Herbalife International
Herbalife International is a multilevel marketing company specializing in weight loss products. The company was founded by Mark Hughes in 1980. Mark said he started the company because his mother died trying to lose weight. The headquarters is located in Los Angeles California. Michael O. Johnson is the CEO of Herbalife. He had previous senior management experience with Walt Disney. You can get more information about the company by visiting the company website and looking under Investor Relations.
The Herbalife products are a line of weight loss products where protein shakes are designed to be low-calorie meal replacements. The concept is to replace two meals a day with the low-calorie protein shake and to eat a third regular mail but to cut back on the amount you eat at that meal. The result is a dramatic reduction in the number of calories consumed on an ongoing basis resulting in weight loss.
Herbalife uses the multilevel marketing concept to distribute its products. The basic Herbalife International Business Pack (IBP) is less than $100. The company is similar to Amway in that you promote your products to family and friends. The more experienced distributors also may operate “Nutrition Clubs” or “Fitness Clubs” to build their organizational volume.
Herbalife does not manufacture most of their product line, instead they buy from third-party contract manufacturers. Herbalife then sells the products to independent Herbalife distributors, who in turn marks the products up then sells them to “retail customers”. Because of the multiple markup for each of these distribution levels the products tend to be more expensive than similar products found at GMC or Vitamin Depot.
The Herbalife Compensation Plan is a uni-level stair step breakaway compensation model. A uni-level plan allows the distributor to enroll as many personal distributors as wanted, however they must be all enrolled as first-generation distributors. The first level of leadership in Herbalife is called Supervisor. A Supervisor is anyone who has purchased $4,000 volume points of product in a calendar month from Herbalife. A Herbalife Supervisor then is qualified in the following months to earn a 5% Royalty on all of the Supervisors under him or her for three generations. This is called Organizational Volume. When a Supervisor has $20,000 in Organizational Volume 3 months in a row they achieve what is called GET Team and qualify to earn an additional 2% Production Bonus on that volume. When a GET Team has $80,000 in Organizational Volume 3 months in a row they achieve Millionaire Team status and earn a 4% Production Bonus. When a Millionaire Team has $200,000 in Organizational Volume three consecutive months they achieve President’s Team and earned a 6% Production Bonus.
The challenge Herbalife distributors have is the same that most multilevel marketing companies face. While the Herbalife products are high quality they are also perceived as being expensive compared to GNC. As a result very few Herbalife distributors keep “retail customers” for more than a few months. This creates an ongoing and never-ending search for new customers and often results in high marketing costs to get those customers. In fact the vast majority of Herbalife distributors never make a profit after expenses and many lose money in trying to build a business.