It’s a Saturday morning at the Long Beach Convention Center, and the mood inside a second-floor ballroom is gleefully anticipatory. Nearly 1,000 people mill around, chattering and dancing to blaring pop music. It feels like we’re waiting for a concert to start, except that it’s not even 10 a.m.
Eventually, a blonde woman and a thin young man walk onto the stage at the front of the room. The crowd explodes. People whoop and rush to the front, begging for autographs. I’m confused until the woman next to me leans over to explain.
“When we have new speakers at these events,” she says, “we like to make them feel special” by treating them like celebrities.
The event in question is an Herbalife “success training seminar.”
Herbalife is an L.A.-based, multi-billion-dollar nutrition and weight loss supplement company. But you won’t find its diet shakes or protein bars at your average grocery store. Instead, the company relies on more than three million independent distributors in about 90 countries who work kind of like door-to-door salesmen. Lately, that business model has drawn a lot of scrutiny.
In December 2012, a hedge fund manager named Bill Ackman publicly accused Herbalife of being an illegal pyramid scheme and bet a billion dollars that its stocks would fall. Herbalife denies Ackman’s claims, and a financial audit last year gave the company a clean bill of health. But Ackman seems to have gotten some traction: Last month, the Federal Trade Commission opened an investigation into Herbalife’s business. Since then, the company’s stock has fluctuated wildly.
That’s what’s happening on Wall Street. But what’s going on with Herbalife on Main Street?
Despite the high-profile controversy, Herbalife continues to attract droves of people to sell its products. The company boasts some 3 million distributors in about 90 countries. I wanted to take a ground-level peek at the company’s message and culture, so I recently went to one of the seminars Herbalife regularly holds for distributors and wannabe distributors.
One thing that struck me right away was how intensely the company promotes itself as a lifestyle as much as a business opportunity. Herbalife is a distinctly California brand, peddling the combined allure of entrepreneurship, physical fitness and potential wealth. All morning at the Long Beach event, the talk from the stage and among the crowd was about helping people “meet their goals” by sharing Herbalife products, making a difference in the world and doing something meaningful. There was also a lot of talk about making money.
The blonde woman and the thin young man who kicked things off turned out to be a pair of young Herbalife distributors named Elyse Falzone and Dan Gleiberman. Falzone is a dancer and massage therapist who said she lost 10 pounds in her first month of consuming Herbalife products, which motivated her to become an independent distributor. Last month, she said, she earned $3,500 from the company. Gleiberman, meanwhile, is a former athlete with a similar story. Before Herbalife, he said, he was active but had terrible eating habits. Now he drinks an Herbalife protein shake every day, stays in great shape and earns more than $5,000 a month. Both Falzone and Gleiberman made a point to say that their results weren’t typical.
“It’s all about the work that you put in,” said Falzone. “It’s not average. Remember the disclaimer.”
Most of the formal seminar was devoted to similar stories, culminating with a former UCLA volleyball player named Heather Cullen who said she makes six figures a year through Herbalife and recently used her earnings to take her mom on a cruise to the Bahamas. “We can create whatever we want inside Herbalife,” she said. “I live the best life ever … if you really open yourself up to what’s possible for you, you’ll be amazed.”
Despite the disclaimers recited by Cullen, Elyse and Dan, hopes ran high among some of the seminar attendees.
“I’m planning to start a career and make some money … help people lose weight,” said an unemployed 20-year-old named Tori Thomas. “I think it’ll be pretty easy.”
According to Herbalife’s own statistics, nearly 90 percent of their “members” (a word the company recently swapped in for distributors) didn’t earn any income from the company in 2012. But in an email, Herbalife spokeswoman Barbara Henderson said that’s because most people “joined for self-consumption, not for the business.” Herbalife President Desmond Walsh also told me that according to internal surveys, only about four percent of people who come to Herbalife expect to earn a full-time living from it. As for what those who do come to it as a business opportunity earn in in come, he said, it “varies from a few hundred dollars a month to several thousand dollars a month.”
But still, I asked him, couldn’t the success stories showcased at these seminars set up earning potential expectations that are unrealistic for most people? “We don’t think so,” Walsh said. “But,” he added, “as with any sales organization … you also want people to understand what is possible.”
Herbalife announces its earnings for the first quarter of this year at the end of the month. Analysts predict that despite the federal investigation, they’ll be higher than last year.