L’Oréal’s potential Body Shop sale: a look behind the headlines

By Lucy Whitehouse contact

- Last updated on GMT

L’Oréal’s potential Body Shop sale: a look behind the headlines
With the recent announcement from global beauty leader L’Oréal that the company is looking into the sale of its ethical beauty brand, The Body Shop, we take a look at industry analysis behind the headlines.

From Forbes to the Financial Times, commentators have come out to consider the pros and cons of a sale, and consider the possible future of The Body Shop.

Where have we come from?

L’Oréal bought The Body Shop in 2006 for GBP 652.3m, taking over ownership of the previously independent British beauty brand.

Founded in 1976 by Dame Anita Roddick, the company was novel on the scene for its emphasis on sustainability, its anti-animal testing stance and its ethical profile: all of which have now become staples - if not, must-haves - for beauty brands today.

The company currently has a range of over 1,000 products and retails via 3,000 franchised stores across 66 countries. Yet despite being an ethical leader long before the trend took hold, The Body Shop is now lagging considerably behind the competition.

Poor performance

Unanimously, commentators acknowledge that the beauty retailer has been beset by a poor performance over recent years, prompting L’Oréal’s decision to consider a sale.​ Indeed, last month the brand reported a 38% slump in full-year operating profits, with sales having fallen nearly 5% to €920.8m.

After L’Oreal’s acquisition of the brand and after the demise of its original founder, Anita Roddick, the brand had started to lose its appeal,​” writes the Trefis Team in Forbes,​ noting that The Body Shop has faced “persistent weak performance”.

“I'm surprised the retailer co-existed with the cosmetics giant for so long,​” asserts Andrew Hill in the FT.

What next?

The Trefis Team notes that part of the problem for The Body Shop in recent years may indeed have been its association with L’Oréal itself, with loyal consumers having felt frustrated by the initial acquisition.

It is essential that the authenticity of these brands remains intact following acquisitions, as this is generally a unique selling point for the brands. The moment that appeal is lost, the brand becomes just another name in a sea of similar brands and loses customer loyalty,​” the team observes.

In the FT, Hill suggests that restoring the ‘original excitement to the brand’ is now necessary, a sentiment with which Grace Bowden in Retail Week agrees.

Makeover

Bowden suggests that any new owner of The Body Shop would need to give the brand a ‘makeover’, noting that Lush has become a formidable retail rival in the ethical beauty space.

She quotes market analyst Charlotte Pearce, from GlobalData Retail.

Shoppers have become much more knowledgeable and brand savvy when it comes to health and beauty and while The Body Shop is known for its cult products, it has failed to innovate enough and offer on-trend products, especially in terms of its make-up,”​ says Pearce.

“Contour sticks, kits and palettes were a strong trend in 2016, and these are nowhere to be seen in The Body Shop’s range.”

Commentators generally suggest the future for the brand lies in digital, where until now, it has lagged.

Though L’Oreal is a digitally advanced company, launching its beauty applications on mobile or promoting beauty influencers on social media, it has done little to connect The Body Shop with younger consumers through these means,​” observes the Trefis Team in Forbes.

“We expect a new owner could look to slim its UK store portfolio and divert a significant share of marketing spend to reinvigorating sales online​,” Harsha Wickremasinghe, an associate at mergers and acquisitions and debt advisory firm Livingstone, confirmed in Bowden’s Retail Week report.

The Forbes report concludes with the suggestion that The Body Shop has a choice to make: does it become a mass market commercial brand in line with players like Maybelline, or a brand serious about its social and environmental ethical profile.

Being perceived as ‘half-ethical’ leaves it lost in the middle ground, where consumers are distinctly lacking.

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