In Herbalife’s nutrition clubs, Ackman’s attacks fail to resonate

Fri Sep 5, 2014 2:09pm EDT
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By Jeffrey Dastin and Daina Beth Solomon

(Reuters) - New York hedge fund manager William Ackman says Herbalife is a pyramid scheme that exploits the poor. He has taken a $1 billion bet against the company’s stock and spent millions on research to attack the nutritional supplements seller, including making a video showing former distributors who claim they were deceived and lost money trying to sell its products.

Yet a visit to some of  the clubs that have been set up to dispense the company’s shakes, teas and other items, largely to the Hispanic community in the U.S., shows that it has fans. These are consumers who stress their health has improved and distributors who are thankful to have the opportunity to run their own businesses.

In conversations at 10 such clubs that Reuters reporters visited in recent weeks in the Los Angeles area, New York and Newark, New Jersey, more than 20 people said they had lost a substantial amount of weight while consuming Herbalife products. These claims could not be verified by Reuters but if true the comments cast a favorable light on Herbalife’s products, especially as Hispanics suffer from higher rates of obesity than the overall U.S. population.

While some of the people running the clubs were struggling to make ends meet, most were optimistic about being distributors of the products. In particular, women with children said they were pleased with flexible hours and the opportunity to bring their kids to work when necessary. 

Two customers sipping shakes in a club in Boyle Heights on the east side of Los Angeles, Silvia Lopez and Ana Montenegro, were typical of those who swear by the products.

"When I met her, her stomach was up to here," Lopez said, holding a hand over Montenegro's belly. "And I said, 'Let's go. We can do it.'"

"She lost 30 pounds!" Lopez said.

"Forty," Montenegro corrected her. Both said they have no interest in selling Herbalife products, just consuming them.   Continued...

William Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks to the audience about Herbalife company  in New York, July 22, 2014.  REUTERS/Eduardo Munoz