L’Oreal and The Body Shop A Case of Opposites Attract Introduction The look, the feel, the touch

, the smell, the taste, these are all of the focuses of a multi-billion dollar industry whose success is based purely on aesthetics. However, not all of the companies in this industry sector operate on selling their products to improve the external beauty of its customers. One such company has been successful in fighting the ideals of traditional beauty and has created a niche market for themselves globally. Now, with a new acquisition, the reputation of this company stands to be impacted, either positively or negatively. This paper explores the acquisition of one of the largest franchise cosmetics companies in the world, The Body Shop, by the largest cosmetics company in the world, L’Oreal. The main concentration of this paper lies in the conflict between the ethics and ideals that both companies have individually imbibed through their history and with the difference in their focus with respect to marketing, human resources management and portfolio diversification. Knowingly a win-win situation for L’Oreal with respect to reputation management, the acquisition may prove to be in favour of presenting an environmentally and socially “cleaner” image. However, for The Body Shop, this transaction may end up harming the company's “squeaky clean” image rather than helping to support it. The answer to whether this partnership will be beneficial to both parties will largely depend on how each of the management teams learn to understand, appreciate and demonstrate the certain elements of both companies that have made them the successes they are today. The Situation - L’Oreal & The Body Shop Human Resources For L’Oreal, workplace diversity is not just a human resources focused issue, it is also important to the business practices for many reasons. At the forefront of these reasons is creativity both in product development and communication in meetings. The importance lies in the fact that separate experiences and thoughts allow for all types of creativity and outlooks which is beneficial when trying to continually develop new and exciting products. It is important to have differing outlooks through a diverse employee base with various cultural backgrounds to consult with when discussing any issue or product in management meetings. Employee recruitment tactics have always been a strong and favourable focus for L’Oreal. Reaching out to the community, schools, and assistance programs are common practice. This has allowed them to primarily stay ahead of the curve when it comes to employee selection and development.

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Jan 5). 19764 and drew crowds with its strawberry-scents. since it was she who had reprimanded L’Oreal only a few years earlier. these are problems that have been subsequently resolved and left in the past. 2008. 2008. with the new issues which were sure to arise during the 2006 acquisition of The Body Shop.uk/news/index. Jules (1998). the environment and to social activism is shown in the company’s mission statement3 and trading charter (see Appendix 1). The Body Shop’s trading charter is a great testament to the company's bold commitment to the environment.uk/news/index.hrmagazine.Although they have had some issues concerning diversity in the workplace and ethical practices with respect to animal testing. it was inevitable that the media frenzy would ensue. It was the belief of both political and business professionals alike that when news of the acquisition was released. HR Magazine. Anita! The Woman Behind The Body Shop. All of these actions have allowed this company to remain profitable. it was in Madrid opening its 1000th store. since this new acquisition was with a company which was not viewed by the general public as a socio-conscious business. Watertown. the community.thebodyshopinternational. from http://www. It was going to be important for the employees working for L’Oreal to be able to communicate and relate to a more environmental and socio-conscious consumer in order to ensure the consistency of The Body Shop’s message to it’s existing customer base. The Body Shop opened its doors at 9 am.851 in December 2007) to be able to work and interact freely with the market and with each other. By April 1984. Interview: Liaison Dangereuse. on March 27th. L’Oreal managed to diversify even further in 2006 when they finally acquired The Body Shop.co. from www. the company launched The Body Shop stock. HR Magazine. Matt (2006.cfm?fuseaction=archivedetails&newsuid=8b2ea266-916a-4f4e-9081-bd52a0ea625f 2 Farquharson. it was imperative for L’Oreal to be able to manage in a wide area of business locations. 2008. Ethics and Social Responsibility The acquisition between these two companies is one that will be remembered in the history books of business acquisitions if for no other reason than the fact that it happened between two companies that are morally and ethically opposite of one another. Now their clientele base was not only a mix of men and women of all races. as well as in future operations. The most important responsibility for those at L’Oreal who set policies (mainly within the human resources department) is to ensure that the integrity and values of each company remain intact and also independent from one another. (2007).com 4 Older. It would be both important and difficult for the company and employees to convey The Body Shop’s continued connection with environmentally friendly practices. The Body Shop. a point supported by the fact that L’Oreal states that they haven’t tested on animals since 1989. from http://www.hrmagazine. Retrieved March 25. bringing Greenpeace posters. Some critics have remarked that the company’s strong ethical stance may cause a conflict with respect to the type of views. The extent of The Body Shop’s commitment to the community. Jan 5). Retrieved March 25.”2 At this point. Nevertheless. 2 . things were sure to get more complicated. This responsibility was accompanied with a large mix of potential employees from varying backgrounds and the challenge of allowing this mass employee base (60.co. Animal rights group Naturewatch immediately demanded a boycott of The Body Shop products and former owner and seller Anita Roddick was accused of being a sell out. and social activism. 1 Farquharson. The Body Shop was a global entity. MA: Charlesburg Publishing. a very different type of consumer than L’Oreal was used to appealing to. Interview: Liaison Dangereuse. Matt (2006. [since] L’Oreal has displayed visionary leadership in wanting to be an authentic advocate and supporter of [The Body Shop’s] values. Although she had been credited with stating that the company was guilty of “promoting unattainable ideals and sabotaging self-esteem”1. campaigns and behaviours that L’Oreal may want the company to move towards. Retrieved March 20. Roddick now states that “[She] does not see it as selling out. it also included the environmental and socially ethical consumer.cfm?fuseaction=archivedetails&newsuid=8b2ea266-916a-4f4e-9081-bd52a0ea625f 3 The Body Shop International plc. In 1993.

