Global Health Suing Herbalife Over Sourcing Contract 27472

Global Health Suing Herbalife Over Sourcing Contract

LOS ANGELES--Global Health Sciences was facing the end of its ingredientsupply contract with Herbalife International Inc., and apparently wasn't pleasedwith the situation. Global filed a lawsuit on Nov. 9 against Herbalife forbreach of contract, citing it was Herbalife's "lifelong supplier" ofcertain nutritional ingredients. According to the suit, Mark Hughes, the formerpresident and chief executive officer of Herbalife who died unexpectedly in May,made an oral agreement with Global.

According to Herbalife, Global filed the lawsuit when Herbalife decided touse other suppliers to source its ingredients. The lawsuit alleges thatHerbalife failed to continue to source its nutritional ingredients throughGlobal, jeopardizing Global's financial status since Herbalife is the company'sbiggest client. Global's most recent contract with Herbalife was started in 1997and expired on Dec. 31, 2000. According to a press release issued by Herbalife,"...based upon the uncertainties that have surrounded the relationship withGlobal for many months, Herbalife ...[is] expected to purchase the substantialmajority of its requirements for the first quarter of 2001 from othermanufacturers."

"This is a very strange lawsuit," said Conrad Klein, a vicepresident and chief business affairs officer at Herbalife. He added that whenHerbalife began its relationship with Global, it supplied good products but withprices that were a little high. "If they continued to give us good product,at competitive pricing, they [could have expected] a substantial portion of ourbusiness in the indefinite future. [Global's] attitude now is 'all ornothing.'"

According to Herbalife, the company's growth was the main reason behind itssourcing decision. Klein said that when Herbalife and Global's partnership beganin 1980, not only was Global its only supplier, but Herbalife was in Los Angelesand Global was in Orange County. Klein said Global has known for years thatHerbalife was actively seeking secondary, and hopefully primary, sources.

Global is seeking monetary damages, as well as an injunction that requiresHerbalife to buy its ingredients. In light of the lawsuit, Herbalife stated thatit is extremely unlikely for Herbalife to purchase any product from Global afterthe contract expires.

For additional information, visit www.herbalife.com.