The offices of Herbalife, a so-called multilevel marketing company that has moved into the protein powder market in Cambodia, stand like a beacon of promise in Phnom Penh’s Prampi Makara district: Six stories of glass and white paneling, crisp lime-green signage and a four-story-high banner of Portuguese football star Cristiano Ronaldo.
And since the offices officially opened last month, hundreds of Cambodians hoping to tap into the Herbalife business model have streamed in and out every day.
“I use the products to make myself healthy, and then I can recruit some friends who trust me and they also sell the product and we all make money,” said Herbalife supervisor Heng Sompiseth outside the offices on Wednesday.
Mr. Sompiseth, 29, in just over a month has risen through the ranks of Herbalife Cambodia to become a “supervisor,” a title that grants him 50 percent off the price of the three products for sale in the country: meal replacement shakes, protein powder and herbal tea.
On a video posted to YouTube by a Herbalife employee and titled “Herbalife Cellular Nutrition,” Dr. David Heber, an American expert in nutrition and a member of Herbalife’s Nutrition Advisory Board, proclaims the benefits of the protein shake.
“Scientific research shows that meal replacement shakes—the scientific name for this protein-fortified healthy shake—if you eat two of them [a day] you lose weight; eat one a day, you can keep it off for a lifetime.”
“I spread the message to my friends,” said Mr. Sompiseth, “telling them that Herbalife makes you lose weight and look more handsome, and when they use the products, I get the points. And if they sell more products, I get those points, too.”
The points that Mr. Sompiseth refers to are the key to rising through the ranks at Herbalife, he says, essentially granting the collector cheaper rates of purchase and the capacity to make more money.
“When we build the mountain of the people, our points increase faster. Like a pyramid,” he said. “This is how they teach us in training.”
Since its founding in 1980, Herbalife has faced a number of battles over its legitimacy as a sustainable business model, with critics labeling it a pyramid scheme, which are illegal in many countries. Most recently, the U.S.-based hedge fund manager William Ackman has conducted a high-profile campaign against Herbalife, calling it a scam akin to “Robin Hood in reverse” and encouraging investors to bet against the company’s stock.
Last week, a two-year legal battle in Belgium over Herbalife’s operations came to a head, with the Belgian Appeals Court overturning a lower-court finding that Herbalife was an unlawful pyramid scheme. As a result, shares in the New York Stock Exchange-listed company rose 6.7 percent to $76.65 a piece.
And in February, the Los Angeles Times cast some doubt over the relationship between Herbalife and Dr. Heber, the nutrition expert, reporting that Herbalife disclosures showed that a firm Dr. Heber is affiliated with collects an annual payment of $300,000 from Herbalife.
Bui Quoc Thang, Herbalife’s country manager in Cambodia, on Thursday defended his company against any allegations of operating unlawfully.
“Like most sales-based businesses, Herbalife Distributors’ earnings are based on product sales of the individual or their sales organization,” Mr. Thang said of the company, which reported $4.1 billion in revenues in 2012 but will not release Cambodia-specific data.
“Pyramid schemes are illegal, while direct selling organizations such as Herbalife, are regulated by law and have strict conditions that protect the consumer and the distributor, such as a 12-month product buy-back policy for unsold products.”
Herbalife’s top-selling product in Cambodia, Formula 1 Healthy Meal Nutritional Shake Mix, retails at $32 for a 550-gram, 10-shake canister, making each shake $3.20.
According to the World Bank, Cambodia’s per capita Gross National Income was $880 as of 2012.
“Sure, it’s not as cheap as Cambodians usually pay for food, but I look strong and healthy. It’s worth it,” said Mr. Sompiseth, who claims to be Herbalife’s No. 1 member in Cambodia.
Last Tuesday, at a Herbalife distributors’ training session in Phnom Penh, Jack Kavulich, the vice president of business development for Herbalife International, recounted his success story to some 200 Cambodians. In a video posted to the company’s YouTube account earlier this year, Mr. Kavulich’s role was described as “handl[ing] the evangelical work of nutrition clubs and daily consumption throughout the world.”
“My belly used to be this big,” the American said, as he used his hands to illustrate a round waistline, which had evidently decreased dramatically and brought rousing applause.
“Before Herbalife, I could swim 60 laps of the pool; after, I could swim 70 laps,” he said of his conversion, which began when he met a distributor in Mexico.
After the training session, which was attended by curious Cambodians and a number of Herbalife employees clad in the firm’s hats, badges and shirts, Heng Sothy, a 32-year-old from Kandal province, said he was inspired by Mr. Kavulich’s story and had no reason to doubt the company’s claims.
“They come from many of the good democracy countries: America, European, Australia, and they make money. Why would they lie to us?”