the company has shifted and changed. (2008. using The Body Shop as a benchmark. and Japanese brands with Shu Uemura. emphasize in no uncertain terms. It is however important to note that the Board of Directors of The Body Shop report directly to the CEO of L'Oréal and is under the professional guidance of L'Oréal with respect to growth. Already others are pushing ahead. The tag line for L’Oreal is “Because you’re worth it!” The product line is priced and packaged such that the average everyday woman can afford to buy it but still feels that the product is above the 5 The Body Shop International plc. makes its shopping bags out of recycled algae found in Venetian canals. but it cannot be stagnant. maturity. L'Occitane. the CEO's. With experience extending over 100 years. the depth of The Body Shop's commitment to the environment. people. Retrieved March 20. especially to the women it is catering its products to. L’Oréal has different brands that target different price ranges and cultures.com/ http://valuesreport. as well as animal-free testing of cosmetics.values.wikipedia. L'Occitane en Provence. Another of its competitors. dilemmas. The Body Shop became an independent non-publicly listed entity within the L'Oréal Group. (2007). and diversification. including more diverse offerings for the multicultural world.org/wiki/L%27Oreal 3 . and future direction of L'Oréal and The Body Shop. changed the world with her bold views and personal drive to operate an ethicallyminded business. from LUSH (2008). It is a ring-fenced division with the same management team (Board and Executive Committee) and the same commitment to its values and ethics as before the acquisition. L'Oreal. Italian brands with Giorgio Armani. L'Oréal is the leading cosmetics company in the world. worried. which is 100% owned by The Body Shop. The Body Shop is a benefit to L'Oréal.com/Default. Retrieved March 2. 2008. LUSH6 has surpassed The Body Shop in some aspects by minimizing its packaging and forcefully pushing the animal testing issues by not buying from companies which do any animal testing at all. L'Oréal has underlying principles of ethics and responsibility.net/ 6 7 L'Occitane en Provence (2008). France. and some of its suppliers in an effort to be transparent. from http://www.aspx?a=426&c=1&l=1&s=2 8 Wikimedia Foundation. April 2). and the cultures wherein the products are outsourced. To keep up with its sense of social responsiveness. the animals. The Trading Charter and Mission Statements (see Appendix 1). A Values Report was presented in 20075 which entailed a dialog between the shareholders.thebodyshop. L’Oreal has been able to establish its presence in major cities all over the world8. anyone familiar with what The Body Shop represented and stood for. and hair care both for men and women. 2008. The Body Shop must continue to lead the way for other eco-friendly companies. The company’s product line is extremely diverse and ranges from hair colour. Retrieved April 3. Inc. When it was brought to light that L'Oréal was acquiring The Body Shop in March 2006. Within this report.7 Marketing and Brand Management L’Oreal is the largest cosmetic company in the world with headquarters in Paris. and a strong sense of ethics and social responsiveness to the forefront. product line expansion. 2008. 2008. The only products which are not outsourced and are manufactured by the company is Soapworks.loccitane. make-up. These presented the situations. Dame Anita Roddick. from http://lush. President & CEO. The Body Shop Values Report. from http://en. L’Oréal has French brands but also American brands with Maybelline New York. L'Oréal restates its commitment to The Body Shop's core values and goes further by looking to extend the benefits and virtues to its other group brands. With over 500 brands worldwide. Retrieved March 20. perfumes. Indeed. LUSH Fresh Handmade Cosmetics. Would The Body Shop remain the same ethics-centered company that it had been since its inauguration under a new conglomerate? Would it be tainted or irreparably damaged through this merging of glamour and ethics? To partially solve these conflicts.

