The Troubling Truth About Herbalife’s Controversial Founder
1985 – Herbalife On The Brink?
The year is 1985, and Herbalife are in trouble. The meteoric rise of the company since its creation in 1980 seems to have come to a shuddering halt, and experts are predicting a total collapse. The company are fighting off negative publicity at every turn – if the media are to be believed then the company executives are liars, the MLM structure is a pyramid scheme, the products are a sham, and they have been responsible for causing serious illness, even death, to many users. For founder Mark Hughes, his dreams look set to be shattered. Everything he has worked for is coming tumbling down, and the end of Herbalife seems imminent.
But 15 years later, by the time of Hughes’ sudden and untimely death, the company had grown into one of the largest and most powerful in America. Determined not to sit back and watch his life’s work disintegrate before his eyes, Hughes had come out fighting. He fought back against the negative allegations, he made concessions, he filed counter-law suits against his accusers, and he hauled Herbalife back from the brink of collapse.
By the time of his death, the company’s financial and operational future had been secured. But the legacy of 1985 lived on, and to this day Herbalife still struggle to shake off the bad image created at this time. So how does history judge Mark Hughes and Herbalife? Can it be called a success story?
Mark Hughes – A Troubled Youth
Mark Hughes always claimed to have had a difficult upbringing, growing up in a single-parent family in La Mirada, Los Angeles County. His mother was over-weight, and fought a constant battle with mental health problems. Throughout his childhood, she was involved in numerous fad-diets, none of which seemed to meet with much success, and Hughes spent a lot of time being brought up by his grandparents. By ninth grade he had dropped out of school, and by the age of 16 he was involved in drug abuse and had been sent to a private school for troubled teenagers. While he was at this school, his mother died of an accidental drug overdose.
Hughes Creates Herbalife
But the school turned Hughes’ life around. Driven by an almost maniacal desire to solve the problems that had plagued his mother, Hughes became involved in several weight-loss products, before developing his own brand – Herbalife – in 1980. Herbalife began as a protein shake designed to replace two meals-per-day, and lead to weight-loss without the need to exercise. Hughes began by selling the powder from the trunk of his car, but he soon acquired a warehouse and very quickly it was apparent that the company was experiencing phenomenal growth. By 1985 he had moved to a high-rise tower block in Los Angeles, sales had reached an unbelievable $423million dollars, and Herbalife was listed as the fastest growing private company in America, with a growth rate of more than 100,000%.
What Goes Up, Must Come Down
Herbalife’s growth had been quick, but perhaps too quick. 1985 was a nightmare year for the company, as things began to catch up with them. With success comes visibility, and with visibility comes responsibility. Herbalife were now firmly on the radar of the government and other regulatory agencies, and these agencies didn’t like what they were seeing. Many of Hughes’ products were seriously under-researched, it was alleged, and many of the claims made on behalf of the products were either misleading or downright untrue.
One such claim was that Herbalife’s N.R.G. (Natures’ Raw Guarana) product was a ‘natural’ energy booster, when in fact its stimulative qualities were attributable to the inclusion of caffeine as an active ingredient, although it was not listed on the label. Many of the herbs in some of the other products were described as ‘non-effective’ and ‘useless’. Many people began to claim that Herbalife had made them ill, and most worrying of all for the company, some people even began to accuse the products of causing death. As for the company’s marketing structure, they were censored for misleading distributors into believing that becoming rich with Herbalife was commonplace, when in fact the examples of success stories they used were not typical.
In a 1985 article for Inc. Magazine, Curtis Hartman predicted that Herbalife was on the brink of collapse. He called it a ‘fad diet’, and said that without public trust no business, particularly a multi-level marketing business, could grow. ‘The American landscape is littered with the skeletons of Herbalife’s predecessors’, he wrote, and he fully expected Herbalife to go the same way.
Hughes Fights Back
But Hughes was not going to let his company go down without a fight. Herbalife was more than just a business to him, it was a labour of love, and had been a monumental success for him. It was a vehicle for him to exorcise the demons of his past, and he would fight tooth and nail to defend it.
Hughes went on the offensive. He dismissed some of the allegations as false and litigious, others he conceded and took active steps to remedy. Caffeine was added to the list of ingredients in N.R.G, for example, and the pyramid structure of Herbalife was compared favourably to respected MLM companies Amway and Mary Kay. To make up for the sales the company lost in the States as a result of the negative publicity, they launched an aggressive expansion program oversees.
Hughes’ counter-attack must have worked, because Herbalife recovered and continued to grow, contrary to popular predictions. But mud sticks, and for the rest of Hughes’ life he would continue to court controversy everywhere he went, as he faced allegations of alcoholism and drug abuse, and the integrity of Herbalife continued to come under scrutiny.
Michael O Johnson – The Real Hero?
It was not until the arrival of Michael O Johnson as CEO, after Hughes’ death, that Herbalife finally began to shed their shady image. Johnson took steps to establish the product on a much sounder scientific footing, and to repair the damage done to the company’s reputation under Hughes. You can read all about the ways that Michael O Johnson cleaned up Herbalife by reading Michael O Johnson – A Bio Of Herbalife’s CEO.
Mark Hughes And Herbalife – A Success Story?
But despite this, it would be wrong to call Herbalife under Hughes anything but a success story. Hughes developed a product which he sold from his car’s trunk, and turned it into a multi-million dollar global empire.
Herbalife and Hughes are inseparable. Even after his death, Hughes’ image continues to adorn the Herbalife website, and he continues to be a hero to the company’s loyal supporters. Without Hughes there would have been no Herbalife. He was certainly not perfect, he made mistakes, and he has to be considered partly responsible for the company’s troubles in 1985. But it is now 2010, and Herbalife goes from strength to strength. They have been trading on the New York Stock Exchange since 2004, and they are endorsed by top athletes across the world.
Mark Hughes was a controversial character, and many aspect of his personal life continue to be clouded in mystery, but one thing is for certain; when it came to business, Mark Hughes was a massive success.