Herbalife Sends Letter To Markey With Some Questionable Claims

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Herbalife Ltd. (NYSE:HLF) sent a letter to Senator Markey, a copy of which has been obtained by ValueWalk. The company claims that it does not target low income populations or minorities; however, this appears to directly contradict some other public statements by the MLM. Below are some comments from the letter contrasted with excerpts from earlier HLF comments. At the bottom is the full letter from Herbalife.

Targeting low income: Herbalife

HLF COO Said Nutrition Clubs Allowed Company to “Penetrate More Deeply Into the Lower Income Segments of the Market.”  In an Herbalife Ltd. (NYSE:HLF) conference call in May 2005 Herbalife COO Greg Probert said: “Two programs, the Nutrition Clubs and the Total Plan are catalysts for expanding and strengthening our business on a global basis. Nutrition Clubs are a planning party concept, which allows distributors to penetrate more deeply into the lower income segments of the market.”  [Q1 2005 HERBALIFE LTD Earnings Conference Call, 5/3/05]

HLF CFO Said Nutrition Clubs Were A Way of “Feeding the Poor.”  During a conference call HLF CFO Rich Goudis said: “That being said, specifically into Mexico, we just think the world of what’s going on with Nutrition Clubs. We think it’s a great concept. Feeding the poor. Individual servings.”  [Q3 2005 HERBALIFE LTD Earnings Conference Call. 11/8/05]

HLF CFO “Dramatic Growth” in Latino Countries Due to Daily Consumption Model for Lower Income People.  During an Herbalife Ltd. (NYSE:HLF) presentation in May 2009, HLF CFO Rich Goudis said: “Well not everybody has $100 month supply, especially when you get into these lower income areas like in Mexico, in Indonesia, in India, in Brazil. But what they do have is that ability to afford maybe a meal a day, alright. So maybe it’s 20 pesos in Mexico or 25 pesos. You ask the guys at Anheuser Busch Inbev SA (NYSE:BUD), you know they sell a lot more individual servings of beer than they do six packs or cases. So breaking that access to Herbalife down to a daily consumption model has opened up the target audience tremendously. And that’s why you see this dramatic growth in a market like Mexico.”  [Herbalife Ltd. at Goldman Sachs Consumer Products Conference, 5/14/09]

Targeting Minorities: Herbalife

“For the company though, we do see, right. So we do see the segments that can provide Herbalife a broader base. So, for example, the African-American initiative that we’re doing, it started about three years ago. We see distributors moving up the marketing plan with that.” Amy Greene, Herbalife Ltd. (NYSE:HLF) VP-Investor Relations, Barclays Capital Retail and Restaurants Conference, 4/24/2012

2012: “We give them stats; this is how many – if you’re only working with the Latino market, this is how many we have in population in this area of Latinos. If you’re working both markets, if you happen to be Latino bilingual, you can recruit both sides. So it really engages with a trigger.” Herbalife Vice President-Investor Relations Amy Greene, HLF Barclays Retail and Restaurant Conference, 4/24/2012

2012: “The growth in the U.S. continues to be driven by the expansion of daily consumption business methods, particularly in the general market segment of the business, building on the successes of our Latino business.”…”The general market saw a 65% increase in attendees, and two new cities added this year. And at the Latino Future President’s Team Retreat, we had a 28% increase in the number who qualified to attend. We view these as significant indicators of increased distributor engagement.” Herbalife President Desmond J. Walsh, Q4 2011 Earnings Call, 2/22/2012

2012: “The U.S. Latino market is still growing. A lot of the markets that adopted daily consumption between 2003 and 2010 are still growing.” Herbalife Ltd. (NYSE:HLF) CFO John DeSimone, Morgan Stanley Global Consumer & Retail Conference, 11/14/2012

2010: Herbalife’s 2010 Analyst Day Presentation featured slides highlighting the “U.S. Latin Market – Opportunity Remains.” Another slide featured “Further Opportunities for Growth – Market Segmentation,” including “Support African-American initiative with Distributor trainings and events” and “Target additional ethnic markets (Korean, Vietnamese, Chinese, Russian, Polish).

2010: “… If you had to pay $60 at the beginning of each month for that month’s supply of coffee, far fewer people could participate. But when you pay $2 a day, it is such a low price point, people can afford it. People living hand to mouth or whatever it may be, so far more people can afford that.” – Herbalife CFO John DeSimone, Jefferies Consumer Conference 6/22/2010

2008: “The U.S. market, the U.S. market remains our largest market and its sales growth rate accelerated 12% sequentially from the first quarter and increased 18% year-over-year. During the second quarter 66% of the U.S. volume came from the Latino distributors which grew 29% year-over-year reflecting ongoing commitments in execution by our Latino distributor leadership.” “We continue to see opportunities in the installed base with further expansion of the nutrition clubs. Our general market business in the U.S. was 34% of the volume and grew 2% year-over-year in the second quarter. Key growth initiatives include the launch of our African American initiative and brand building to alliances and sponsorships, including, as Michael mentioned earlier, our successful relationship with the LA Galaxy soccer team.” Herbalife Executive Vice President Des Walsh, HLF Q2 2008 Earnings Call, 8/6/2008

2007: “The Latino business is now about 61% of the U.S. business, 46% up. One of the big things, markets that we are going to penetrate next year is the college market.” Herbalife COO Greg Probert, Analyst Meeting 11/28/2007

2007: “Part of our business is entertainment. We entertain our distributors with opportunity, with dreams, stories, it’s all a part of what this company is.” Herbalife Ltd. (NYSE:HLF) CEO Michael O. Johnson, Goldman Sachs Group Inc (NYSE:GS) 14th Annual Global Retailing Conference, 9/5/2007

2005: “We continue to see a strengthening in the recruiting in the United States, and a lot of that is driven by our Hispanic business, is continuing to strengthen.” Herbalife COO Greg Probert, HLF Q1 2005 Earnings Call, 5/3/2005

hlf letter (1)

Hlf Letter (1) by ValueWalk.com

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