For example. Inc.htm 12 Wikimedia Foundation. supermarkets. A large part of the marketing appeal of L’Oreal products is the spokeswomen that sell the products. L’Oreal half a year report. Retrieved on March 25. April 4). Defend Human Rights. perfumeries. L’Oreal’s spokeswomen are well known celebrities that exemplify the meaning of “class” such as Vanessa Williams. from http://yahoo. The Body Shop prides itself on producing animal testing free vegetable based products. The Body Shop maintains that they are 100% vegetarian. 2008. hair.(2008. from www. face.businessweek. L’Oreal acquired Soft Sheen. In 2005. With very high moral and ethical values. The marketing strategy for The Body Shop has been termed as eco-marketing. Retrieved on March 25. and because there are over 500 L’Oreal brands. and direct mail. the company spent 30. By using this marketing strategy. The company carries a large range of cosmetics for the body.10 L’Oreal has also strived to diversify its product line to fit different socioeconomic backgrounds and cultures. a U. from http://www. and Protect Our Planet. Most popular for their body butter creams.org/wiki/The_Body_Shop 4 . Support Community Trade.5% of its sales on advertising and promotions alone9. Retrieved on March 31. The Body Shop. health/beauty outlets.html 11 BusinessWeek (1999 June 28). China. To this effect.000 stores in over 50 countries and is the second largest cosmetics franchise in the world.wikipedia. The company has created a niche in the cosmetics industry and has managed to sell their specialty products through promoting to environmentally and socially responsible consumers. recent L’Oreal commercials have featured Aishwarya Rai. L’Oreal has been able to penetrate the cosmetics industry of the United States. Europe. Activate Self Esteem. Retrieved April .com/biography/M-R/Owen-Jones-Lindsay-1946. from http://en. The company has research and development centres in nearly every major market to ensure that the company is selling the cosmetic product that will appeal to the demographics of the population11. 2008. L’Oreal established a research and development centre to study African hair types. The spokeswomen also change depending on which geographical market and/or cultural segment the company is targeting. When entering into new markets. to market their products in sub-Saharan Africa. For example. 2008.L’Oreal.com 10 Business Biographies (2007). Japan. product-line diversification. and Jennifer Lopez.quality and appeal of the drug-store brands. Launching ad campaigns such as the Ruby 9 L'Oreal (2005). The Body Shop has tried to maintain a “squeaky clean” image with marketing campaign slogans such as “Against Animal Testing.com/1999/99_26/b3635016. This gave the company the ability to market the many different perceptions of beauty around the world. L’Oreal has become very successful in winning the hearts of consumers in China and Japan. L'Oreal: The Beauty of Global Branding (int'l edition). Lindsay Owen-Jones 1946-. 2008. L’Oreal chose to use her in their North American campaigns to target the large and increasing Asian population in North America in order to increase product appeal to this segment. instead of penetrating the market from ground-up. With the exception of still using beeswax. and the Russian Federation. and customer savvy. By increasing their presence through using global marketing. the leader from whom the high values and “pushing-the-limits” marketing campaigns were created. The appeal of The Body Shop comes from its founder Dame Anita Roddick. The company’s product distribution strategy globally encompasses being anywhere where beauty and cosmetic products are in demand. the company is known for buying smaller well established cosmetic companies.”12 The Body Shop has over 2. L’Oreal changes their product line and marketing approach to fit the look of L’Oreal and reintroduces the product lines into the new market for instant success2. a famous Bollywood actress in India. pharmacies.S.referenceforbusiness. their distribution channels include hair salons. Like their in-store displays. Cybill Shepherd. The price difference between L'Oreal and its nearest competitors is actually either nonexistent or too small to deter consumers from paying extra for haircolour products that they can rely on for quality. and home. line of hair-care products aimed at African-American women with the ultimate goal of being able to use this brand to expand their product line in Africa. For example.

Vol. T. The company created alliances with organizations such as Greenpeace and most recently with Friends of the Earth and the World Wildlife Foundation. The contrasts in terms of profit margins of the two companies are: The Body Shop £18 million in profits and L'Oreal £1.18 to £2.reuters. In early June 2001. which was certainly not appreciated by The Body Shop owners.. It accepted an offer of £3. The Body Shop heavily relies on emotional and relationship marketing to attract and retain their customers through appealing to the ability of everyone being able to do the right thing for society and for the environment13. During March 2006. Omnilife. The Body Shop and the Role of Design in Retail Branding. from http://stocks.00 a share from the French firm . The concept of CT was that communities in need that provided The Body Shop with natural ingredients or handicrafts like wooden foot massagers from Nepal would be able to trade their services for a fair price to The Body Shop.” set The Body Shop apart from any other cosmetics company in the world whose idea of beauty was based on selling the looks of celebrities and super models. from http://www. March 17). which runs the health and beauty chain. This is the only way that The Body Shop trades with all of their suppliers worldwide in over 24 different countries.co. In 2006 alone. 14 The Independent (2006.us. Analysts suggested that L'Oréal may have had to pay up to £650m for The Body Shop if it proceeded with a bid. L'Oreal & The Body Shop stocks. Stone.independent. Financial Portfolios15 16 17 The Body Shop International. from http://www. 2008. valuing the 18% stake held by Dame Anita and her husband worth more than £100m. the company that gave the world banana shampoo announced a fall in profits of up to 15% in January 2000. 2008.3 million takeover bid by L'Oreal.uk/news/business/news/loreal-buys-body-shop-for-pound652m-470244. for £350m. Received April 5. By 2008.7. Retrieved April 4.185 to £96. LUSH. The company was also the first to create a program called Community Trade (CT). valuing the company at £570m.a large premium on its closing price of £2. The Body Shop shares fell £0. The Body Shop was again under negotiations for a buyout by a Mexican company.4m. Despite making a remarkable recovery from its disastrous performance in 1999. then offered a cheeky bid of £175m.independent.loreal-finance.co.com/stocks/balanceSheet. 2006). 2008. During May 2001. Anita and Gordon Roddick made £130 million from the sale.68(34. D. The Body Shop shares jumped £0.com/eng/regulatedinformation 17 Reuters (2008). when profits fell from £38m to £3. L'Oreal Regulated Information. The French firm said The Body Shop would enhance its business because of its 13 Kent. International Journal of Retail and Distribution Management.65 on the news. The Body Shop shares increased from £0. The Body Shop hopes to have 65% of the company’s products attained through CT. 531-543. The Body Shop agreed to a £652. has endured a rocky ride since Dame Anita Roddick inspired its rapid expansion in the eighties and nineties. valuing the business at £240m. (2007).html 15 The Independent.17 to £1.24 on the news. during March 2001. Received March 30. February 2006 was the beginning of takeover bid discussions with L'Oreal and The Body Shop. valuing the company at just £201m. 35 No. the company spent $12 million in purchasing ingredients through CT14. L'Oreal buys Body Shop for£652m. Received April 5. from http://www. pp.1 billion in profits.campaign where an obese version of a Barbie doll was shown with the tag line “There are 3 billion women in the world and only 8 look like supermodels.2% premium over the share price on February 21. The Body Shop issued profit warnings which stated that its profits would decrease by half compared to the last year due to management mistakes and launching too many new products and discontinuing its popular product lines.asp 5 .uk 16 L'Oreal (2008). Later during the month when it was announced that the takeover talks for the potential buyout has ended. 2008.

