July 22, 2024

The woman swears to me that she is not part of Herbalife, and I believe her. But given the looks of her juice shop, you could easily mistake it for an Herbalife nutrition club when you know what to look for. In fact, the resemblance is so striking, Herbalife representatives have repeatedly visited her establishment. She tells me they wondered if she was selling their products and not reporting her sales to the company. After all, she offers teas, protein shakes, and vitamin juices. It could very well have discreet ties to Herbalife, but it does not.

These “clubs,” as they are called, are likely to be in your neighbourhood. They are not retail stores or restaurants, and no Herbalife sign or product can be visible from the outside. The clubs are not clones of each other; instead, they rhyme. They have the word “nutrition” in the name, like Beyond Nutrition and Iconic Nutrition; stickers with their logo, often printed on a black circle, can be seen on their disposable glasses; the drinks themselves display gorgeous gradients of colours; and they commonly use a chalkboard where they list their products. I found five in the Greater Montreal area simply by searching for places with “nutrition” in the name and spotting the Herbalife products in a photo uploaded to their Google Maps location. Laura Ligos, a dietitian who blogged about this phenomenon in 2019, identified 29 in upstate New York, where she lives.

What’s wrong with selling products, you might ask? The problem, some will argue, is that, when you walk into these nutrition clubs, you are the product.

MLM vs. pyramid scheme

“Health is wealth.” These are the words of former Herbalife CEO, Dr. John Agwunobi, during the first year of the COVID-19 pandemic when both health and wealth were jeopardized for a lot of people. I heard a similar phrase—“health and wealth”—from the mouth of one of Agwunobi’s predecessors, Michael O. Johnson, who has returned to helm Herbalife again. You could say it’s one of the company’s taglines.

Herbalife, founded in 1980, sells meal replacement shakes, instant herbal beverages with tea extracts, dietary supplements, and drinks derived from the aloe vera plant. Its website boasts that, in 2022, five million of its protein shakes were consumed daily.

Herbalife works hard at maintaining legitimacy. Their former CEO, Agwunobi, is a paediatrician who was assistant secretary for health under George W. Bush and who attained the rank of four-star admiral within the United States Public Health Service Commissioned Corps. Michael O. Johnson, the current CEO, was once president of the international division at Walt Disney Company. Herbalife counts former Secretary of State Madeleine Albright as an endorser, and it sponsors soccer mega-star Cristiano Ronaldo, the LA Galaxy soccer team, and five National Olympic Committees. The California Academy of Nutrition and Dietetics Foundation held a fundraiser earlier this year, and it was sponsored by Herbalife. Dietitian Leah McGrath, who founded Build Up Dietitians, told me that when McDonald’s sponsored the Academy years ago, “people had a fit.” Obviously, junk food and dietetics are strange bedfellows. But when Herbalife did it? Some people’s reactions were akin to “meh.”

Despite this superficial credibility, Herbalife has an unconventional way of selling its products. You can’t buy them in a store; you buy them from someone, a distributor, who has purchased the products with their own money and is trying to sell them. This person may also try to recruit you to sell more of them. You then enlist others to sell these products. Picturing it, a triangular pattern emerges. Indeed, a Belgian court once found Herbalife was operating a pyramid scheme, but that judgment was reversed by the Belgian Appeal Court which decided that Herbalife was a legitimate multi-level marketing (MLM) business.

What is the difference? According to the Federal Trade Commission (FTC) in the United States, whose mandate is to protect consumers from frauds and scams, the distinction hinges on how a person in the business makes money. In both a pyramid scheme and an MLM, people sell a product to other people and they recruit others to do the same. In an MLM, you earn money from selling the product to people who will use it and you don’t have to recruit new distributors. In a pyramid scheme, however, “your income would be based mostly,” the FTC writes, “on how many people you recruit, not how much product you sell.” Put simply, within an MLM, the product is the product; in a pyramid scheme, the product is the people.

Where Herbalife fits in this dichotomy is not easy to decide, and for many people, the appeal of rags-to-riches stories that are platformed on opulent stages at Herbalife’s massive extravaganza events render the question irrelevant. Herbalife distributors show off their expensive cars and lavish mansions. They embody the American dream. In the documentary Betting on Zero, about Herbalife and the hedge fund manager who wants to bring it down and have his clients profit from its downfall, an Herbalife distributor is quoted as saying, “If I can do it, I made a small fortune—actually a large fortune—with the company, anyone can. It’s simple.”

The math, however, clearly shows that not everyone can. If everyone recruits, let’s say, six people under them, the numbers quickly rise to an impossible goal. Level two has six people, level three has 36 people, level four has 216. Somewhere between levels nine and ten, we have everyone currently selling Herbalife products. By the time we get to level 14, we have exceeded the population of planet Earth by five billion people. If you were recruited early, you get to profit from your downline, i.e. the people in the levels below you from whom you earn a commission. But since the company has been around since 1980, your chances of recruiting a wealth-generating downline are very slim. This is where numeracy matters. When you run the numbers, you realize the downline can’t go on forever.

These simple calculations are supported by actual data. The Wall Street Journal has reported that 90% of Herbalife’s rank-and-file distributors dropped out in 2004, according to the company’s own securities filing the following year. It’s not hard to figure out why: the Internet is full of testimonials from former Herbalife distributors who thought they’d make it big but ended up losing money. They couldn’t find enough people to sell to. They couldn’t recruit enough people on their downline. The products they had bought and that were filling up their homes were expiring and had to be thrown out.

