The vast majority of Herbalife’s US distributors receive no compensation from the company, according to new data from the Michael Johnson-led company.
The figures on Herbalife’s website yesterday show that 88 percent of its 493,862 distributors receive no gross payments from the nutritional supplements company.
A small fraction of distributors with sales recruits — 1.4 percent — gross more than $50,000 a year. A little more than 8 percent of that group gets more than $5,000.
The greater disclosure by Herbalife, which is under attack by hedge fund activist Bill Ackman for being a pyramid scheme, sheds some light on its operations — but hardly tells the whole picture.
The payments to distributors don’t deduct expenses, which the company said “might include advertising or promotional expenses, product samples, training, rent, travel, telephone and Internet costs, and miscellaneous expenses.” The hefty investment was one issue raised by former distributors who have complained to the Federal Trade Commission.
The numbers also don’t reflect profits distributors could make by buying wholesale and then reselling the product. The extent of such retail profits is unknown.
Herbalife pointed out that 71 percent of distributors have “no downline,” meaning they do not have sales recruits. Herbalife called them “single-level distributors.”
To make any real money, distributors must recruit others, which allows them to get bonuses and royalties as part of “multilevel compensation on downline sales.”
“Single-level distributors benefit from buying Herbalife products at a preferred price for their consumption and that of their families, and for many this is the only benefit they seek,” Herbalife said.