the policies which brought this comfort to the workers of The Body Shop came not from ease of mind as a result of the company’s commitment to diversity but more from their adamant and active protection of the environment and animal rights. Della (2003.18 This is a result which promises to bode well for L’Oreal since they seem to be ever changing. Another action that L’Oreal took to assist in diversification of employees was to actively pursue employees through universities. automatically enrol and are assigned a mentor who stays in this role for the first year of employment. though arduous. They were a company with great success and a low turnover rate because of a satisfied employee base. Over the next fortnight. who explains how the FIT programme works. HR ensures that log-in details. On their first day. 2008. Having partnerships with 129 universities in 46 countries19 allows for an 18 Paton. no matter their background. and telephones are all in place. the new arrival meets HR and their line manager. Retrieved March 26. what the objectives and values of the company were. The Body Shop had an advantageous relationship with their employees as well. as well as a product 'goodie' bag. age. March). they are shown to their desk. not only in their employee and clientele base but also in their business size and structure. At least five days before they arrive. and that there is a desk and security pass ready. p. L’Oreal was a company which prided itself on their practices when it came to employee assistance and diversity. 6 . Within the first month. e-mails. Positive feedback to the FIT program was found in a survey of 30 employees who began working during the acquisition. they have a review with HR."sizeable and complimentary brand" across 54 countries. they had maintained that animal testing of makeup had ended in 1989 and has remained nonexistent since. New starters. Nic (2007. would now need to develop systems which would ensure that all of the workers felt secure in the new arrangements. (Document ID: 405269181). The Analysis of the Acquisition Human Resources Prior to obtaining The Body Shop. Personnel Today. This formal induction programme involves six stages and occurs over the first month of employment. To deal with these issues. which delivered revenues of £419 million last year. or other potentially discriminatory factor. Recruiting and keeping creative and diverse minds is a challenge that they should be able to minimize substantially with continued us of FIT. Retrieved April 4. or people who have transferred in from another country or division. and where they fit into the bigger picture. health and safety or product planning. similar to L’Oreal’s. The company’s first major focus. This process. 2008. which is followed up at regular intervals. Financial Times. from ABI/INFORM Global database. 19 Bradshaw. introduced to the team and then they spend time with their HR manager. has proven to be beneficial to this company who constantly had new employees joining the team and had just increased the amount and diversity of each new member. There is a team lunch and they are assigned a mentor. was for their employees and their comfort level within the company. Because they're worth it: hiring the L'Oreal way: [LONDON 1ST EDITION]. The results reported that more than 90% of the employees felt that they had a better understanding of what they were supposed to be doing. However. L’Oreal launched the FIT programme in 2005. September 15). These two companies. who were so similar on their views towards employee relations but who looked at some key social issues with differing intensity. the new recruit meets other staff from all over the company . experience. but for slightly different reasons. Though they were not the most socially conscious of all beauty product companies. Because they're worth it. who stays in this role for at least the first year. (Document ID: 1247630991). 12.36-37. from ABI/INFORM Global database.whether they are from marketing.

