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Herbalife’s share of the global meal replacement shake category has more than doubled from 12% in 2003 to 30%+ today driven by the success of its daily consumption model, the direct selling giant has revealed.
Founded by entrepreneur Mark Hughes in 1980, Los Angeles-based Herbalife sells its products through a network of more than two million independent distributors in 76 countries.
This gave it unique access to people that were trying to lose weight, said chief financial officer John DeSimone, who was speaking at the Barclays Back to School consumer conference in Boston yesterday.
Citing new Euromonitor International data showing that Herbalife had captured almost a third of the global meal replacement shake market, he said: “In 2003 we had 12% of the category. In 2009 it was 23% and in 2010 we were up over 30% in market share.”
Redefining direct sales
The secret of its success was its sales model, he said.
While the traditional direct sales model was “characterized by medium to high-priced purchases made infrequently”, Herbalife had “completely redefined” this model through its daily consumption approach, which was all about smaller, more frequent purchases, he said.
Because distributors were increasingly interacting with customers though nutrition and weight management clubs, it was also a more efficient model, he claimed.
“Customers are now going to distributors rather than distributors going to customers. This also allows distributors to have more customers than with the traditional model. It also improves compliance, making sure the consumer is taking our meal replacements every day, and if the consumer loses weight, that builds credibility, it builds the brand and creates long term customers.”
Because what was being sold was a meal, not a supplement, the money consumers spent on meal replacements was not discretionary, but replaced what they would otherwise have spent on food, making the business model surprisingly resilient in difficult times, he claimed.
The ‘stickiness factor’
The social aspect to clubs also improved loyalty, ensured more repeat purchases and improved discipline among distributors, because if they had customers coming to them, they were more motivated to turn up, he said.
In the US, more than 50% of consumers attending nutrition clubs attended every day, with at least 50% of these spending an additional $75 a month on products other than meal replacements, he added.
On a mission
Herbalife is on a mission to triple volumes by 2020 as it ramps up its presence in emerging markets and expands its distributor base in mature markets through new concepts such as sports nutrition range Herbalife24.
The firm, which posted a 35% surge in net profit to $111.2m on net sales up 27.7% to $879.7m in the second quarter, has also pledged to manufacture more of its products in-house in future.
Almost two thirds (62.8%) of Herbalife’s sales came from weight management products, 22.4% from targeted nutrition (dietary supplements), 4.9% from sports nutrition and energy products, and the remainder from skincare and other products, said DeSimone.
The firm expects to grow sales by 24% in full year 2011, he said.
12 comments (Comments are now closed)
Great Product Great Company
Unbelievable product result in Nutrition clubs increases the confidence of General public and customers. Keep it up. I love Herbalife I love Mark Hughes
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Posted by Ram
18 October 2011 | 18h19
Our nutritional support for over 17 years ;)
Our family has used the Herbalife products as our nutritional support for over 17 years and are not surprised over the success.
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Posted by Urban
06 October 2011 | 13h12
Herbalife the best
I start using Herbalife 1 year ago i lost 30 pounds i feel with a lot energy i loved these product
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Posted by Madelin
17 September 2011 | 04h43
29 Years of Healthy Success
I started using Herbalife Products in Feb of 1982. Lost 29 lbs my 1st-month, 40 lbs my 2nd-month & have maintained that weight loss for 29-consecutive years, and I always feel 'Great!' Thank you Mark Hughes for helping SO many of us live Healthy, Happy Productive lives! K Pat Boyd
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Posted by K Patrick Boyd
16 September 2011 | 17h24
Without Herbalife, I would be in trouble
I know it sounds "over the top", but if you try to be healthy 24/7 using the Great American Diet, you are in trouble. Herbalife has made it easy for me to lose all my weight and KEEP IT OFF for 19 years.
It is just like going shopping for food, but you shop in yoru own store.
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Posted by Richie
16 September 2011 | 16h33
CAN'T LIVE WITHOUT THEM
I was over weight tired and had a chronic cough for ten years. After starting on the Herbalife Ultimate program My energy skyrocketed my cough was gone in two weeks and I lost 10 lbs gained lean muscle now I'm 54 years old and have the body of a teenager. I LOVE HERBALIFE!
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Posted by Christopher Reese
16 September 2011 | 06h56
Love Herbalife
I've been using Herbalife for over 4 months. Dropped nearly 40 lbs, feel fanatasic. There are other shakes out there, I've tried them all, Herbalife is the best.
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Posted by Tony DeFrancisco
13 September 2011 | 19h18
Using IsaLean Shakes
I've been using Isagenix shakes for meal replacement Very happy with results and cost.
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Posted by Diane DoBucki
12 September 2011 | 14h25
Herbalife
Its a great product once you have lost your targeted weight you can stay on the shakes to maintain your weight and stay healthy and get great energy.
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Posted by Christine Hemingway
12 September 2011 | 06h41
Re: Shakes
Why should you have to take this for 18 years?? If it takes this to keep your weight off you are not eating correctly in my opinion.
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Posted by Mary Matthews
10 September 2011 | 23h26
HerbaLife
HerbaLife has some nice targeted nutrition
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Posted by Anne
10 September 2011 | 11h51
My family has been usiong the Herbalife Shakes for 18 years
Love Herbalife shakes lost 40 lbs in 9 weeks for a total of 74 lbs
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Posted by Martin Lyttek
10 September 2011 | 02h23
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