Herbalife, the international multi-level marketing company known for selling shakes, teas and health supplements, is holding its annual sales convention for North American distributors this weekend at the America’s Center in downtown St. Louis.
Billed as an “Extravaganza,” the event was expected to draw an estimated 25,000 people — most of them independent distributors from around the country — to hear motivational speeches, network and participate in sales seminars.
Though not the city’s biggest convention — it’s easily eclipsed by the Church of God in Christ’s annual Holy Convocation — it’s still significant. The St. Louis Convention & Visitors Commission estimates the Herbalife attendees are booking about 34,000 hotel nights, pumping about $18 million into the area economy.
But although hotel, restaurant and retail owners are welcoming the infusion of business, Herbalife also is a company that has garnered a great deal of controversy since its founding. The firm has been the subject of investigations by the Federal Trade Commission, the FBI, the Securities Exchange Commission, and the U.S. Department of Justice, as well as attorneys general of New York and Illinois for running what critics say is a veiled pyramid selling scheme.
According to a Herbalife representative, it costs $90 to join Herbalife. New members receive sample products, and are eligible for a 25 percent discount. The more products they buy, either for personal use or resale, the bigger the discounts they receive, up to 50 percent.
To qualify for the 50 percent discount, a distributor must accumulate 4,000 "volume points," representing about $3,000 in purchases of Herbalife products.
Herbalife products are not available in retail stores; instead, the products are largely distributed through an informal network of “nutrition clubs.”
Based on interviews with convention attendees, the company appears to attract many people new to the retail business but looking for career changes.
Brian Couvillon traveled from Orlando, Fla., to the Herbalife convention because he says he believes in the product and the company’s compensation structure. A biology major in college who is employed as a lab assistant, Couvillon said he had been looking for a different line of work, and he believes in the product.
“I like helping people stay healthy,” he said.
Couvillion, who has been pursuing Herbalife sales for the past seven months on a part-time basis, is in a level the company calls “Future Millionaire.”
Another “Future Millionaire” is Antwoine Love, 39, of Dalton, Ga., a father of 14 children with a 15th on the way. Love said he got involved with selling Herbalife products full-time a month ago, after having a career “working with music.” Selling Herbalife products helps him assist people with their medical problems, he said.
Though Love has not made a significant profit selling Herbalife and has yet to recruit a downseller, “the guy who got me into this makes $7,000 a month,” Love said.
He said he was completely into selling Herbalife, from the moment he woke up until 2 or 3 a.m.
“This is how I eat,” Love said.
Not all Herbalife distributors are new to business. Claudia Silva of San Antonio, Texas, owned a Mexican restaurant until a friend suggested she use Herbalife products to help her lose weight. After 18 months of using Herbalife, she says, she lost 120 pounds. So she closed her restaurant, leased out the building and for the past two years has been running a Herbalife nutrition club.
“I have a 15-year-old and now I get to spend more time with my daughter, I am getting out and interacting with people rather than staying in my restaurant all day,” Silva said. “I wear the Herbalife gear, and when people see me in the grocery store, they want to know if I can provide them with the products.”
In March 2014, Herbalife became the target of a FTC civil investigation. The move came more than a year after the hedge fund Pershing Square, managed by Bill Ackman, published a critical report alleging the company is a pyramid scheme whose primary profit is generated by bringing in more sales distributors rather than by selling more product.
Ackman, who shorted Herbalife stock (meaning, he profits if the stock loses value), accused the company of misleading distributors by selling them commodity products at inflated prices, publishing false sales figures and targeting vulnerable segments of minority communities especially Latinos, to sell products. Federal investigators have looked into Ackman’s claims as well as claims that outside contractors used by Ackman’s firm may have made false statements to regulators.
The company’s stock price initially fell after the announcement of the investigation but rebounded after it initially appeared regulators would not act on Ackman’s allegations. Herbalife’s backers have included high-profile investors such as Carl Icahn, George Soros and Bill Stiritz, the executive chairman of Brentwood-based Post Holdings.
After the release of Ackman’s allegations, Herbalife significantly increased the company’s federal lobbying efforts in Washington. Former U.S. Surgeon General Richard Carmona has joined the company’s board of directors; former Federal Trade Commissioner Pamela Jones Harbor is the company senior vice president.
On Friday in St. Louis, the company announced its latest public relations effort: a new partnership with the American Red Cross.
Herbalife is donating 280,000 protein bars to blood donation centers nationwide.