thus providing help to L’Oreal as they attempt to bring together a wide spread of talented employees. L’Oreal appointed a Director of Global Values. payroll and pension management outsourcing. For the future. Retrieved March 24. which tracks new employees over their first two years with the company .22 23 Ethics and Social Responsibility The precedent is set to go above and beyond social obligations and mere competitive pressures to push what is considered the norm in the cosmetics industry. from http://www. product development. March). 2008. Retrieved April 7. (Document ID: 1247630991).pdf 7 . and the e-commerce business across the four regions – 1) the UK and the Republic of Ireland.com/NR/rdonlyres/A675B0BD-0195-4FF2-BD6C1B5C351108ED/0/CLIENT81152203562022_lg2006AnnualReport. 3) Europe the Middle East and Africa. This was done to ensure that The Body Shop’s values were not compromised and that the employees/customers feelings of comfort with and loyalty to the brand were maintained. L'Oréal falls under the Social Responsibility compliance set forth by Keith Davis. Approximately 1. the at-home business.extremely broad base for selection and recruitment. Oliver. Therefore. marketing and HR. 2008.cfm?fuseaction=archivedetails&newsuid=8b2ea266-916a-4f4e-9081-bd52a0ea625f 22 Wagg.21 This will be used to help bridge any gaps which may arise when it comes to positions on values. the direct-selling business. 2) the Americas. and 4) Asia-Pacific. by the name of Jan Buckingham. L’Oreal has put in place a new program in addition to FIT. 2008.hrmagazine. Retrieved April 4. supply chain. This is conducive with the practices of employees at The Body Shop.24 by ensuring its products are not tested on animals since 1989. as well as round-tables with more experienced staff to discuss culture and ways of working. Because they're worth it. such as legal conformity.thebodyshopinternational.000 graduates and more than 1. HR Magazine 01/05/06. and software solutions). 21 Farquharson.50020 intern students benefit from this mutually beneficial relationship each year.com/stories/ccbl.ethical-jobs. Instead. but each of the main competitors go much further.php 23 The Body Shop International plc. responsible for running the stores. from http://www. Corporate Citizenship Briefing. and the four regional managing directors.36-37. personalized training and mentoring programs. Nic (2007. the environment has been so amiable that unionization has not been factor. for the cosmetics industry are sufficiently fulfilled. The Body Shop's 2006 Annual Report. In the spotlight: The Body Shop. Retrieved March 25. Matt.co. she sits on The Body Shop’s Executive Management Board and reports back to the CEO of L'Oreal. One step that The Body Shop has taken to deal with the public relations issues regarding socio conscious responsibilities is their implementation of an integrated HR and payroll solution. from ABI/INFORM Global database. Employees fill in time sheets and holiday or training request forms online which are then managed entirely by Northgate HR (a leading provider of HR.uk/news/index. On this board is a wide array of members including the team who are each responsible for maintaining corporate social responsibility and the values of The Body Shop. As a result of the supportive and positive relationship that L’Oreal works so hard to maintain with its employees. The members include: the directors of the global functions of finance. to oversee all related issues. issue 87 April/May 2006. 2008. social obligations. Peter Saunders. since they too have enjoyed a stable relationship with their employer and thus have gone without unions. This electronic paper saving system will definitely serve to support the company’s eco-friendly image and will help to smooth over some of the rough terrain The Body Shop has faced from political environmental groups since the acquisition. Personnel Today. Interview: Liaison Dangereuse. Since their values are the fabric of business. from http://www. it cultivates nature through genetic 20 Paton. which includes a 'self-service' module that reduces paper waste.covering selling products in the field.

These traditions focus on a hierarchy with humans always at the top using the resources of the earth to their advantage.27 It has received the International Standard of Compassion . encouraging suppliers to take all animal testing out of any aspect of the companies they deal with. both human and monetary. Marketing Analysis In 2006. & Post. The company follows a cooperative traditiontype ethical standard.html 8 .au/~pdwgrey/web/res/sylvan. from www. commitment.the only cosmetics company in Canada to receive such recognition by the animal protection movement.com/ 27 The Body Shop International plc.uq. Richard (1973). These are to support community trade.com/Values+and+Campaigns/ 28 Sylvan. confidently blazing the path forward through their strong environmental ethics. L’Oreal’s marketing scheme has been based on selling external beauty while The Body Shop has focused its campaigns on appealing to the internal beauty of 24 Frederick.forwomeninscience. to be against animal testing.. UNESCO and L'Oréal united to form the “For Women in Science” Award25 beginning in 1998. Public Policy. Ethics (10th ed. The Body Shop and LUSH are both in this Social Responsiveness category. there has been some doubt in the minds of The Body Shop consumers that this acquisition will precede smoothly. One of its competitors. The Body Shop has a stewardship philosophy: they are here to manage the earth and care for it.”28 that the indirect traditional ethical theories. The Body Shop's Values and Campaigns. Retrieved March 20.neweth. L’Oreal purchased The Body Shop with the idea of enhancing the French company’s luxury product line and increasing the presence of The Body Shop in the mass market and prestige sector. Both feel a sense of corporate social responsibility to improve society through their research. William C. Business and Society: Corporate Strategy. and diversity. A few companies push themselves to overcome huge obstacles by standing firm in their beliefs above and beyond others to lead the world through their example. L'Oréal uses a cooperative tradition structure by using nature for their own gains. For Women in Science Program. our existing philosophies on environmentalism. Richard Sylvan suggested in his 1973 paper. Although these cosmetic companies are exceeding standards in our present societies and cultures (by not following a western liberalism philosophy of basic human chauvinism). are not enough. expertise.26 The Body Shop draws upon its five core values to shape the world it shares. Retrieved April 7. defend human rights. 2008. 2008. Keith (1991). L'Occitane.modification by testing its products on cells bred in a lab.com 26 LUSH (2008). . 1990. an Environmental Ethic. from http://www. value and belief systems. it is still not enough. James E. 25 L'Oreal (2008).edu. It highlights women in science from around the world.thebodyshopinternational. and capital. Although L’Oreal did state that The Body Shop would retain its brand and would operate independently from the parent company. from http://www. recognizing their research. and to protect our planet. LUSH Fresh Handmade Cosmetics. Mcgraw-Hill College:Mcgraw-Hill Series in Management. an Environmental Ethic? Retrieved March 20. Is There a Need for a New. activate self esteem. “Is There a Need For a New.). This is where the world is headed in the years to come – a sense of community with the earth which far surpasses the current philosophies. as well as taking on their governmental organizations. Retrieved March 2. is also characteristic of the industry by following the prevailing norms and expectations of society. from http://lush. & Davis. Ingredients must have a guarantee they have not been tested on animals after the cut-off date of December 31st. 2008. Our capitalist society can go many steps further but it would require a massive economic shift to putting the earth's needs on the same level as our own. for example their cellular testing of cosmetics. Some of the uncertainty with consumers comes from the night and day difference in the marketing strategies of these two companies. LUSH pushes further into the “Against Animal Testing” category. 2008.

