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An Inside Look at Herbalife’s 180,000-Square-Foot Plant in Lake Forest

Herbalife Ltd., a maker of nutrition products and dietary supplements, continues to chug along at its Lake Forest facility despite occasional claims of fraudulent activities and a stock price that’s dropped 86% in the past three years.

The company’s 180,000-square-foot innovation and manufacturing center was Herbalife’s first facility to open in the U.S. and employs more than 300 full-time workers.

“Over 15 years of being here, this facility has laid the framework that laid the foundation for our equipment, processes and testing,” Timothy Price, vice president of manufacturing, engineering, security and facilities at Herbalife, told the Business Journal.

The facility makes two of the company’s core products: protein powders and aloes.

The company said the facility has produced over 630 million units of powder and liquid products since opening in 2009.

Herbalife, founded in 1980, is a multilevel marketing company that sells health and wellness products through a network of more than two million independent distributors in 90 countries.

The company is based in Los Angeles with 12 total manufacturing sites and labs across the world in the U.S., China and India.

Herbalife’s Formula 1 Healthy Meal Nutritional Shake Mix is ranked as the top health shake in the world by market research company Euromonitor International.

The company counted a $618 million market cap at press time (NYSE: HLF).

Former Micelle Laboratories Facility

Herbalife acquired its Lake Forest facility from Micelle Laboratories, a now-closed contract manufacturer of food and nutritional supplements, in an all-cash deal valued at approximately $10 million.

Micelle Laboratories had been a premium contract manufacturer of Herbalife’s protein powders and aloes prior to shutting down.

Now, over 65% of Herbalife’s products are manufactured in-house in Lake Forest, according to Price. “The strategy for our plants is to produce our core products—aloes, teas and powder—that make up a big portion of our business,” Price said during a tour of the facility last October.

“This gives us the ability to control every aspect of the manufacturing process, ensuring the highest quality.”

Products at the facilities go through five rounds of testing, blending and packaging before being shipped out to distribution centers.

The process begins in the fields.

Herbalife partners with farmers that supply the raw materials for its products, including a large tea grower in the Hunan province of China.

Farmers in the Midwest of the U.S. grow soybeans for the company’s Formula 1 shake and other protein products.

Herbalife’s other raw materials, such as aloe, come from Mexico.

The quality of the raw materials is tested in the facility’s chemistry lab, which houses a proton nuclear magnetic resonance (NMR) spectrometer, as well a gene sequencer.
The proton NMR instrument is best described as an MRI machine but for raw materials. It tests them, mainly aloe, for any impurities at the molecular level.

In another room, a mixture of soy, fructose and other micronutrients are blended into Herbalife’s protein powders.

Typically, it can take between two to three hours for the standard practice of filling bags with ingredients, blending and unloading each batch, according to Price.

Herbalife, however, has streamlined the process to just 30 minutes using load cell technology and two large stainless-steel containers that can blend up to 1,500 kilograms of powder at a rate of 105 revolutions per minute.

Protein powders are then filled into different sized bottles on an automated high-speed line, capable of filling 70 bottles per minute, before going to a robotic packer and palletizer for shipment.

“We continue to invest in the equipment and technology to drive innovation in the manufacturing process,” Price said.

Herbalife launched two new products last summer: Herbalife Protein Chips and Herbalife24 Creatine.

The company said that these products will help meet the evolving snacking habits of younger consumers, as well as the need for a plant-based sports performance supplement.

Company Restructuring Program

The company most recently reported third-quarter revenue of $1.2 billion, a 3% decrease from the year prior.

In a conference call with analysts, Chief Executive Michael Johnson said that while net sales remained flat, the company is “seeing positive trends” in recruiting distributors.

Analysts estimated sales fell 1.6% to $5 billion last year and may increase 1.6% to $5.1 billion this year.

During the first quarter of 2024, Herbalife laid off 109 employees in Los Angeles and Torrance, according to the state’s WARN layoff notifications.

The layoffs came amid a major restructuring of the company “designed to bring leadership closer to its markets, streamline the employee structure and accelerate productivity.”

“Our new business initiatives are taking root as we continue on our path to sustainable top-line growth,” Johnson said in the earnings call.

Herbalife estimates the restructuring program to have delivered the company at least $50 million in annual savings for 2024 and at least $80 million for 2025.

Johnson said these cost-saving initiatives are part of the company’s strategy to reduce total debt by $1 billion in under five years.

The company in March appointed John DeSimone as chief financial officer to lead the restructuring, succeeding Alex Amezquita who served as CFO for nearly seven years.

“Our margins have improved year-over-year, and we continue to strengthen our financial foundation,” DeSimone said in a statement.

Herbalife also generated $38 million in net proceeds from the sale of its 186,000-square-foot Herbalife Plaza office building in Torrance, which was acquired by Los Angeles-based Rexford Industrial Realty Inc. (NYSE: REXR) in July.

The company will move out of the building by November 2025. This will give the company “adequate time” to relocate employees and R&D and quality labs to other office locations in Southern California, according to Johnson.

Pyramid Scheme Allegations

One of Herbalife’s early founders and suppliers was Dick Marconi, who went on to start the Marconi Automotive Museum in Tustin.  Marconi passed away last year, at the age of 89.
Herbalife has had its fair share of controversies throughout the years.

In 2016, the Federal Trade Commission (FTC) charged Herbalife with “deceiving consumers into believing they could earn substantial money selling diet, nutritional supplement and personal care products.”

Herbalife settled the lawsuit by agreeing to pay $200 million in compensation to customers, hire an independent compliance auditor and restructure its business model so that distributors make money from product sales opposed to how many people they recruit.

Bill Ackman, CEO of New York-based Pershing Square Capital, has also been an outspoken critic of the company, accusing the business of being a pyramid scheme.

The billionaire hedge fund manager in 2012 placed a $1 billion bet on the company’s stock falling to zero. While the stock price initially took a tumble, it recovered in part due to another billionaire investor Carl Icahn, who became Herbalife’s biggest shareholder.

Six years and major reported losses later, Ackman ended his short bet against Herbalife to focus on other investments. The ordeal inspired the 2016 documentary “Betting on Zero.”
Last February, Ackman revived his accusations against Herbalife after the company reported fourth-quarter earnings below analysts’ expectations, causing shares to plummet 32%.

“It is a very good day for my psychological short on @Herbalife,” Ackman wrote in a post on social media platform X, formerly known as Twitter. “And it is an even better day for the world to see one of the biggest pyramid schemes fail.”

Herbalife disputes any claims of being a pyramid scheme under the frequently asked questions section on its website, saying that distributors are compensated exclusively for sales of products and are entitled to a 90-day money back guarantee “should they wish to cancel their membership.”

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Yuika Yoshida
Yuika Yoshida
Yuika Yoshida has been a reporter covering healthcare, innovation and education at the Orange County Business Journal since 2023. Previous bylines include JapanUp! Magazine and Stu News Laguna. She received her bachelor's degree in literary journalism from the University of California, Irvine. During her time at UC Irvine, she was the campus news editor for the official school paper and student writer for the Samueli School of Engineering. Outside of writing, she enjoys musical theater and finding new food spots within Orange County.
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