Herbalife Ltd. (HLF) President Des Walsh said Thursday that hedge fund manager Bill Ackman’s claims that his nutritional supplement company was a pyramid scheme were a “gross distortion of reality” adding “product results drive sales” and provide a “tremendous business opportunity.”
In an interview on CNBC, Mr. Walsh said “the majority of (Herbalife) distributors become distributors because of their affinity with the product, and they want to effect a product discount.” “Sort of like club membership, like Costco,” he said.
Mr. Walsh said that a “vast majority of company revenues come from sales and consumption of the product” which he defended as being effective, scientifically based and having a 32-year record of success.
Defending Herbalife against Ackman’s claims that it uses a “shot and drop” sales strategy, Mr. Walsh said “mature markets” drive the business model, not new markets. The company has developed a huge distributor base, but also a “huge customer base” outside the network, he said.
Herbalife is holding an analyst and investor meeting later Thursday morning to address investor questions about its business model.
Source: Dow Jones