Herbalife: A Successful Business Model for Latinos or a Predatory Pyramid Scheme?

It is early Sunday morning and hundreds of Hispanics are flocking to the streets of downtown Los Angeles. They are not attending a comprehensive immigration reform rally or a Latino music festival; they are getting geared up to exercise, not only their bodies but their minds. With green bottles in hand containing a daily nutritional regimen of shakes, aloe juice, or tea while others consume protein bars and all for the commitment to the parent company, Herbalife, and the many economic benefits they can collect if they become successful distributors.

We cannot demonize successful business ventures and business models that provide income and entrepreneurship opportunities for our people, simply because not every person that gets involved succeeds.

– Rafael Fantauzzi

It’s the annual Herbalife Latin Extravaganza, a typical distributor’s conference in the likes of MillerCoors, IBM, Mary Kay, and McDonalds. Only difference is that Latinos run these conferences. Yes, Latinos are in charge.

Why? Simple. Herbalife has succeeded at something that quite a few companies, and the Federal government for that manner, have failed, and that is to achieve real Hispanic inclusion. Hispanics make up at least 60 percent of Herbalife’s direct selling workforce – better known as distributors.

Hispanic consumers and workers are an integral part of this industry. In a 2013 Second Quarter earnings report, Herbalife reported that its South and Central America volume grew 33 percent and Mexico reporting an 8 percent increase in year over year volume. North America, which includes Puerto Rico, reported an 11 percent volume increase during the same period.

As President of the National Puerto Rican Coalition (NPRC) and a Board member of the Hispanic Association for Corporate Responsibility (HACR), I had been lobbied heavily by groups that portrayed Herbalife as pure monsters, who were taking advantage of innocent Latinos. Our organization was approached to discuss Herbalife and join a group that had already requested a full investigation by the Federal Trade Commission. At the epicenter of these allegations is well known hedge fund manager Bill Ackman, CEO of Pershing Square Capital Management, who bet that Herbalife stock would collapse if a federal investigation is launched. 

But I know there are always two sides to a story, so I requested a meeting with Herbalife corporate executives and its distributors. I wanted to confirm allegations that Herbalife was “a pyramid scheme that preys on the Latino community.”

As a guest of the corporation, I was given an all “access pass” to a company culture that promotes self-improvement in order to achieve economic empowerment and nutritional wellness. Herbalife’s culture might resemble a cult to some but to the people that I spoke to, Herbalife is not only a source of income but a source of work-life balance. Carla, a USC graduate from Los Angeles said, “I can do the business part-time or give it all I got and the outcome is the same, I’m gaining control of my life.”

But aside from this visit to Herbalife, I decided to do my research. Multi-level marketing companies are becoming more attractive to Hispanics with different educational backgrounds because of the lack of job opportunities or progress in the traditional marketplace. In addition, direct selling offers a unique flexibility for families that are juggling with the realities of life. But let’s be honest, not everybody is caught up to be a salesperson. It is clear to all the people I’ve spoken to that you reap your rewards if you work hard at selling and how to become an advocare distributor at building your down-line network, that is the foundation of American entrepreneurship. I’m a firm believer that Hispanics are smart enough to ascertain risk.

The big problem I see is that the critics of Herbalife and multi-level marketing companies are confusing business ventures with a welfare program. They assume that everyone must have equal outcomes, not just equal opportunity. If individuals want to become distributors/salesmen for these companies, their compensation and reward is based on the results of their effort. A worker that dedicated time and sweat and achieved high sales and promotions should be rewarded. His/her compensation should not be equal to that of an individual who did not put much effort or thought into this venture. Plain and simple, this is a business, not a charity. And if, as community advocates, we are going to demonize every company that rewards success over mediocrity, then we are not advocates for our communities, we are simply advocates of dependency and failure.  And that is not the kind of future I want for my two girls. 

During my visit, I met a young man from Puerto Rico named Jonathan. Jonathan had worked in fast food and several other retail type jobs that required him to work long hours with very few opportunity for a promotion. Acknowledging that education was his way out, he became a registered nurse. After graduating he secured a job in the neonatal intensive care unit at a major hospital institution on the Island. But even with his education and the remarkable job, he had no quality of life. It was then that a family member exposed him to Herbalife’s nutritional products and the chance to improve his financial outlook. Jonathan is now a very successful Herbalife distributor and is making a difference in other people’s lives. 

As the battle lines on this fight continue to be drawn, I encourage my colleagues, politicians, and the rest of corporate America to look closely at how multi-level marketing companies are transforming the emerging majority demographic of America, Hispanics.

In our capitalistic system, there will always be winners and losers. Our organizations should be on the look-out for predators. But we cannot demonize successful business ventures and business models that provide income and entrepreneurship opportunities for our people, simply because not every person that gets involved succeeds. Let us allow our community to explore the capital system openly and trust that they know when to spot a “limón”.


Rafael A. Fantauzzi is the President & CEO of the National Puerto Rican Coalition (NPRC) and a Board Member of the Hispanic Association on Corporate Responsibility (HACR).   

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