When the FTC finally investigated Herbalife, it revealed that the majority of distributors stop ordering products within their first year and that nearly half of the entire distributor base quits in any given year. Half of Herbalife’s higher-level distributors earn on average less than $5 a month from selling the company’s products, and the majority of people who opened a nutritional club made no income from it or lost money. Herbalife was ordered to pay USD 200 million in consumer compensations and to fundamentally restructure its business. Its practices were judged to be “unfair and deceptive.”

As a lawyer who was spearheading a class action lawsuit against Herbalife says in Betting on Zero, “joining Herbalife is like buying a lottery ticket for a lottery that’s already over.”

What is in those shakes?

From a nutritional perspective, many of Herbalife’s products should also be looked at with some skepticism. Its popular Formula 1 shake mix is advertised as “a delicious healthy meal,” but at 222 calories per serving, it falls short. Dietitian Laura Ligos agrees. “The average female [her main client base] generally requires 1,800 to 2,400 calories a day depending on activity level,” she tells me. “To me, this would not constitute an actual meal replacement.”

In general, liquid meal replacements have their place. Dietitian Kat Benson, who takes to YouTube to warn people against nutrition MLMs, tells me that shakes can be useful for people who can’t chew at the moment due to dental work, who have difficulty swallowing, who have pancreatic issues, or who need to replenish after an intense workout but don’t have the appetite to stomach solid food. Outside of these situations, she doesn’t think protein shakes are necessary. And with regards to Herbalife’s, she has a concern: the main source of carbohydrate is fructose. She recommends instead a combination of glucose and fructose, as glucose is more immediately available as a source of energy, whereas the body needs to wait for the liver to convert fructose into glucose to use it.

Everyone I spoke to pointed out that Herbalife shakes are also significantly more expensive than comparable brands, a point that was also made in the Betting on Zero documentary. Then there’s the issue of what exactly is inside those powder tubs.

The fact that dietary supplements have no regulatory oversight in the United States (and a very loose one in Canada) means that they can easily be contaminated or purposefully adulterated with drugs and toxic substances. This is why a third-party certification is so important. This is when an independent company tests batches of the product to certify that it really is what it claims to be and is free of common contaminants. Benson typically recommends looking for the seal of USP, Informed Choice, or NSF on the supplements you want to buy. While the “Herbalife24” product line is NSF certified, the rest of the company’s products—including the popular Formula 1 commonly used in nutrition clubs—is not, according to Herbalife’s website, the NSF website, and photos of the product labels available online.

Searching the scientific literature for “Herbalife,” I found a number of reports of acute liver toxicity associated with the use of Herbalife products (summarized here). Determining that these products were causing the liver damage, however, has proven to be difficult. The time span between starting the product and being diagnosed with a liver injury varies from case to case, and many patients are taking multiple products at the same time, each one containing many supplements and plant products.

Herbalife cares about its public perception, even within scientific circles, and has published rebuttals to these case reports in the medical literature. Naturopath Kristy Appelhans, Herbalife’s vice-president for global consumer safety, has at least 12 papers to her name, most of which are pushbacks against concerns that Herbalife products may cause liver toxicity. But these rebuttals are not the only way the company tries to maintain its image. A paper describing the case of an Indian woman who died of liver necrosis after using an Herbalife product in an attempt to slim down was retracted by its publishing journal “for legal reasons.” The scientists did not manage to test the exact tub the woman had purchased, but they tested similar products from the same seller and detected heavy metals and bacterial contaminants in most of them. Both the authors and the journal then found themselves on the receiving end of legal threats, and the paper was pulled.

Would you like a Spiderman tea for your child?

Despite the FTC’s decision in 2016, Herbalife is alive and well, and it has found new ways to bolster its credibility. Since 2019, it has funded scholarships for people studying nutrition to do research or seek clinical training. It also announced that the Centers for Disease Control and Prevention have recognized its lifestyle intervention program as a Certified Diabetes Prevention Program. Even more worryingly, from my perspective and that of the dietitians I spoke to, Herbalife has made inroads with children and teenagers. Ligos works with parents, and many don’t like that Herbalife’s name ends up on the back of jerseys for their children’s sports teams. There are Herbalife product samplings happening at schools. Kids are attracted to the rainbow-coloured teas. If a friend tried a flavour, they want to try it too. “They’re just doing it because it’s cool,” she tells me. “They don’t know that, one, they’re supporting an MLM, but two, the quality of the food they’re consuming is not great.”

To be an Herbalife distributor, you don’t need any health science certification. To then give advice about healthy eating or slimming down to adults, teenagers, and children in the absence of any formal education in the matter is not ideal. Benson is concerned because messaging about food aimed at younger people needs to be very carefully crafted so as not to trigger disordered eating.

I did visit an actual Herbalife nutrition club in Montreal. A sign on the door said they were closed for three months, but the door was open. I looked around. At the very back, in the next room over, I spotted a man sitting in a restaurant kitchen specializing in Jamaican food. It turns out the two businesses share a front door but are unrelated. I asked him if the juice bar was part of Herbalife but he didn’t know. On its Instagram page, however, as you scroll through the videos—highlighting their multicoloured drinks, the Sip ‘n’ Paint events they’ve hosted, their kids’ teas with flavours like “Spiderman” and “Moana”—I finally spotted it. Two white plastic containers with a light green ring at the top and the Herbalife logo.

The cook had been sharing a space with an Herbalife recruitment business and didn’t even know. Given how difficult it is for Herbalife distributors to avoid losing money on these nutrition clubs, I wonder how long this one will last and if it will impact the Jamaican restaurant at the back.

All of this sobering information—about the financial reality of Herbalife distributors, about the low caloric content of Herbalife meal replacement shakes, about the possible contamination of some of their products being associated with liver problems—is out there. But the font size matters.

The dreams are printed big. The reality gets buried in the small print. Buyer beware.


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