and gross profit amounted to € 11. Although L’Oreal has continued to state that they stopped testing on animals since 1989. L'Oreal's Body Shop acquisition meets with mixed reaction.com/news/ng. and the continuing industrial streamlining programmes (see Appendix 3. The sales of the L'Oréal group. from http://www. Retrieved April 1. It noted that without The Body Shop.221 million. from http://www.asp?id=66584-l-oreal-the-body-shop-takeover-ethical 30 L'Oreal (2006 March). L’Oreal’s operating items with The Body Shop can be summed up as follows: sales reached € 15.3%.3 million.39 ahead of the news.790 million. made a positive contribution to the growth of both sales and earnings in the second half. only time will tell the impact of this change30. which amounted to €3.pdf 9 . question the success of this acquisition. 2008.com (2006.2 %. After the year end release of annual reports (2007). implying a potential upside for the second half (see Appendix 3 – Table 3).2% since the start of the year.91. compared with 70. The Body Shop amounted to +5. First half 2007 earnings per share rose to €1. up by +8. as well as the ability of The Body Shop to expand further globally and increase overall sales for L’Oreal. this practice of a lack of ethical and social values is in direct contrast to those of The Body Shop29.76 a year earlier and compared with 1. outperforming the Dow Jones Stock personal and household goods index by 7. amounted to €17. Table 2). Mar 22). Table 1).4 million. The consolidation of The Body Shop made a positive contribution to L’Oreal’s main operating items. In the second half of 2006.7%. There is no doubt that this acquisition will provide The Body Shop access to L’Oreal’s research and development centres to improve the quality and appeal of its products worldwide. The Body Shop recorded an operating profit of €1. up from €1.4% higher at €84. the acquisition of The Body Shop. Table2). The earnings per share for L’Oreal grew strongly at +13.6 %. consolidated since July 1st 2006.36 million.7% sales growth.1% in 2005. Acquisition of The Body Shop by L'Oreal. its operating margin would have risen to 17.0%. retail sales for the company increased by +7. Financial Analysis During 2007. L'Oreal attributed the decline to the seasonality of its Body Shop business. However.9%.4 %.1%. The profitability of The Body Shop is not comparable year-on-year due to the business becoming consolidated in the second half of 2006. With a comparable store base. at December 31st 2007. up by 10. The structure of the profit and loss account of The Body Shop in the second half has a profile which is quite different from that of the L'Oréal group (see Appendix 3.lorealshareholder. Gross profit for L’Oreal prior to the acquisition increased very significantly and represents 71.3% of sales.063 billion. There is a potential for The Body Shop to lose it’s customers on the basis of being bought out to a company that contradicts all of the ethical and moral values The Body Shop holds high. The profitability of each cosmetic Division grew substantially in 2007 (see Appendix 3. This improvement mainly reflects an enhanced value of the product mix. It will also help to increase L’Oreal’s image as far as social responsibility and awareness go but it may not do the same for The Body Shop.cosmeticsdesign. the increase in sales amounted to +3. The shares have risen 11. In the first half of 2007. Finance costs increased from €64 million to € 116 million in 2006 then to € 174 million in 2007 for 29 Cosmeticsdesign.women and people. its operating profit amounted to €58. Furthermore. Another concern with respect to research and development is the fact that there have been claims that the French company continues to test on animals.com/_docs/fichiers_contenu/0000000154/the_london_meeting_170306.94. The concept of a strongly ethical company fitting into the portfolio of a cosmetic company that has not shown the same level of ethical integrity is one that is making many. Retrieved April 1. 2008. acquired in mid-2006. an increase of 8. but each year almost all of the profit is made in the second half. L'Oreal shares closed 1.

