Are Herbalife's Products A Bad Value Compared To Its Competitors?

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 |  Includes: GNC, HLF, VITC, VSI
by: Tom Shaughnessy

Background

Successful companies are those that provide high value items to the consumer at a fair price. Apple (NASDAQ:AAPL) changed the world with its incredibly innovative product line and Microsoft (NASDAQ:MSFT) put a computer in every house. These two companies have been attributed with being light years ahead of their competitors. But what about companies that have competitive product lines with other companies? Herbalife (NYSE:HLF) sells a vast array of nutritional supplements, yet when comparing Herbalife products to similar products sold by Vitamin Shoppe (NYSE:VSI) and General Nutrition Center (NYSE:GNC), Herbalife's products are a bad value. Information and ease of use regarding supplements has expanded for the consumer in recent years, making it easier to find cheaper products that provide more value. One such company is Vitacost (NASDAQ:VITC), which provides products from numerous companies all online for ease of comparison.

Product Line Value

The value encompassing a company's product is the key reason consumers decide to buy that product. This in turn creates profits for the company and is attributed to the success of the company and the creation of shareholder value. Yet, what if a company has competitors that can provide superior products for a cheaper price than Herbalife?

Disclosure

I have no investment in Herbalife and I am neither long nor short the company. This article is written to serve as a product comparison for Herbalife products vs. other companies' similar products. It seeks to uncover whether or not the company's products hold value to the consumer and what that value's effect is on that company. Herbalife dominates the news with regard to Carl Icahn and Bill Ackman's long and short positions. This article seeks is simply to discuss Herbalife's product vs. its competitors.

Multi-Vitamin Comparison
Vitamin GNC Mega Man (2 caplets) Vitamin Shoppe Ultimate Man (2 tablets) Herbalife Formula 2 Multivitamin Complex (1 tablet)
Vitamin A 5000 IU 5000 IU 1667 IU

Vitamin C

300 mg 300 mg 50 mg

Vitamin D

1600 IU 1000 IU 133 IU
Vitamin E 30 IU 100 IU 10 IU
Vitamin K 80 mcg 80 mcg Not Supplied
Thiamin 50 mg 50 mg 6.7 mg
Riboflavin 50 mg 50 mg 8.3 mg
Niacin 50 mg 50 mg 33.3 mg
Vitamin B-6 50 mg 50 mg 10 mg
Folic Acid 400 mcg 400 mcg 133 mcg
Vitamin B-12 50 mcg 50 mcg 2 mcg
Biotin 300 mcg 300 mcg 100 mcg
Pantothenic Acid 50 mg 50 mg 6.7 mg
Calcium 200 mg 200 mg 112 mg
Iodine 150 mcg 150 mcg 50 mcg
Magnesium 100mg 25 mg 66.7 mg
Zinc 25 mg 25 mg 5 mg
Selenium 200 mcg 200 mcg 17 mcg
Copper 2 mg 2 mg 0.5 mg
Manganese 2 mg 2 mg 1.7 mg
Chromium 120 mcg 120 mcg 33 mcg
Molybendium 75 mcg 75 mcg Not Supplied
Amino Acid Blend 100 mg 100 mg Not Supplied
Superfoods and Vegetable Blend 105 mg 105 mg 10 mg
Alpha Lipoic Acid 25 mg 50 mg Not Supplied
Green Tea Leaves Extract 40 mg 50 mg Not Supplied
Choline 10 mg 10 mg Not Supplied
Inositol 10 mg 10 mg Not Supplied
Silica 4 mg 4 mg Not Supplied
Boron 2 mg 2 mg Not Supplied
Lutein 950 mcg 1 mg Not Supplied
Lycopene 950 mcg 1 mg 0.33 mg
Astaxanthin 50 mcg 50 mcg Not Supplied
Zeaxanthin 190 mcg 50 mcg Not Supplied
Vanadium 10 mcg 1 mg 2 mcg
Potassium Not Supplied Not Supplied 30 mg
Iron Not Supplied Not Supplied 2 mg
Grape Seed Extract Not Supplied 25 mg Not Supplied
Pomegranate Extract Not Supplied 25 mg Not Supplied
BIOPERINE Not Supplied 5 mg Not Supplied
Cost Per Container $14.39 with a gold card $14.99 $19.95 (Amazon)
Tablets Per container 90 90 90
Recommended Usage 2 capsules per day 2 tablets per day 3 tablets per day
How Long Does it Last? 45 days 45 days 30 days
Cost Per Tablet $.3198 $.3331 $.665
Link GNC

Vitamin Shoppe

Herbalife, Amazon (NASDAQ:AMZN)

Click to enlarge

The above tables shows a comparison of three multi-vitamin supplements. For argument's sake, I did not use the Mega Men-Sport version multivitamin which includes more ingredients also the Herbalife Multi-Vitamin which recommends three capsules per day. Even with three capsules per day the Herbalife multi-vitamin does not stack up against its competitors.

Comparing The Three Supplements: Ingredients

This table comparing the three supplements demonstrates how cheaper priced supplements from GNC and Vitamin Shoppe put Herbalife's multivitamin to shame. Herbalife's multivitamin provides a fraction of the supply of each ingredient that GNC and Vitamin Shoppe's multivitamins provide. Moreover, Herbalife's multivitamin does not provide near the amount of ingredients that the other two provide. Not only does the Herbalife Formula 2 Multivitamin Complex not provide the same ingredients that GNC's Mega Men and Vitamin Shoppe's Ultimate Man provides, the ingredients that are included supply considerably less than its competitors. The table shows that Herbalife's multivitamin does not provide nearly as much supplementation in terms of number of ingredients and amount per ingredient when compared to GNC and Vitamin Shoppe's multivitamins.

