When Brazil’s biggest cosmetics manufacturer, Natura Brasil, announced its intended £877m (€1bn) purchase of The Body Shop earlier this month, it signalled the beginning of the end to its unlikely marriage with existing owner L’Oréal.
In 2006, The Body Shop founders, Dame Anita Roddick and husband Gordon, had been eager to free up their controlling stake and spend their cash and remaining time in helping the many environmental and social causes that they vocally supported. On a wave of idealism, L’Oréal’s long-standing CEO, Jean-Paul Agon, brokered the original £652m purchase, in the face of opposition from Nestlé, one of his biggest shareholders. At a meeting at the Littlehampton, West Sussex, HQ he explained that the purchase would transform the sustainability credentials of the L’Oréal business and be the key to extending The Body Shop’s global reach.
Over the last decade, however, The Body Shop’s fortunes have languished. Large numbers of long-standing employees were laid off when L’Oréal took over. Global sales decreased by 5% between 2015 and 2016. In April this year, after it controversially ceased financial support for The Body Shop Foundation, created by the Roddicks in 1989, the charity closed down. Despite a well-regarded change of leadership, when current CEO Jeremy Schwarz joined in 2013, and subsequent attempts to revitalise the brand, including the recent opening of a global R&D centre in Croydon, The Body Shop had remained a problem child. Earlier this year, L’Oréal announced it was looking for a buyer.
On paper, Natura looks like a good fit. Natura espouses many of the environmental and social causes for which The Body Shop is famous. It ranks 19th in the Corporate Knights Global 100 sustainability rankings (L’Oréal is 38th). It has a large direct sales operation, mirroring The Body Shop at Home, a direct-selling business that Anita founded and adored. It has grown its retail interests and taken a controlling interest in Melbourne-based natural beauty business Aesop, which has successfully established itself internationally as a premium, boutique retail brand.
A mixed bag
As it climbs into bed with The Body Shop, what can Natura learn from its new partner’s inauspicious previous relationship? Similar acquisitions by big corporations of small, hearts-on-their-sleeve, values-led brands have been at best a mixed bag, dating all the way back to the contentious purchase of Quaker-founded Rowntree by Nestlé in 1988.
The transition of Cadbury’s, with a similar heritage, via its merger with Schweppes to the current ownership by Kraft/Mondeléz, was at least as patchy – overshadowed by factory closures, UK job losses, the 2016 reversal of its long-standing Fairtrade commitments and, for sister brand Green & Black’s, a back-track last year on a wholly organic product range. The last has happened in order to create a product for the US market – arguably, trading its ethical provenance in order to reach into a potentially lucrative market.
Ben and Jerry’s ‘tipping point’
Conversely, the “rocky start” to Unilever’s acquisition of Ben & Jerry’s transitioned into a global commercial success, whilst retaining many of the Vermont ice-cream maker’s ethical credentials, including a campaigning stance on global warming and LGBT rights. Unilever credits the purchase as a “tipping point” in establishing sustainability as a credible pillar in its overall corporate strategy. Ben and Jerry’s founder, Jerry Greenfield, is more laid-back, recently describing his creation as being more “like a flea on the back of this giant thing”.
When Coca-Cola invested in Innocent in 2009, subsequently acquiring a 90% controlling share, the owners insisted that Coca-Cola remained hands-off – allowing access to Coca-Cola’s global distribution without touching the values and culture of the business. Like Ben & Jerry’s, Innocent set up an advisory board and remained personally involved. The Innocent management has so far stayed at arm’s length from the giant US parent.
Karen Jones, MD for UK, Ireland and Nordics at culture consultancy Denison, describes it this way: “Core values are the glue to culture, particularly when we’re talking about global companies.” While other aspects of the culture can flex from country to county, the values have to stay constant. If the acquiring organisation fails to respect and understand the values of the business it buys –or worse still, seeks to impose its own conflicting values – then it will create inconsistency, lack of focus and instability.
‘Weave core values into everything’
As leadership expert Patrick Lencioni wrote in the Harvard Business Review, organisations need to have a single, distinctive set of values that reinforces their identity and shared purpose. They need to take time to get this right, especially after merger or acquisition, and then “weave core values into everything”.
“When we’re surveying organisational culture,” Jones explains, “our most sensitive question is about whether ignoring core values will get you in trouble.” If the answer to this question is no, then she argues that the espoused values are unlikely to create focus, consistency and stability. Instead, in Patrick Lencioni’s words, they may become “bland, toothless or just plain dishonest”.
Businesses like Ben & Jerry’s (“to make the world a better place”) and The Body Shop (“to enrich not exploit”) have always rallied around core values that are outward-facing, even evangelical. They have a purpose that travels beyond the organisation. This can be very new and hard to grasp for executives from global organisations, more used to internally referenced values statements – their compasses calibrated around the familiar corporate rhetoric of collaboration, customer focus, empowerment and accountability.
‘Be patient and listen’
Gary Coulton, CEO of The Adaptive Intelligence Group (a collaboration of nine consultancy companies, of which I am a founding member), partners with Denison in the UK. Coulton advises a sensitive approach. “You need to be very inclusive to start with,” he says. “Which means the leaders taking time to understand the culture and complexion of the new business before jumping in too fast.” It’s often something he and his colleagues have to coach executives around. He encourages them to experiment, ask lots of questions and listen patiently. For corporate leaders who are used to decisive decision-making and quick results, it can be hard to hold back but if they can master this inclusive style, Coulton believes, sustainable results will follow.
As Jones says: “Values statements aren’t about celebrating successes; they are about guiding choices.” And when acquiring a business like The Body Shop, even a company with an ethical head-start like Brazil’s Natura will have a great deal to learn about the core values of its new subsidiary, for these guiding choices – and the venture itself – to succeed.
Patrick Ballin is a former head of supply chain development at The Body Shop and a past trustee of The Body Shop Foundation. He is a member of the Adaptive IG consulting group and Visiting Lecturer at Brighton Business School.
See also Why community trade comes natural to The Body Shop.
Image: Tags: The Body Shopcommunity tradeCSRL'OrealUnileverBen & Jerry'sCadbury'scoca-colaInnocentGreen & Black'sChannels: Business StrategyPrécis: Patrick Ballin, a former senior manager of The Body Shop, says the Brazilian beauty giant would do well to learn from Unilever’s acquisition of Ben and Jerry’s and Coca-Cola's purchase of Innocent as it takes over from L’OréalPremium`: Freemium`: Is weekly watch: No