org/english/index. There was exceptional growth in net profit after minority interests: +28.9% compared to the dividend paid in 2007. and concerns with other companies in order to better understand the underlying problems. rising interest rates in the United States and Europe. up by some 13%. the European Union has banned the marketing of cosmetics that have been tested on animals. L'Oreal . 2008 should approve a dividend of €1. 2007 amounted to € 2. Compromise Agreed on Major EU Legislation. as most companies are following suit with animal cruelty-free products becoming the norm. pushing their core values and extending these to all L'Oréal-owned companies. Observing the fundamental and technical analysis of L'Oreal’s stock. As one of the pioneers of eco-friendly cosmetics. and by extension.720 million. The net debt accounted for on December 31st. (see Appendix 3. 2008. from http://www. Retrieved March 30.L’Oreal. Presently. Cash flow at December 31st 2007 amounted to € 2. For the shareholders’ interest and stake the Board of Directors of L’Oreal has decided to propose that the Annual General Meeting of Shareholders of April 22nd. current issues. and possible solutions to advance the industry and focus it into the most sustainable. which was € 1 billion lower than that on December 31st. China also contains a huge market for cosmetics.373 million. dilemmas. In contrast. The company retains its earnings to a certain percentage so that it can operate efficiently up to its growth prospects. which is why The Body Shop does not market there. and the continuation of their share buyback programme.5% compared to 4. 2006 which shows a positive impact on the business. they should be transparent with their knowledge. it is evident that the share price will boost up alongside the company’s performance. and equity figure tells how efficient and appreciable the management is with its finances and operations.html 10 . This reflects the cost of financing acquisitions. The return on assets. Table 3). The Body Shop accounts for a very small percentage of the company’s financial contribution. while the dividend payout has been steady.as the No. It is more likely to grow in the future and has contributed positively towards L’Oreal after its acquisition. The Body Shop should not try to imbibe the marketing strategies with respect to advertising and promotions that L’Oreal uses as these are very far from the core values of The Body Shop. Additionally.9% in 2007. (see Appendix 4 – L'Oreal's Recent Share Price) Though the share price profile has been choppy. it is still upward sloping.38 per share. This will also apply to those produced outside of the European Union. The Body Shop can continue to retain the respect of its customers regardless of the acquisition.7% in 2006. representing an increase of +16. Comparing its current ratios and the share price to the industry average and present market. Working capital requirement remained well under control at € 76 million. By continuing on with their socially minded marketing promotions and strategy.eceae.1 company in its industry – looks profitable in its business in future keeping up with the market. Capital expenditure at € 776 million decreased slightly as a percentage of sales to 4. Recommendations The Body Shop needs to continue to be trend setters. The focus on “no animal testing” should not figure as prominently in their advertising as previously. keeping the investors attracted. in March 2009. The performance of L'Oreal in the last few years has been evidently positive. leading the way to sustainable development. other conglomerates. With L'Oréal backing them. The growth rates back up its future performance. eco-friendly direction. The Body Shop needs to challenge these outdated laws by offering alternatives.31 China is a nation which requires animal testing on their products. investment. this cosmetics market can 31 European Coalition to End Animal Experiments. L'Oreal will continue to grow through deliberate and continuous acquisitions and performance.

Pushing the bar to become the leaders will enrich these communities. These added training methods also lessen the chances of unions entering. & Davis. It can use its influence to improve the human rights within these communities as a whole. What is most important in terms of maintaining the comfortable and confident employee relationships enjoyed in the past is ensuring that the introduction and training programs remain as extensive. The Body Shop should go back to its roots by embracing more Greenpeace. the former influenced by the latter in most occasions.33 have the expertise and thus the obligation to heal any environmental and ethical impacts it possibly can – even those which were not caused by themselves. . It is also of great importance to both companies to continue to assist each employee to really amalgamate themselves with all of the aspects. Make the world aware of The Foundation through its acts of environmental rights and activism at the grassroots levels. changing and challenging current practices. 32 33 The Body Shop Foundation. Business and Society: Corporate Strategy. from thebodyshopfoundation. These company focuses may be motivated by various reasons but the importance of them is equally important to images in both employees and the public eye. As such.. increasing costs and complexity. Further expound upon how The Body Shop helps those communities it supports through its Community Trading. Public Policy. Continue to support their company. L'Oréal should absorb some of The Body Shop’s core values as their own. but needs to be more detailed and clearer as well as spread out amongst every aspect of the company. people. Mcgraw-Hill College:Mcgraw-Hill Series in Management. leading by example a globally sustainable and eco-ethical business. environmental and animal rights activities respectively. climate change. Using The Body Shop as their prime source. and helpful as they have been in past years. not only the people directly influenced by them. The Body Shop must ensure that the CT program continues as this is a large part of their commitment to communities in need. Additionally.org Frederick. they should carry their campaigning to other countries where animals are still used for human testing. Keith (1991). The Body Shop Foundation. the carbon neutrality of their stores is a great step. imperative to continued employee loyalty is that L’Oreal and The Body Shop each continue to focus on and pursue their independent company agendas. 11 . It will also emphasize the fact that the company’s goals and missions have not changed which is very important to keeping their current customer base and to attracting new environmentally and socially minded customers.32 in innovative ways to influence ecofriendliness and small projects which are otherwise ignored and unfunded. As such a huge company. Ethics (10th ed. The Foundation.). James E. L’Oreal needs to support The Body Shop to make certain that this program grows within the body shop and that they fulfill their goal of CT purchases for 2008. two aspects of business which are of great importance to any company but appear to be of greater importance to these cosmetic distributors. This in itself would have a huge impact upon the world. Use of programs such as FIT will continue to act as effective assistance and it would serve the companies well to continue practices such as this to help out new and transfer employment when they join up with either the L’Oreal or Body Shop team. 2008. This suggestion effectively moves L'Oréal even further toward social responsiveness. After conquering China's laws. & Post. World Wildlife Foundation and Friends of the Earth campaigns. as Keith Davis suggests. L'Oréal and all companies under its wings. These will help them focus even more on their environmental issues. Retrieved March 20. or implementing more safe drinking water campaigns. Finally.be animal-friendly and quite lucrative. it is clear that these concentrations on separate but equally important issues are pivotal to the success of these companies in sales and in minimizing employee turnover rates. Introduction to the company is not enough. welcoming. such as saving the rain forests. they have the ability to influence the world. but also set an example for others to follow. diversity. and operations of the organization. reforestation. William C.

