Herbalife is a global nutritional company that sells weight management and skin care products through a multi-level marketing model. In 2012, hedge fund manager Bill Ackman presented a report alleging that Herbalife operates as a pyramid scheme by targeting low-income populations. Ackman took a short position on Herbalife stock. Herbalife denies the pyramid scheme accusations and points to expanded disclosure on its business practices. However, critics argue Herbalife takes advantage of financially insecure communities by relying on unpaid product promotion through secretive training programs.

1. ARE YOU A
DREAMER?
ARE YOU PREPARED TO
WORK HARD IN ORDER
TO REACH YOUR GOALS?
DO YOU WANT TO BE FIT
HEALTHY AND BEAUTIFUL?
DO YOU WANT TO BE SUCCESSFUL???
WELL THERE JUST MIGHT
BE A PLACE FOR YOU….

2. A place where you can relax…
Meet open-minded people
Start your own business
Make people’s lives better
AND WHERE YOU CAN BECOME A MILLIONAIRE!

3.  Herbalife is an American nutritional company that sells weight
management and skin care products globally.
 But Herbalife is beyond a simple firm, it’s an ideology. It
guarantees to its followers that they are going to achieve the
three main goals every single person strives for, health a good
body and money.
 It employs around 7.400 people worldwide and has reported net
sales of 3.825 billion dollars in 2014
It all went herba-well, until…

4. The American hedge fund manager Bill Ackman laid his
hands on Herbalife.
In 2012 Ackman, with the help of his team from Pershing Square Capital
Management presented a research report calling the Herbalife’s multi-level
marketing business model a pyramid scheme.
In 2013 Ackman announced on Bloomberg Television Pershing Square’s open short
position in Herbalife, stating that he would hold the short “to the end of the
earth”. A short is an investment position in which the investor seeks to make a
profit if a particular stock he is shorting declines in value.
The question is: Why?

5. “All pyramids eventually collapse”
Herbalife’s strategies under CEO Michael Johnson:
1. Expand globally, especially in the world’s poorest countries;
2. Target Latinos and low-income populations in the U.S.
3. Propagate Nutrition Clubs
4. Support “Training Programs” within Nutrition Clubs
More than 4 billion people live at the
Bottom of the Pyramid and they earn
less than $2 per day

6. The poorest of the poor
- Financially insecure populations
- Who want to build a better life
- Who are hardworking and “teachable”
- From close-knit communities based on affinity
- Unlikely to complain (culturally or because of legal risk)

7. The main consumers

8. What is the job of the
“trainers”?
 Making shakes
 Promoting the shakes
 Using them as a status
symbol.
 Most importantly they
themselves have to
drink them.
They are “working for themselves” which seems more like an unpaid
internship, in the same time paying for the products (the price of owning a
club).
They do this by the
standards of the Club
100. Club 100 is an
institutionalized system
for recruiting and
training Nutrition Club
operators.

9. What is wrong with Club 100?
 Club 100 is intentionally secretive, with almost no written explanation
or rules
 Completion of steps is at the discretion of the sponsor
 Relies on deceptive income claims
 Deceives “trainees” into believing they are “investing” in an education
with a valuable pay-off
 Creates fake club traffic consisting of “trainees” and their family
members and friends
 Demand duplication for success

10. Advertising costs?
Herbalife advertises
its corporate name
and logo, but not its
products.

11. Numerous high profile paid endorsers
Madeleine
Albright,
former
secretary of
state
Dr. Luis
Ignarro,
Nobel laureate
David
Beckham
Proffessional
Soccer Player
Lionel Messi
Proffessional
Soccer Player
Cristiano
Ronaldo
Proffessional
Soccer Player
 The endorsers don’t actually consume the product, or take
part of any of the Herbalife’s clubs.
 Other than the world-famous endorsers, Herbalife’s members
try to play the role of testimonials by posting the “before and
after” photographs on their social network pages.

12. Fictitious
Customers
Fictitious Business
Opportunity
Fictitious
University Degree
A fraud designed, conceived and executed
to exploit the poor
To sum up

13. Herbalife’s response to Ackman’s Criticism

14. A seemingly more
transparent than
before website
Ackman’s “Herbalife is
a pyramid scheme”