Comparison: Cost

Herbalife's Formula 2 Multivitamin Complex's cost per tablet is 2.079x higher than GNC's Mega Men Multivitamin and 1.996x higher than Vitamin Shoppe's Ultimate Man multivitamin. This means that Herbalife's product is more than twice as expensive as its competitors, and it provides considerably less ingredients and supplementation per ingredient. Part of this increased cost is that for each of the ninety tablet bottles, Herbalife's is only good for 30 days, versus its competitors at 45 days. This table demonstrates that when comparing the multivitamins of these three companies, Herbalife's product is very overpriced.

More Competition In The Industry

The inception of Google (NASDAQ:GOOG) has changed the online buying experience for every person with internet access and a credit card. A simple search of a product will take you to numerous sources supplying what you need. Internet based websites are making it easier to compare supplements on all levels, such as price and what is included in each product with ease. Online company Vitacost sells over 40,000 products and 2,000 brands making it easy to have access to any supplement you want at various prices and qualities. The site also lists free shipping over $49 and an auto-ship option to have your desired supplements on a rolling basis. Competition is abound in the Vitamin market, and Herbalife is going to have to meet the challenge or unlock value at a different part in its business to remain competitive.

Value of The Support Group

Herbalife does add value to the consumer with the support group they provide. It is a side effect free experience to have a community stand together to fight unwanted attributes together, such as obesity. The value of the support group is strong but it is for problems such as obesity, not supplementing your daily routine with a multivitamin. A support group is not necessary for the needs of the majority of Americans who are looking to use supplements such as a multivitamin on a daily basis. These consumers are simply looking for the best value in the product they desire and a support group is not a deciding factor here. Thus the support group does not increase product value for those looking to add individual supplements such as multivitamins to their daily routine.

Other Herbalife Examples

Although listing the nutritional facts for multiple supplements is too long for one article, other comparisons in the Herbalife product line can be found. Let's take a look at Herbalife's Formula One Nutritional Shake found on Amazon (AMZN) for $39.99. I am looking for an alternate product of the same price that can provide increased benefits to the consumer. After looking through Vitacost's Website I came across a product called Green Vibrance for $37.21. In this case both products would have to be shipped for near the same price, so we will leave shipping out of the equation. Both products cost about the same and have 30 servings each so what is the difference? Green Vibrance provides 25 billion probiotics with each serving and has a comprehensive list of green superfoods and veggies that the Herbalife shake does not even begin to include. Green Vibrance has 1500mg of Spirulina and 990 mg of wheat grass juice, no comparison to Herbalife's shake. Moreover Green Vibrance provides 73 concentrated foods and extracts for optimal health of the user, ingredients Herbalife's Formula One Shake don't begin to include. Additionally Green Vibrance is 100% gluten free. This may be an overkill example as the formula one nutritional shake should be compared to something like Carnation Instant Breakfast Drink, but it demonstrates how easy it is to find products that provide a better value than Herbalife's. I recommended the reader look at the nutritional facts in each of these products to see the differences. In this case the value increase in switching products was enormous.

What Does This All Mean

Companies earn their success on the value they offer to consumers who buy their products. Successful companies provide an exceptional product at a cost that is competitively priced. When looking at one of the main supplements used in America today, consumers will be looking for the most comprehensive multivitamin that provides them with the most supplementation per ingredient. They certainly will not be looking to buy Herbalife's multivitamin if they have the option to buy GNC's or Vitamin Shoppe's.

"The most popular supplements are multivitamins, used by 39% of U.S. adults in 2006." -CNN

Since Herbalife neither provides a product that is either cheaper or more comprehensive than its competitors, what is to be said about the company is a whole? CNN and the Huffington Post reported that half of Americans use supplements and that the percentage is rising.

This article is only about one product, the main one used in America today, but it says a lot about the company as a whole. They have no absolute advantage here in the marketplace. They neither provide a better or a cheaper product than their competitors, it is as simple as that. This reflects poorly on the company as a whole as they will likely not be able to compete in with their competitors in the long term who provide a more comprehensive product at a cheaper price than they do. This results in decreased profits, poor brand recognition and a consumer dislike of products that are overpriced and lacking substance.

Conclusion

The success of companies like Apple, Microsoft, 3M (NYSE:MMM), Caterpillar (NYSE:CAT), Coca-Cola (NYSE:KO), Proctor & Gamble (NYSE:PG), Wal-Mart (NYSE:WMT) and other businesses is attributed to their ability to provide cheaper or better products than what is currently available on the market. If those products are already available on the market at a lower price, then a competitive company either lowers their prices, adds value to their product or a mix of both. In this specific viewpoint, Herbalife does not provide any advantage over its competitors in two main areas of value or pricing. While searching the Herbalife website, one can make comparisons and conclude that Herbalife's products are overpriced and do not provide equal or more ingredients than its competitors. Selling products that are overpriced and lack value reflects negatively upon Herbalife's business, and will ultimately contribute to a decrease in sales. A company's success is not based on which side, Icahn or Ackman, screams louder in the media, it comes down to the business itself along with its products or services. Herbalife will need to supplement its supplements or lower the prices of them if it wishes to remain fairly competitive.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am neither long or short Herbalife. This article is simply meant to inform the reader as the value in the company's products. This article does not discuss anything related to whether Herbalife is or isn't a pyramid scheme and it does not attempt to.