highs and lows of an ethical beauty pioneer

The Body Shop could potentially be up for sale again. Six years after buying the beauty brand from L’Oréal, Brazilian group Natura & Co. is now envisaging selling it off. In a statement published on August 28 on Natura & Co.’s corporate financial information site, the board of directors said it has authorised the group’s senior management to explore various avenues for The Body Shop, including a possible sale.

In April, Natura & Co. sold another of its brands, Aesop, to L’Oréal. The operation valued the Australian premium skincare brand at $2.5 billion (€2.28 billion). Hit in quick succession by the Covid-19 pandemic, the invasion of Ukraine and renewed inflationary pressures, the Brazilian beauty specialist, owner also of Avon and Natura, is keen to improve the health of its finances, and especially to refocus on its Latin American business.

But while Aesop was a buoyant, emerging brand within Natura & Co.’s portfolio, The Body Shop could instead be defined as the weak link in the group’s chain. In H1, The Body Shop’s revenue fell by 12.8% to BRL2.308 billion (€437 million), while EBITDA dropped by 19%. In fiscal 2022, The Body Shop’s revenue was €820 million (at current exchange rates), equivalent to a 13.5% downturn, nearly €100 million less than in 2016, before it was acquired by Natura & Co. And this despite that fact that the cosmetics market worldwide has been growing by 4% on an annual basis since 2016, except for pandemic-stricken 2020.

To make matters worse, David Boynton, the CEO who had been at The Body Shop’s helm since its acquisition, left the company in April, replaced ad interim by Ian Bickley.

It therefore seems that The Body Shop, with its 10,000 employees and some 2,400 stores worldwide (of which 1,430 are franchised stores) is struggling to find a place within some of the world’s top cosmetics groups.

The Body Shop a UFO for major groups

The Body Shop was founded in 1976 by Anita Roddick, a British businesswomen and a militant campaigner for human rights and environmental protection, and soon emerged as a pioneering brand in ethical and natural beauty. Staunchly opposed to animal testing, The Body Shop met with resounding success in the early 1980s, notably thanks to products like the White Musk perfume and, later, its signature body butters. The brand’s ethical positioning and its nature-oriented product range, one step ahead of the competition, were the elements that probably attracted L’Oréal to The Body Shop.

In 2006, after its public bid was approved by the British group’s founding shareholders, L’Oréal bought The Body Shop, which at the time operated 2,000 stores in 50 countries, and generated a revenue of €945 million. With its huge number of stores, The Body Shop held an unusual place within the brand portfolio of L’Oréal, which was then starting to shift its focus to e-tail. However, the acquisition enabled the French giant to strengthen its position and gain credibility on the booming natural cosmetics segment. In October the same year, L’Oréal also bought French bio-cosmetics and aromatherapy brand Sanoflore.

Ten years after being bought by L’Oréal, and despite investment to accelerate its internationalisation, The Body Shop was still performing disappointingly. In 2016, the 3,000 store-strong retailer generated a revenue of €920.8 million, down 4.8% on the previous year, while its profitability fell by 3.7%.

In 2017, L’Oréal put The Body Shop on the market. For a time, rumours were rife that an investment fund like Bain Capital, CVC or Advent might step in, but it was Brazilian group Natura & Co. which eventually bought the British brand, in an operation that valued The Body Shop at €1 billion. Natura & Co., then also the owner of Aesop and Natura, became a major player in the natural cosmetics segment.

Trying to recover ethical brand positioning

Under the aegis of Natura & Co., The Body Shop introduced wholesale changes to its packaging, using more recycled materials and jettisoning some secondary packaging. By the end of 2023, all its 900 products will be certified vegan. In 2019, The Body Shop obtained B-Corp certification, which identifies companies with a positive social and environmental impact, adding new shine to its ethical corporation status.

The Body Shop, which in France currently operates some 60 stores and generates, according to general manager France Hugues Laurençon, a revenue of €50 million, is also busy streamlining its global organisation. For example, it is increasing the number of franchised stores, and is expected to rely more on the wholesale channel.

The global economic situation, and the high number of more agile brands operating in the natural beauty sector, are certainly thwarting The Body Shop’s recovery efforts to some degree, but the brand does have some strong assets. The question is, were a sale to go ahead, which group could buy such a long-established beauty brand? After featuring in L’Oréal and Natura & Co.’s portfolios, it seems improbable that a global cosmetics group will buy the brand. An acquisition by an investment fund, as was mooted in 2006, could then be on the horizon. Something to keep an eye on.