is the CEO of Herbalife?

Since March 2020 John Agwunobi is the CEO of Herbalife.

He is Scottish-born Nigerian-American and in 2016, Agwunobi joined Herbalife Nutrition.
In 2018 John was a co-president and in 2020 became the CEO.

Herbalife Conclusion

Is Herbalife a Pyramid Scheme

Do you find yourself as a Herbalife seller in the next few weeks?

Do you love their products and do you handle rejection well?
Then this might be for you, but even if you are passionate about Herbalife products, think in the long term.

You need to undergo the “training” that lasts a few months and be prepared that you won’t make a dime during this period.

Well, I personally think that it is a bad idea to become a member of any MLM kind of business, and that includes Herbalife as well.
But I wanted to offer you a perspective and your mindset must be ready for it.

I believe we have covered both the pros and cons of this business model and now it is up to you to decide.

Again, my personal recommendation is, to stay away from Herbalife.

There are a lot of better opportunities out there, and these days you can start your own business online in a few hours, with a reasonable budget.

Do you have a personal experience with Herbalife? Or any person close to you that was part of it?
Please share the experience in the comment section below.

I am sure a lot of readers would like to get more information from others as well.

Thanks a lot for reading,
Have a nice rest of the day!
Mike

4 thoughts on “Is Herbalife a Pyramid Scheme? Or a Good Business Model?”

  1. You have a lot of good information here, I used to use these products in the past but they did not work for me. I have had many thoughts of becoming a distributor for herbal life, but I always assumed it was a pyramid scheme and chose not to. Thank you for sharing, this was a good read and good advice as I have come across these products and job opportunities multiple times. In my opinion, I feel the products were too pricey and didn’t work out for me this was my experience. 

    Reply
  2. Here everything is nicely explained about the cooperation with Herbalife. If anyone wants to try this way of making money, they really should read this text, so I would recommend it to everyone. I think it can be well earned and not a scam, but first find out about all the benefits.

    Reply
    • Thanks a lot for your comment. 

      Yeah, it is really important to find out how it works and what is the earing potential before signing up. 

      Wishing you all the best 
      Mike 

      Reply

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