When moral high ground hurts growth

The Body Shop’s stringency on its corporate values turns it into a victim

An activist business can be wildly successful for a while, but it gets hard to stand out when everybody else adopts the same values and mantras.

That may help explain French cosmetics giant L’Oreal’s reported interest in selling The Body Shop after 10 years of owning the revolutionary store chain and product-line.

Anita Roddick, a fiery animal-rights activist, environmentalist and champion of every progressive cause, founded The Body Shop almost 41 years ago. The chain grew on Roddick’s stringent activism and hippie ethos, which permeated its culture.

By the time she and her husband resigned from the company’s board in 2001, the company had 1,700 stores in 46 countries, but Roddick thought it “a dysfunctional coffin” that had sacrificed its values to market demands. It was also having business problems because it had expanded too fast and competitors such as Aveda and Lush had seized on “natural beauty” as a great selling pitch. Its formula is tired.

L’Oreal acquired the company in 2006, and has struggled with it ever since, despite continuing to expand its global presence to more than 3,000 stores. Some customers were disappointed that L’Oreal tested some of its own brand products on animals — something it claimed it has since stopped doing. But that cannot explain why, years after the stigma of the acquisition should have worn off, The Body Shop’s revenue growth has turned negative again lately.

The downturn came despite CEO Jeremy Schwartz’s attempt to revive the brand’s values by doing “something that is today considered totally radical and in 20 years will have become mainstream.” That idea has been promoted under the slogan “Enrich Not Exploit”, which was registered as a trademark. Schwarz’s plan includes a promise to make 70 per cent of the company’s packaging biodegradable and other, somewhat vaguer commitments such as to “help 40,000 economically vulnerable people access work around the world.”

The plan, which Schwartz claimed came to him in an epiphany during a trip to the Amazon, is based on solid business reasoning. The organic cosmetics market, worth $11 billion (Dh40.40 billion) in 2016, is expected to double by 2024. A growing number of consumers are looking for “organic” labels when they buy personal-care products.

Naturalness and sustainability are important to a majority of buyers now, and they can check a product’s place on that scale with an app.