Herbalife Suspends Operations and Sales in Russia Following Ukraine Invasion

Downtown-based Herbalife Nutrition Ltd. last month joined the ranks of hundreds of U.S. companies shutting down their operations in Russia to comply with the economic sanctions imposed by the U.S., European Union and other countries following Russia’s invasion of Ukraine.

In a statement issued March 11, Herbalife condemned the invasion of Ukraine and then announced that it will suspend operations in all 62 of its sales centers in Russia. Also, it will no longer ship its nutrition products to the country.
Herbalife uses distributor networks in 95 countries to sell its health and fitness products.

The company entered Russia in 1995 and as of February had about 44,000 active distributors in the country, along with the aforementioned 62 sales centers, according to the statement. Herbalife doesn’t have any manufacturing operations in Russia; all of the products sold in that country are imported.

Herbalife also said in the statement that it will donate any profit from Russia to organizations supporting Ukrainian refugees; the statement did not clarify where that profit would be coming from if all of its operations in the country are shut down.

For Herbalife’s bottom line, these actions are mostly symbolic. According to the company’s 2021 10-K filing with the Securities and Exchange Commission in February, sales in Russia in 2021 were $144 million, representing a 2.1% decrease from 2020. That represented just under 2.5% of Herbalife’s companywide 2021 sales of $5.8 billion.

According to the 10-K filing, the sales drop was due to impacts of the Covid-19 pandemic, including the shutdown of in-person nutrition clubs that tend to generate high sales. Instead, distribution switched entirely to online sales.

While attention now may be focused on the Russian and Ukrainian markets, prior to Russia’s invasion, the main concern for analysts had been weakness of sales volume in China, which totaled about $630 million in 2021, down from $810 million in 2020.

Herbalife Chief Executive John Agwunobi said in the company’s earnings teleconference call that the pandemic had disrupted the ways that the company attracts, trains and retains new entrants in the China market.