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Herbalife (HLF) has a huge market to prospect if the adult obese population is the market.

The CDC website says:

Almost 41 million women and more than 37 million men aged 20 and over were obese in 2009-2010.

I could be wrong but this appears to be a large potential market (78 million) for Herbalife products, right? It would not be surprising to learn that some of this population uses or has tried Herbalife products, would it? If 2% of the 78 million used the product, that would be 1.56 million users. Might users try Herbalife products like a gym membership? Start out the New Year working out, (using Herbalife products), then as the year goes by making fewer and fewer trips to the gym (using Herbalife products). Then repeating the process each year?

Another section of the CDC website provides some further detail of on the obese population.

Non-Hispanic blacks have the highest age-adjusted rates of obesity (49.5%) compared with Mexican Americans (40.4%), all Hispanics (39.1%) and non-Hispanic whites (34.3%) [See JAMA. 2012;307(5):491-497. doi:10.1001/jama.2012.39].

What group would a weight loss business target? The group(s) with the largest population in need, wouldn't it?

The Facts about Herbalife website has a link to this website to help support its case. Below are a few passages that caught my attention.

This line caught my attention, bold section.

Yet another way that multi-level marketing supporters try to convince people that they're not pyramid schemes is by focusing on the internal consumption. This refers to product consumption by the distributors themselves. If we pretend that the distributors are consuming or selling the Herbalife products they purchase, then we in fact have retail sales and the company is not a recruiting scheme!

Another section:

Remember that pyramid schemes can last a long time, particularly with clever moves by their operators. According to the indictment of Bernie Madoff, his scheme went on for 30 years or more.

Let's see Mr. Madoff needed only fool his accountant, right? His investors never questioned how the results were produced, did they? Investors were not provided a detailed listing of trades, so investors could see what was being done, right?

Herbalife files quarterly SEC filings, and has entered the public market multiple times, each one requiring due diligence, right?

Herbalife according to the website needs to replace 1.9 million distributors (users) per year. If Mr. Madoff required 1.9 million investors most likely a few would want to see the details on how their money was invested, right?

This article mentions.

So why is there so much investor interest in Herbalife? Pyramid schemes are highly profitable for those who run them, which is why the stock of HLF has historically done so well. There is big money in conning consumers out of their money by promising them an "income opportunity," all the while knowing they are almost guaranteed to lose money.

Let's replace the words "pyramid schemes" with Hedge Funds. Hedge Funds are highly profitable for those who run them… That is correct isn't it? Let's now replace the words "pyramid schemes" with "Businesses." Businesses are highly profitable for those that run them… That is correct isn't it?

The website further says.

The sad truth is that so many consumers know nothing about MLM or pyramid schemes, and companies like Herbalife, Mary Kay, Amway, Avon, and MonaVie do everything in their power to convince people they're not pyramid schemes. They have compelling presentations about this issue because they're professional con men.

Many consumers know nothing about the financial markets, that doesn't make financial professional con men, does it?

Another golden passage:

Multi-level marketing companies have a vested interest in limiting the information they disclose. That's not an accident. It is intentional.

Let's replace "Multi-level marketing companies" with "hedge funds." Hedge funds have a vested interest in limiting information they disclose. That's not an accident. It is intentional.

Last one

The insiders are making the real money, as evidenced by CEO Michael Johnson's $140 million of HLF stock sales since 2007 and his $89.4 million salary in 2011.

Don't insiders at most firms make the real money? That is normal in a capitalistic system, isn't it?

Time will tell what happens with Herbalife, but the 78 million market size appears to support millions of "discount buyers" which Herbalife in its 10-k describes.

We define discount buyers as customers who have signed up as distributors to receive a discount on their purchases; small retailers as product users and sales people who generate modest sales to friends and family; and distributors who are proactively developing a business with the intention of qualifying to become a sales leader.

There might be reasons to not invest in Herbalife or use its products, but the argument presented on the Facts About Herbalife website don't convince me.

Source: Herbalife Big Market - CDC Says 78 Million Obese