Bloomberg News

Herbalife Distributor Decamps for Energy Drink Company Vemma

January 09, 2013

One of Herbalife Ltd.’s (HLF:US) biggest independent distributors has left the company to sell energy drinks and he’s exhorting his 16,000 distributors to join him.

Anthony Powell will distribute Verve energy-drink products for Scottsdale, Arizona-based Vemma Nutrition Co., he said in a webcast to his distributors Jan. 6. Spokesmen for Vemma and Herbalife confirmed the move. Powell didn’t respond to messages seeking comment.

“This is going to be the biggest explosion in network marketing history,” Powell, a 22-year Herbalife distributor who is in his early 40s, said on the webcast distributed by Ustream.tv. “This is a big move for all of us.”

Herbalife rose 4.9 percent to $38.35 at the close yeterday in New York.

Herbalife’s stock (HLF:US) has lost almost half its value since Greenlight Capital Inc.’s David Einhorn questioned the company’s disclosures during a May 1 conference call.

Then in December, hedge fund manager Bill Ackman, head of Pershing Square Capital Management LP, accused Herbalife of operating illegally as a pyramid scheme and urged regulators to take action.

Ackman mentioned Powell in a three-hour presentation about Herbalife on Dec. 20 in New York. Ackman detailed some of Powell’s business dealings, culled from court filings. Herbalife, which has denied operating a pyramid scheme, plans to lay out its case for investors in New York on Jan. 10.

Offering Incentives

Powell wants all of his distributors to move with him by Jan. 10 and he’s offered incentives for doing so, which include free entry into Vemma’s network, he said.

While Herbalife has said its network of distributors numbers 3 million, Powell is an influential figure in his world because he’s on Herbalife’s President’s Team, one of the highest levels a distributor can attain.

The loss of business from Powell’s departure won’t have a material impact on Herbalife’s 2013 guidance, said Barb Henderson, a company spokeswoman.

“Anthony Powell’s stated focus is on creating ‘explosive growth’ fueled by lead purchases,” Henderson said in an e-mail. “As he has also stated, this is `a difference in philosophy,’ not consistent with Herbalife’s focus on building business through the daily consumption of our nutrition products.”

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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