Herbalife International is one of the giants of MLM from back in the day when an MLM business meant knocking on doors instead of going online. It's grown immensely in its 25 or so years of existence, but it has also acquired a disturbingly long list of controversies which a change in management hasn't quite been able to offset. Despite it's efforts to address certain troublesome issues, quite frankly, I'd be a more than a little hesitant about signing up with Herbalife if only because it's been around so long that it will be difficult to convince people to sign up for it, but that's just my opinion.

The Company

Herbalife was founded by Mark Hughes, who died at age 44, in 2000. It was then acquired in 2002 by Whitney and Co LLC and Golden Gate Capital for $685 million USD. On December 16, 2004, Herbalife International went public on the NYSE with 14,500,000 common shares at $14/share. Net sales for 2004 were reported at USD 1.3 billion.

Over the years, Herbalife has had its share of controversies though. For example, in 1985, the Attorney General of California sued the company for making inflated claims about just how effective it's products were. The suit was eventually settled for $850,000 USD without Herbalife admitting any wrongdoing. To be fair, many nutrition companies like Herbalife face the occasional legal challenge over the safety of their products, but as of 2009, none of these charges concerning product safety have been upheld.

However, Herbalife management, in it's filings with the U.S. Securities and Exchange Commission (SEC), noted problems with inappropriate business practices in the company's past, their subsequent long-term effects and the need to avoid repetition in the future.

As of December 2008, there are 1.9 million independent Herbalife distributors in 70 countries.

The Compensation Plan

Herbalife uses one of the oldest and most common compensation plans in multilevel marketing known as "stairstep breakaway." In this type of compensation plan, distributors need to meet monthly volume quotas to qualify for a higher achievement levels, or "stairsteps." When a distributor reaches a certain level, he can then "break away" from his or her sponsorship line. The original sponsor will then receive a percentage override on the sales of the entire breakaway group.

There are two drawbacks to this plan. First, it can be difficult to explain in detail to new recruits. The second disadvantage is that it encourages some distributors to get involved in inventory loading. That's when distributors end up forcing their agents and retailers to buy large inventory in order to keep their agency status or qualify for volume bonuses. I do not know if Herbalife monitors all of their distributors well enough to prevent this practice.

The Verdict

When you're dealing with a company as big as Herbalife, you can expect a lot of people to already have been exposed to this particular MLM business opportunity. To put it another way, the people you approach with this MLM business opportunity will have either heard about it already and said "no," or are already part of that MLM business opportunity.

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