Herbalife, based in Los Angeles is the world’s third largest MLM overall and is the largest devoted solely to the sales of nutritional products, according to industry publication Direct Selling News. Herbalife has held the No. 3 spot on DSN’s Global 100 list for a number of years now behind Amway and Avon.
Herbalife uses an internal measure called volume points as an additional way to keep track of the amount of products sold, as the company’s network marketing model means a number of different discount levels float through the system. By that basis, the company sold more products in the fourth quarter in North America, Europe and the Middle East and in Asia Pacific excluding China. In that region volumes during the full year increased in India by 24%, and notched double digit gains in Indonesia, Vietnam, Malaysia and South Korea, as well.
WeChat switchover expected to cushion ‘100-day review’ fallout
In China, which is not relatively speaking as big a market yet for Herbalife as it is for some other MLMs such as Usana, product volumes fell in the fourth quarter by 12.6% and declined in the rest of 2019 as well.
John Di Simone, Herbalife’s co-president and chief strategic officer, said a move to the WeChat social media and ecommerce platform will help cushion the impact of the national government’s ‘100-day review’ of the network marketing sector that happened early in 2019. The fallout from that event is reportedly still being felt in terms of diminished consumer confidence in this method of doing business.
“Turning to China, volume points decreased 13%, an improvement in the trend from Q3, which had declined 19%. As we mentioned on last quarter’s call, in response to last year’s 100-day campaign when sales meetings were curtailed, we launched a personal e-store on WeChat at the beginning of Q4. This new technology was designed to give service providers and sales reps another platform to sell products, so they would be less dependent on meetings in nutrition clubs. . . . Since its launch, approximately 30% of total volume in China has come from the personal e-store,” Di Simone said. His comments were part of an earnings call with stock analysts that was posted in transcript form on the site seekingalpha.com.
Coronavirus, bribery issues
As far as the ongoing disease outbreak in China is concerned, it has prevented Herbalife from issuing an updated outlook for 2020, according to incoming CEO Dr John Agwunobi.
“The scope and duration of business disruption and the related financial impact from the coronavirus can’t be reasonably estimated at this time, but it could materially impact our consolidated results for the first quarter and for the full year 2020. As such, we will update our guidance for the full year of 2020 when we can reasonably estimate the impact on our near-term business results,” he said.
The company also said it has set aside $40 million to cover a potential settlement of a case brought late last year by the US Department of Justice and the Securities and Exchange Commission against two Herbalife employees who have been accused of bribing government officials over more than decade to obtain licenses for the company in China.