Conclusions Despite trepidations to the contrary. both companies have the ability to make an impact on the cosmetics industry and on the world. shareholders. the acquisition of The Body Shop by L'Oreal appears to have potential to be advantageous to both parties. this transaction has caused stock prices to rise. Working together. In its new. The Body Shop should continue to operate within a ring-fenced division to retain its raison d'etre while continuing to embrace and enjoy a new world level by being part of the L'Oreal Group. Financially. highly political position. 12 . and board of L’Oreal of the paramount importance of eco-friendly products and promotions. The Body Shop has the opportunity to influence the researchers.

nor will we commission others to do so on our behalf. whilst making fun. 2008. We aim to ensure that human and civil rights. or physical coercion of any kind. women and disadvantaged peoples who are socially and economically marginalized. To Meaningfully contribute to local. ingredients. suppliers and shareholders. human and civil rights. Retrieved April 2. We will not test ingredients or products on animals. creed. We will institute appropriate monitoring. healthy working environment. We are against animal testing in the cosmetics and toiletries industry. Our trading principles reflect our core values. national and international communities in which we trade. Our Trading Charter We aim to achieve commercial success by meeting our customers' needs through the provision of highquality. sex or sexual orientation.will be commercially viable. from http://www.Appendix 1 – The Body Shop's Mission Statement and Trading Charter34 Our Reason for Being To dedicate our business to the pursuit of social and environmental change. We will establish a framework based on this declaration to include criteria for workers' rights embracing a safe. To Passionately campaign for the protection of the environment.with customers. mutually beneficial and based on trust and respect. franchisees and suppliers . fair wages. passion and care part of our daily lives. We will promote animal protection throughout our business activities. honesty. To Courageously ensure that our business is ecologically sustainable: meeting the needs of the present without compromising the future.thebodyshop. Our trading relationships of every kind . good-value products with exceptional service and relevant information which enables customers to make informed and responsible choices. auditing and disclosure mechanisms to ensure our accountability and demonstrate our compliance with these principles. fairness and respect. To Tirelessly work to narrow the gap between principle and practice. We will support long-term.ca/body_main. We will pay special attention to those minority groups. 34 The Body Shop Canada (2008). The Body Shop's Mission Statement and Trading Charter. as set out in the Universal Declaration of Human Rights. by adopting a code of conduct which ensures care. no discrimination on the basis of race. We will use our purchasing power to stop suppliers animal testing.asp?Lang=EN&CName=ProfitsMain 13 . franchisees. are respected throughout our business activities. To Creatively balance the financial and human needs of our stakeholders: employees. Our purchasing will be based on a system of screening and investigation of the ecological credentials of our finished products. and against animal testing within the cosmetics and toiletries industry. sustainable relationships with communities in need. We will use environmentally-sustainable resources wherever technically and economically viable. packaging and suppliers. customers.

Company Overview.Appendix 2: L'Oreal's Mission Statement and Company Values35 Mission Statement The right to be beautiful day after day. Building on our unrivalled experience and expertise. Leading Innovation In Beauty Research is as much a part of our business as marketing. 35 L'Oreal (2008).is in itself a new beginning. Our goal is to serve the beauty and well-being of our consumers in all cultures throughout the world. 2008. fundamental research is a specific focus of investment that drives creativity and contributes to developing the cosmetics of tomorrow. Our staff members come from many different backgrounds and work together to offer a full range of products through varied distribution channels. Valuing Individual Talent Just as we are dedicated to enhancing the well-being of our consumers.com/_en/_ww/index.each step forward . We are determined to continue enhancing our brand portfolio with innovative products and to meet the most demanding standards of quality and product safety at all times.aspx 14 .loreal. Company Values Striving For Excellence Perfection is our goal. A Passion For Adventure Our expertise drives our passion for new discoveries and innovation in cosmetics. from http://www. Retrieved April 6. Enrichment Through Diversity Understanding and valuing each individual is an essential part of our corporate culture. sensitivity to consumer needs is as important as scientific rigor. and know-how and expertise are as essential as intuition. Each new achievement . we also make it a priority to ensure that each employee has the opportunity to develop his or her potential through personal and professional growth.

com/eng/regulatedinformation 15 .12.4 % 30.3% .009 2.4.153 2.9 % 70.7 % 71.1 % 20.2% C C/A 31. general and administrative expenses Operating profit before Foreign exchange gains and losses Foreign exchange gains and losses Operating profit 31.569 28.5% €M Sales Costs of sales Gross profit Research and development expenses Advertising and promotion expenses Selling.313 .1 % 3.1% + 12.4.4.718 .47 2.185 .533 .2 % .7 % 20.4.266 As % of sales 100 % 29.1% 36 L'Oreal (2008).56 0.6% 2.Appendix 3 Financial Information for L’Oreal and The Body Shop36 Table 1: Operating items of L’Oréal.531 .355 .367 .3.414 10.3.3% 2.3% 16.4% .loreal-finance.783 30.2006 with As % of The Body Shop 2nd Sales trend sales half 15.1 % + 10.9% B 31.3. with and without The Body Shop A €M Sales Costs of sales Gross profit Research and development expenses Advertising and promotion expenses Selling.4.12.12.221 71. general and administrative expenses Operating profit before Foreign exchange gains and losses Foreign exchange gains and losses Operating profit 0. 2008. L'Oreal Regulated Information.483 16.3 % .941 .55 2.533 3. from http://www.7 % . Received April 5.4% 15.2006 excluding The Body Shop 15.596 16.5 % 16.496 .4 % .3 % 3.7 % 15.4.2005 14.541 0.539 As % of sales 100 % 28.347 10.309 21.9 % 11. in 2006.5 % 30.0 % + 12.790 100 % + 8.

421 776 221 2.1 % 13. i. (2) (2) