The Body Shop International

When North American consumers have been asked to describe the cosmetics industry they often respond with words such as glamour and beauty. Beginning in 1976, The Body Shop provided a contrast to this image by selling a range of 400 products designed to cleanse and polish the skin and hair. The product line included such items as Honeyed Beeswax, Almond, and Jojoba Oil Cleanser and Carrot Facial Oil. Women s cosmetics and mens toiletries were also available. They were all produced without the use or animal testing and were packaged in plainlooking, recyclable packages. The primary channel of distribution was a network of 600 franchised retail outlets in Europe, Australia, Asia and North America. The company enjoyed annual growth rates of approximately 50 percent until 1990, when net income began to level off. Few questions were raised in the media about this decline in performance, because the firms social agenda and exotic product line captured most of the publics interest. Indeed, at this point in time, The Body Shop was the poster child company for the burgeoning corporate social responsibility. Managing director and founder Anita Roddick was responsible for creating and maintaining much of the companys marketing strategy and product development. Roddick believed that The Body Shop was fundamentally different form the other firms in the cosmetics industry because we dont claim that our product will make you look younger, we say they will only help you look your best. She regularly assailed her competitors: We loathe the cosmetics industry with a passion. Its run by men who create needs that dont exist. During the 1980s, Anita Roddick became one of the richest women in the United Kingdom by challenging the well-established firms and rewriting the rules of the cosmetics industry. Anita Roddick became admired within the business community for the convictions of her beliefs and the success of her company. She received many honours and awards, including the UK Businesswoman of the year 1985, British retailer of the year in 1989, and the Order of the British Empire. The firms customers included several celebrities, including Diana, Princess of Wales, Sting, and Bob Weir of the Grateful Dead. Ben Cohen, cofounder and chairman of Ben and Jerrys described her as incredibly dynamic, passionate humorous and intelligent individual who believes its the responsibility of a business to give back to community...she understands that a business has the power to influence the world in a positive way. Mrs Roddick opened the first Body Shop store in Brighton, England, as a means of supporting her family while her husband was taking a year-long sabbatical in America. Her husband, Gordon Roddick, a chartered accountant by trade, was using much of his savings to finance his trip. Anita Roddick had little money to open a store, much to less to develop products or purchase packaging materials. She called upon her previous experience as a resource. Having been a United Nations researcher for several years in the 1960s, she had had many opportunities during the field expeditions to see how men in Africa, Asia, and Australia used locally grown plants and extracts, such as beeswax, rice grains, almonds, bananas, and jojoba, as grooming products. Roddick knew that these materials were inexpensive and readily obtainable. With some library research, she found several recipes, some of which were century old that used these same ingredients to make cosmetics and skin cleansers. With the addition of inexpensive bottles and handwritten labels, Roddick quickly developed a line of products for sale in her first Body Shop. She soon opened a second store in a nearby town. When Gordon Roddick returned to UK in 1977, The Body Shop was recording sizable profits. At Anitas request, he joined the company as its chief executive officer. The Body Shops strategy grew out of the companys early reliance on cost containment. Roddick was able to afford only 600 bottles when she opened first store. Customers were offered a small discount to encourage the return of empty bottles for product refills. This offer was extended to both retail and mail-order customers. The Body Shop couldnt afford advertising, so Roddick resolved to succeed without it. The Body Shops retail stores were somewhat different from the cosmetic salons and counters familiar to shoppers in highly industrialised nations. The typical retails sales counter relied on high-pressure tactics that included promotions, makeovers, and an unspoken contract with the customer that virtually required a purchase in order for the customer to receive any advice or consultation from a sales counter employee. Body Shop employees were taught to wait for the customer to ask questions, be forthright and helpful, and not press for sales. Store employees were paid a half-days wages every week to perform community service activities. At the company headquarters in Littlehampton, England, The Body Shop employed an anthropologist, six herbalists, and a variety of

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others in similar fields. These were nothing that resembled a marketing department. Husbands and wives frequently worked together and could visit their children during the workday at the on-site day care centre. The companys hiring procedure included questions about the applicants personal heroes and literary tastes, as well as their individual beliefs on certain social issues. At one time, Roddick was ready to hire a retail director, but refused to do so when he professed his fondness for hunting, a sport that Roddick despised because of her support for animal rights. As the company prospered, Anita Roddick used her enthusiasm and growing influence on her suppliers and customers. The Body Shop began to produce products in the country of origin when it was feasible and paid workers wages that were comparable to those in the European community. Customers were asked to petitions and join activist groups that the Body Shop endorsed, mostly in the areas of animal rights and environmental causes. The Body Shop contributed significant portions of its earning to these groups, including Amnesty International and People for Ethical Treatment of Animals (PETA). Roddick was careful to choose causes that were easy to easy to understand and could be communicated quickly to a customer during a visit to a Body Shop store. An example of this corporate activism was The Body Shops opposition to a practice that had become common inn the cosmetics industry. Cosmetics firms were not required to perform animal testing of their products to comply with product safety and health regulations. Rather, companies voluntarily adopted animal=based testing procedure to guard against product liability lawsuits. The Body Shop was not worried about such lawsuits, because the product ingredient Roddick chose had been used for centuries. In addition, the older recipes had been used for many decades without incident. These circumstances led to the companys rejection of animal-based product testing. Any supplier wishing to do business with The Body Shop had to sign a statement guaranteeing that it had done no animal testing for previous 5 years and would never do such testing in the future. The Body Shop used human volunteer from its own staff and University Hospital of Wales to test new and current products under normal use. The Body Shop also volunteered to share the results of its tests on individual ingredients with other cosmetic manufacturers. Most other cosmetic firms used a variety of producers to determine the safety of cosmetic products, with two animalbased test becoming standard procedures. The Draize test involved dripping the substance in question, such as shampoo or a detergent paste, into the eyes of conscious restrained rabbits and measuring the resultant damage over the course of several days. Rabbits cannot cry, which allowed researchers to complete the tests quickly. Another test required researchers to force-feed large quantities of a substance to a sample of laboratory animals. The substance could be solid (such as lipstick or shaving cream), a paste, or a liquid. The lethal dose of a substance was determined by the amount that had been ingested by an individual surviving animal when 50 percent of sample had died, hence the name of test, LD50. Beginning in 1970s, animal rights group such as Humane Society and PETA began protesting the use of these tests by the cosmetic industry. The Body Shop lent its support to these groups efforts, labelling all animal testing as cruel and unnecessary. By 1991, alternative procedures that involved far less cruelty to animals had already been developed but were yet to be approved for industry use. In the United States, The Body Shops market share was limited by two factors. First, its process were significantly higher than those charged for mass-marketed products in drugstores, although they ware generally comparable to the prices charged for cosmetics and cleansers at the department stores sales counters. Second, The body Shop was considered by number of stores it had opened in the United States. By 1991, only 40 stores had been opened in dozen metropolitan areas across the country. A mail-order catalogue and a telephone line were used to supplement the American retail stores, but they were inadequate substitutes for the product sampling and advice that were readily available at The Body Shops stores. Roddick maintained that those consumers who sampled Body Shop products became loyal consumers: Once they walk into one of our stores or buy from our catalogue, they are locked. The Body Shop was taken public in 1984, with the Roddick owning a combined share of 30 percent of the out standing stock. The firms subsequent sales and net income figure grew during 1985 to 1990 from sales revenue of $15.3 and net income of $1.4 million to $137.7 and $14.7 million. Without The Body Shops monetary donations to various social causes, all of these net income figures would be higher than reported in the financial statements. Estimates of the companys annual contributions to outside organizations varied from several hundreds thousand to several million dollars. Industry analysts considered The body Shop to be a strong performer with the potential to prosper even in an economic downturn. The exotic nature of its products, such as hair conditioner made with 10 percent real bananas

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This case was prepared by William A Sodeman using publicly available information.

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and a peppermint foot lotion, would attract consumers who desired affordable luxuries. Analysts regarding the publics desire for the personal care products as insatiable, especially in North America. The addition of the strong emotional appeal of social issues formed the basis for one of the most successful marketing and promotional concepts in the cosmetic industry in decades. The twentieth anniversary of the Earth Day, celebrated in 1990, focused media attention on many of the environmental issues that Roddick and The body Shop regularly addressed. Further, it spurred interest in environmental issues in the commercial sector. Several new entrants and existing competitors challenged The Body Shop in the United States and Europe. Among the largest of these firms were Estee lauder and Revlon. The Limited had opened 50 Bath & Body Works stores, patterned after The Body Shops outlets and located in shopping malls across United States. In addition, an English competitor, Crabtree & Evelyn, had held a significant presence in North America and Europe since the mid-1970s. By 1991, The body Shop was a successful and profitable firm that had attracted a variety of well-financed competitors. The company faced a real threat from these firms because they were all financed and had a broad range of experience in the United States, yet no one firm dominated the new product segment that The Body Shop had helped create. In addition, there were indications that the environmental concerns that attracted customers to the Body Shop might not have permanent drawing power. Roddick had vowed never to sell anything but environmentally friendly cosmetics and grooming [products in her store. but the industry was growing and changing faster than anyone had anticipated. It seemed that The body Shop needed to take action to ensure its long-term survival.

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