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Herbalife vs. Bill Ackman

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Magdalena Grdanoska
Magdalena Grdanoska

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.

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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….
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!
? 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…
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?
“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
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)
The main consumers
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.
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
Advertising costs? Herbalife advertises its corporate name and logo, but not its products.
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.
Fictitious Customers Fictitious Business Opportunity Fictitious University Degree A fraud designed, conceived and executed to exploit the poor To sum up
Herbalife’s response to Ackman’s Criticism
A seemingly more transparent than before website Ackman’s “Herbalife is a pyramid scheme”

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Herbalife vs. Bill Ackman

  • 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)
  • 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”
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