"An incomparable business opportunity allowing men and women to build a home based business of their own",
"An approach that has a lot to teach anyone who is reaching for the American dream",
"Truly loved by its customers because it has found a need and filled it exceptionally",
"When you read profiles of the consultants [sales people] you may wonder what you are doing in your nine-to-five cubicles whilst [the consultants] are on their way to fame and fortune".These statements of course are ample evidence that Herbalife is not really selling product but selling a fraudulent "business opportunity" and is in fact a pyramid.
Except that I am playing a game of misdirection here. These statements are not about Herbalife and they have not been criticized by Bill Ackman.
They are the statements about another multi-layer-marketing scheme - "The Pampered Chef" and they are made by none other than Warren Buffett. Warren Buffett (through Berkshire Hathaway) owns The Pampered Chef and its 60 thousand plus "consultants".
In a future post I plan to talk about why The Pampered Chef is a business worthy of being owned by Berkshire - why it meets Warren Buffett's (very high) business quality hurdle - and how Herbalife has some, but not all of the properties of The Pampered Chef.
But for the moment I want to note a few things.
(a). Herbalife and The Pampered Chef were both founded in 1980. Bill Ackman criticized Herbalife for being a recent company founded in 1980 - see this screen shot from Bill Ackman's presentation.
(b). Herbalife is much bigger than The Pampered Chef and more deeply embedded over the world, and
(c). Herbalife is growing at a high rate both relative to its past and relative to The Pampered Chef. Indeed if you look at Google Trends data Pampered Chef is in a slight decline but Herbalife has more interest than at any time in its history. In the following chart (courtesy Google) Blue is Herbalife searches, Red is "Pampered Chef".
(d). Herbalife is taking off in some large important markets. This for example is the UK:
This is the (potentially vast) market of India:
And even in markets that were once declining is re-emerging strong. (This is Australia...)
Pyramid schemes are expected to collapse under their own weight - and so if Bill Ackman is right it shouldn't matter what I say. But if Google Trends data is right then Herbalife is likely to beat estimates maybe offset a little bit by the strong US Dollar.