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Case Details:

Price:

Case Code Case Length Period Pub Date Teaching Note Organization

: MKTG181 : 25 Pages : 2000-2007 : 2008 : Not Available : The Body Shop International Plc. : Beauty care / Cosmetics : Europe, USA.

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Themes

Marketing Management/ Product management, Consumer behavior, New and emerging media

Industry Countries
Abstract:

The case discusses the evolution of 'The Body Shop' brand since its inception - its rapid growth in the 1980s; decline in the 1990s; repositioning to target the 'masstige' segment; acquisition by L'Oral; and, impact of the acquisition. Since its inception in 1976, The Body Shop International Plc (TBS) had caught the imagination of its customers as well as the world through its ethical stance and social activism of its founder Dame Anita Roddick (Roddick). The brand, considered an example of the societal marketing concept, grew rapidly for more than a decade till it faced some serious problems in the 1990s and the early 2000s. It suffered due to a combination of factors - quality issues related to its products; emergence of many other 'me-too' brands; and, targeted by critics who alleged that TBS was not as ethical as it projected itself.
This was the time the management of TBS decided to reposition the brand to target the 'masstige' segment. It took various initiatives to reinforce the positioning and by the mid2000s, TBS was well on its path to recovery. In 2006, TBS's management agreed to be acquired by multinational cosmetics giant L'Oral. This decision led to a spate of criticisms against TBS and Roddick as the critics alleged that L'Oral did not share the values of TBS. Some felt that the 'The Body Shop' brand was irrevocably damaged through its association with L'Oral.

However, TBS sales seemed to be unaffected by the criticisms and consumer backlash that followed the acquisition, at least in the short term.

Issues:
Understand the issues and challenges in building up a brand through the societal marketing concept Understand the issues and challenges in repositioning a brand, particularly to the 'masstige' segment of the consumers Understand the reasons for the consumer backlash against TBS after it agreed to be acquired by L'Oreal and the effect social criticism/consumer backlash has on a brand

Contents:

Page No. Strange Bedfellows? Background Note Building The Brand Through Societal Marketing Re-Positioning the Brand to Target the 'Masstige' Segment Marketing Initiatives in 2005 Criticisms Faced Over the Years Acquisition by L'oral Have The Body Shop Sold Out? Body Shop's View What does the Future Holds for The Body Shop Brand? Exhibits
Keywords:
Body Shop, L'Oreal, Societal marketing concept, Repositioning, Masstige segment, Positioning, Anita Roddick, Multi-channel strategy, The Body Shop At Home, e-commerce, Loyalty program, Corporate social responsibility, Ethical score

1 2 5 7 10 12 13 14 16 17 20

"Our strategy is to move the brand to a 'masstige' positioning by developing innovative and credible products for our customers at affordable prices."
- Annual Report of The Body Shop International Plc, in 2004.

"We see substantial synergies going forward as L'Oral benefits from Body Shop's retail expertise, as well as its positioning in the 'masstige' segment, an area that has been expanding in the US while [also] bringing its expertise in production, product development and marketing to Body Shop."1
- Eva Quiroga, an analyst at UBS,2 in 2006.

"This brand has been damaged, perhaps terminally, by linking itself to the world's 'least responsible company'. As people abandon Body Shop for companies with higher 'ethical scores', rather than put money in Nestl's3 coffers, it is ethical business, their suppliers and employees who are the winners."4
- Mike Brady, coordinator of Baby Milk Action,5 in 2006.

Strange Bedfellows?

On March 17, 2006, The Body Shop International Plc. (TBS), the ethical retailer of natural-based cosmetics, announced that it had agreed to be taken over by cosmetic and beauty care company L'Oral SA6 (L'Oral) in a cash deal worth 652 million (US$ 1.14 billion). The deal was a significant premium for the shareholders of TBS and a major windfall for its founder Dame Anita Roddick (Roddick). However, the announcement resulted in a wave of criticism against TBS and Roddick, who had often voiced her strong opinions against the practices followed by companies like L'Oral.
Ever since its inception, TBS had been strongly associated with social activism and had been promoting values such as opposition to testing of cosmetics on animals, support for community trade, etc.

Strange Bedfellows? Contd...

