Anita Roddick once called the cosmetics business a “monster industry selling unattainable dreams”. When L’Oréal confirmed on Thursday that it was looking at selling The Body Shop, prospective buyers may have recalled its late founder’s warning.
L’Oréal is said to want €1bn for the brand, which Roddick started in a Brighton shop wedged between two funeral parlours in the twilight of Britain’s hippy counterculture in the late 1970s.
That is about the same price that the owner of Garnier and Maybelline paid a decade ago when it sought an infusion of soul — and sales — for a skincare portfolio that had been marketed as a distillation of science.
The mix has not proven wholly successful. The Body Shop’s performance has been “uninspiring”, according to James Edwardes Jones, an analyst at RBC Capital Markets, as profits withered and a once-distinctive moral purpose was copied by other brands.
L’Oréal, meanwhile, has managed to recover its sheen in the age of social media, using smartphone apps and eye-catching product innovations to appeal to millions of beauty enthusiasts who trade tips online.
The Body Shop had become one of Britain’s biggest cosmetics retailers, against all the odds, through its habit of thinking small, which analysts worried was not the easiest fit for the multi-brand, French cosmetics giant.
Known for exotic ingredients, social activism and environmental conscience, the chain insisted on apparently ruinous practices such as refilling bottles after customers emptied them of white musk moisturiser or banana hair conditioner.
Roddick railed against cosmetics executives, whom she accused of promoting impossible ideals of beauty. She was among the forebears of the “Fair Trade” movement, paying extra for recycled packaging and importing ingredients from developing countries as a way of promoting economic development.
While such principles were costly, they won The Body Shop a following. The trouble for L’Oréal, beauty experts say, is that its young, budget-conscious and idealistic customers had started looking elsewhere.
“You go there if you’re in an airport and you need something. I last bought their stuff about three years ago,” says Fiona Klonarides, who runs a cosmetics blog called The Beauty Shortlist.
While Ms Klonarides still rates The Body Shop for bathroom staples, she says the packaging looks dated and, when she has time to shop around, she prefers more innovative boutiques such as Neal’s Yard. L’Oréal chief executive Jean-Paul Agon conceded in 2009 that the pace of innovation was slow.
Meanwhile, after three decades in which the cosmetics industry has mostly shunned animal testing, ethical credentials no longer set The Body Shop apart. “I mean, these days it would be pretty hideous to be pro-cruelty,” says Ms Klonarides.
Mr Agon, who had only just become chief executive when the group bought The Body Shop in 2006, also may have chosen the wrong moment to conclude that L’Oréal needed to connect better with customers by running its own chain of shops.
YouTube, which was launched a year before the deal closed, now hosts tens of thousands of beauty-related channels that are viewed billions of times a year. It has become a popular venue for teenagers to share beauty tips and search for inspiration without leaving home.
L’Oréal has seized on the trend, developing a smartphone app that works like a magic mirror, allowing customers to try out a look by applying virtual make-up to a live video image of their faces before ordering the products online. Such innovations, along with intensive marketing on social media, have enabled the group to grow an average of 5 per cent a year over the past decade.
But they have largely bypassed The Body Shop, which has spent the same years ploughing money into an expanding store network while reaping only half the sales growth of its French parent.
The chain has added 1,000 stores under L’Oréal ownership, far short of the 3,000 once planned by Mr Agon. Ambitions to enter about 40 new countries have been shelved entirely. Operating margins fell below 4 per cent last year, compared with 20 per cent for L’Oréal’s main consumer business.
L’Oréal says it will explore “all strategic options regarding The Body Shop’s ownership” and that no decision has yet been taken. While the brand could yet prove attractive to a consumer products group such as Unilever, some analysts say the €1bn price tag mooted by L’Oréal may indicate that the group has set its sights on a private equity buyer.
Under Roddick, The Body Shop managed to create a principled, mass-market brand, drawing millions of customers on to the moral high ground. But consumers are more demanding now, and Ms Klonarides reckons a new owner will have to decide between the two.
“The clean beauty crowd are purists,” she says, referring to the contemporary trend towards environmentally conscious beauty that has succeeded in the niche that Roddick carved. “It’s like buying organic veg and eating it with Spam. They have to decide. Are they green and clean or [are they] mass market? Half clean is like half ethical. It does not work.”
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