Herbalife in Traditional Chinese Medicine Venture

(Beijing)— Nutritional specialist Herbalife Ltd. said it has agreed to form a China joint venture to develop products based on traditional Chinese medicines, as it seeks to expand its direct sales business by catering more to local tastes.

The joint venture will draw on the expertise and other assets of partner Tasly Holding Group, a maker of Chinese drugs and other medical products in the port city of Tianjin, Herbalife said in an announcement late last week. It added that the pair have reached an agreement in principle, and expect to sign a formal joint venture agreement within the next 60 days.

“We believe the combination of Tasly’s pharmaceutical development experience and experts, clinical research skills and network along with the two firms’ high-end quality control standards, will bring the best evidence-based products to consumers,” said Tasly vice chairman Henry Sun.

Herbalife operates a retail business model that sees it sell products directly to consumers via intermediary salespeople without traditional retail stores. China has allowed such companies, which also include Avon and Amway, to set up shop, though it remains wary of some of their aggressive sales tactics. It often also requires such retailers to operate real stores in addition to their direct sales models.

Herbalife made headlines three years ago when its China operations came under attack from well-known U.S. hedge fund manager William Ackman, head of Pershing Square Capital Management, who accused the company of several illegal business practices. Herbalife shares lost about half of their value in the year after the attack, and today still trade about 15% below their pre-attack levels.

Contact reporter Yang Ge (geyang@caixin.com)