Analysts felt that social activism was not something ancillary to TBS brand, but its essence. Over the years, TBS had built up a base of loyal customers who admired the values the brand stood for. Though there were various allegations of hypocrisy and other serious allegations leveled against it, the company was viewed by and large as a highly ethical company. On the other hand, L'Oral's critics saw the company as the face of modern consumerism that tested cosmetics on animals, exploited the sexuality of women, and sold its cosmetics by making women feel insecure. And it did not help that Nestl owned 26% of L'Oral.
Nestl had been severely criticized in the past for its alleged unethical practices and aggressive promotion of baby milk in developing countries.

Many consumers and activists felt that TBS had sold its soul and called for a boycott of the company's products. John Ruane (Ruane), director of Naturewatch,7 said, "Since 1974, the Body

Shop have been using animal rights as an emotive marketing tool. Yet they break their own rule in consideration of having a parent company with a less than cruelty-free record. The money their sales are generating may well end up in the pocket of a shareholder in Japan or the States or in a cosmetic lab where it could be used to fund animal testing. In terms of bedfellows you really couldn't pick a worse company
Excerpts Background Note
In 1970, Roddick (then Anita Perella) and Gordon Roddick (Gordon) saw a store called "The Body Shop" in Berkeley, California, USA, selling cosmetics like shampoos, lotions, body creams, etc. The store was run by two entrepreneurs, Jane Saunders (Saunders) and Peggy Short (Short), who sold these cosmetics on the 'care for the environment' plank...

Building the Brand through Societal Marketing

During the initial years, TBS adopted a marketing approach that was different from other traditional retailers of cosmetic products. The products were promoted through offbeat brochures. Roddick's social and environmental activism was also central to the company's marketing strategy. Her views about business as a model for social change and her rhetoric against standard corporate practices soon attracted a lot of media attention. Roddick had said, "There is no more powerful institution in society than business. I believe it is now more important than ever before for business to assume a moral leadership."...
Re-Positioning the Brand to Target The 'Masstige' Segment
In the early 2000s, some analysts felt that the marketing approach of TBS had become no better than that of the typical retailers as it had gone soft on the activism agenda. Following poor financial performance, the management was changed and Roddick relinquished her position as the co-chairperson in 2002...

Marketing Initiatives in 2005

In 2005, TBS took forward its strategy to consolidate its 'masstige' positioning by launching new products and various campaigns. The aim was to drive sales by providing customers with an

improved shopping experience. The focus was on launching an innovative range of personal care products, new store design, and customer service programs for sales associates and TBS At Home consultants. As a part of product development strategy, various innovative products were launched that aimed to encourage multiple purchases and higher transaction values (Refer to Table II for new products launched in 2005)...
Criticisms Faced Over the Years
Though the company was widely considered as a pioneer in corporate social responsibility it also had its fair share of critics. Since the 1990s, TBS had to face increased scrutiny from many quarters. For instance, Jon Entine (Entine), a business ethics expert, was one of its fiercest critics...

Acquisition by L'oral
On March 17, 2006, TBS announced that it had agreed to be taken over by L'Oral in a 652 million (US1.14 billion) deal. L'Oral offered 300 pence a share, a premium of 34.2% to TBS's closing price of 223.5 pence on February 21, 2006...

Have The Body Shop Sold Out?

TBS immediately came under fire as L'Oral allegedly used animal testing for cosmetics, something Roddick had opposed throughout her 30 years of business life. Critcs also alleged that L'Oral exploited the sexuality of women. They recalled Roddick's earlier criticism against L'Oral for engaging only sexy women in their stores. In a statement on its website, Naturewatch said: "We feel that the Body Shop has 'sold out' and is not standing by its principles." Ruth Rosselson (Rosselson) of Ethical Consumer magazine said, "It's ironic that a company well known for its antianimal testing stance should sell out to one that tests on animals and which has yet to show its commitment to any ethical issues at all."...
Body Shop's View
TBS clarified that the acquisition by L'Oral would not diminish its ethical stance and it would continue its animal testing policy. TBS spokesman Bill Eyres said, "It has been agreed that all our values are ring-fenced and we will continue to apply our animal testing policy."...

What does the Future Holds for The Body Shop Brand?

Both the companies had high hopes from the merger. L'Oral was hoping that TBS would help enhance its business. It felt that TBS with a presence in 54 countries was a "sizeable and

complementary brand", and it would help L'Oral to increase its presence in the "masstige" segment. According to Euromonitor International's (Euromonitor) Briony Davies, L'Oral, which had lost its leadership in the global cosmetics and toiletries market to P&G in 2005, had a lot to gain from the acquisition of TBS...