This weekend, Herbalife its Herbalife Latina Extravaganza event in Los Angeles.
It’s a massive event hosted for the company’s thousands of Latino distributors.
On Friday, members League of United Latin American Citizens (LULAC), a leading latino organisation, hosted a “press conference” outside the Attorney General’s office in L.A.
LULAC members handed out copies of a “Dear Herbalife Distributor” letter warning distributors about the perils of the company. (We’ve included a copy of the letter below.)
While LULAC members were distributing letters, Herbalife’s CEO Michael Johnson came outside and began yelling at them, according to Reuters.
The incident became very heated. What’s more is witnesses told Reuters that current Herbalife distributors also spat on the LULAC members.
Outside the convention center where Herbalife hosted its event the atmosphere became testy when some distributors spat at some of the community activists and when Herbalife CEO Michael Johnson arrived, several eye witnesses said.
“Johnson approached us and was very confrontational,” said Randy Fox, a regional director for LULAC, adding “he told us ‘You don’t know the facts. We don’t want to hear your lies. This is all lies. You should be ashamed of this.” Herbalife spokesman James Golden declined to comment on the matter.
Herbalife, a multi-level marketing firm that sells nutritional shakes and supplements, is the company that hedge fund manager Bill Ackman is shorting. Ackman, who runs Pershing Square, believes Herbalife is a “pyramid scheme” that targets lower income individuals, particularly from the Hispanic population.
Ackman has said the U.S. will be better off when Herbalife is out of business.
Herbalife’s CEO told CNBC back in December that the “United States will be better off when Bill Ackman is gone.”
So far, Ackman’s short hasn’t worked out in his favour. Shares of the stock have skyrocketed. A number of fund managers, including his rival Carl Icahn and George Soros, have gone long the stock.
If anyone has video footage from this incident, feel free to send it to [email protected]
Here’s the letter:
October 18, 2013
Dear Herbalife Independent Distributor:
This weekend you will hear unbelievable success stories about individuals who have gone from rags to riches by becoming Herbalife distributors. Unfortunately, if the stories seem too good to be true, it’s because the vast majority of Herbalife distributors experience something far different.
According to Herbalife’s Statement of Average Gross Compensation Paid by Herbalife to United States Distributors in 2012, 88% of Herbalife’s distributors earned no payments from Herbalife in 2012, and only 3.67% received more than $US1,000 for the entire year.
As an Herbalife Independent Distributor you have the right to demand that the company make important changes to the way it operates to ensure that the work of many does not end up lining the pockets of the few. While you participate in training sessions over this weekend, we encourage you to suggest the following reforms to Herbalife officials so the company can truly realise its vision of changing people’s lives for the better:
1) Report the average net income of Herbalife distributors and stop featuring highly unlikely “rags to riches” success stories. The only way a potential distributor can tell if Herbalife is really a good “business opportunity,” worth pursuing is if the potential distributor knows what the average distributor makes for a given amount of work after subtracting their operating costs. Herbalife should publish this information to ensure that potential participants are not induced into becoming distributors with unrealistic expectations only to be disappointed when the expected profits fail to materialise.
2) Limit Herbalife’s down line compensation to three levels deep. This reform would limit compensation (including royalty overrides, production bonuses and other forms of multi-level income) for a distributor’s downline to the number of levels that a distributor can reasonably be expected to train and manage and reduce the incentive for distributors to engage in predatory or deceptive business practices that place a far greater emphasis on recruitment than on actually selling Herbalife products to retail customers.
3) Track and report Herbalife retail sales to new recruits and the general public. A fundamental practice of all legitimate consumer product companies is to track retail sales to consumers. While you as a distributor are required by Herbalife to keep track of all your retail sales, Herbalife’s policy is not to collect this data from you and not to report any data on retail sales to new recruits and the public. The FTC has clearly stated that robust retail sales to non-distributors are the key to separating legitimate multi-level marketing companies from pyramid schemes.
4) Don’t Exaggerate the Health Benefits of Herbalife Products. Herbalife claims that their products are healthy and nutritious; however, Herbalife’s 2013 product catalogue has a disclaimer that the vast majority of their health claims have not been evaluated by the Food and Drug Administration nor are their products intended to diagnose, treat, cure, or prevent any disease. Health claims should not be made about any Herbalife product unless the claim has been proven to be true.
5) Require Nutrition Clubs to come into compliance with the law . Herbalife’s nutrition clubs are required to follow a bizarre set of rules that prohibit club owners from displaying the Herbalife logo on the outside of the store, posting prices for their products, having an open/closed sign and advertising. Clubs are required to cover their windows, sell only Herbalife products, destroy used containers, and keep products hidden until they are sold. These bizarre rules appear to be designed to bolster Herbalife’s contention that nutrition clubs are not retail stores, restaurants or food establishments when in fact that is exactly what they are because they are selling food at fixed retail locations. Herbalife distributors should demand that the company ensure its nutrition clubs are in compliance with local, state & federal health and business codes that apply to retail food outlets. Better yet the company should franchise the nutrition clubs as most other national brands have done when selling food at fixed retail locations. The “future of the company” shouldn’t depend on hiding from the law.
6) Stop targeting low-income Latinos. Between 60 to 80% of Herbalife’s 500,000 US distributors are Latino — 4 to 5 times their representation in the US population. Close to 90% of these distributors will quit within a year and Herbalife will seek to replace them with another 300,000 to 400,000 Latino distributors to sustain their US profits.
If Herbalife’s executives refuse to implement the necessary reforms listed above, at the very least they should stop targeting the family-oriented and trusting Latino community with their deceptive business practices. No one community should have to bear the brunt of a company’s predatory business model.
Herbalife claims to do the right, honest and ethical thing. By insisting the company undertake the 6 reforms listed above, you will not only help Herbalife live up to its slogans, you will also help the company move to a financially stable business model for the long haul and address the long standing criticisms that have plagued the brand for decades.
Herbalife’s US business depends heavily on the Latino market. As Latino Herbalife distributors,it is time for you to take a leadership role in determining the direction of the company you represent and to bring the Latino values of honesty, integrity, fairness, and compassion to a company that sorely needs them.