Herbalife

In February 1980, Mark R. Hughes began selling the original Herbalife weight management product from the trunk of his car. Hughes often stated that the genesis of his product and program stemmed from the weight loss concerns of his mother Joanne whose premature death he attributed to an eating disorder and an unhealthy approach to weight loss. His first product was a protein shake designed to help people manage their weight. He structured his company using a direct-selling, multi-level marketing model.

In 1982, Herbalife received complaints from the Food and Drug Administration for claims made about certain products and the inclusion of mandrake, poke root, and food-grade linseed oil in another.

The Department of Justice of Canada filed criminal charges against the company in November 1984 for misleading medical claims in advertisements. As a result of the complaints, the company modified its product claims and reformulated the product.

By 1985, Herbalife was considered the fastest-growing private company in America by Inc. after its sales increased from $386 thousand to $423 million over the previous five years. That same year, the California Attorney General sued the company for making inflated claims about the efficacy of its products. The company suffered as a result of the lawsuit and was forced to lay off nearly 800 employees by May 1985. The company settled the suit for $850,000 without admitting wrongdoing.

In 1986, Herbalife became a publicly traded company on the NASDAQ and rebranded itself as Herbalife International. However, as a result of the negative publicity from the FDA lawsuit, the company posted a $3 million loss that year.

By 1988, the company had expanded its reach to Japan, Spain, New Zealand, Israel, and Mexico, and it increased its worldwide sales to $191 million in 1991.

In 1993, the company underwent a secondary offering of five million shares.

The company launched a line of personal care products in 1995 which included fragrances and facial cleansing products.

Products

Herbalife Nutrition's products include weight-loss and protein shakes, as well as protein bars, teas, aloes, vitamins, and sports hydration, energy, and personal care products. The company's original product is the Formula 1 protein shake, a soy-based meal-replacement shake. The product debuted in 1980 and, as of 2015, was the company's best selling product accounting for nearly 30% of total sales.

Herbalife's products are produced at the company's five manufacturing facilities in the U.S. and China, as well as by third-party manufacturing partners. The company's production process is based on a "seed to feed" strategy, which the company initiated in the 2010s that allows it to trace where the ingredients in its nutritional products originated. Since 2013, the company has operated a botanical extraction facility in Changsha, Hunan Province, China. The facility produces botanical extracts, including teas, guarana, chamomile, broccoli, and bilberry, for use in many of the company's products. Before extracts are processed, they undergo a botanical identification program and are tested several times throughout the production process. The processed raw materials from the extraction facility are used at all of the company's branded manufacturing facilities as well as by its partners. As of 2015, 58% of the company's nutrition products were manufactured at Herbalife-owned facilities.

In China, the company's manufacturing sites are located in Suzhou and Nanjing. In the U.S., the company has manufacturing facilities in Lake Forest, California, and Winston-Salem, North Carolina.

Herbalife's claims of health benefits from its products have met scrutiny from the medical community, consumers, and government agencies.

FTC investigation

Based on information from a Freedom of Information Act (FOIA) request, the New York Post reported on February 4, 2013, that Herbalife was subject to a pending probe from the Federal Trade Commission (FTC). The FTC released 729 pages containing 192 complaints received over a seven-year period in regards to the New York Post's FOIA request. The FTC stated that the wording in its response to the FOIA request was incorrect; the FTC could not confirm or deny an investigation into Herbalife.

In March 2014, the FTC opened an investigation into Herbalife in response to calls from consumer groups and members in both houses of the United States Congress. Herbalife responded to the probe by saying it "welcomes the inquiry given the tremendous amount of misinformation in the marketplace, and will cooperate fully with the FTC. We are confident that Herbalife is in compliance with all applicable laws and regulations". However, in the press conference, Herbalife was declared not necessarily not a pyramid scheme.

In July 2016, Herbalife agreed to modify its business model and pay $200 million in a settlement with the FTC. Partial refund checks were mailed to roughly 350,000 Herbalife distributors in January 2017. The FTC said in a press release about the settlement "it's virtually impossible to make money selling Herbalife products."

The lawsuit alleged Herbalife deceived consumers into believing they could earn substantial income from the business opportunity or big money from the retail sale of the company's products. In addition, the complaint charged that one of the fundamental principles of Herbalife's business model—incentivizing distributors to buy products and to recruit others to join and buy products so they could advance in the company's marketing program, rather than in response to actual consumer demand—is an unfair practice in violation of the FTC Act.

The company remained under investigation as of early 2019 both by the United States Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC) for corruption in China.

On September 27, 2019, the SEC announced Herbalife agreed to pay $20 million to settle charges of making false and misleading statements about its business model and operations in China between 2012 and 2018. The company did not admit or deny the charges but agreed to the settlement terms.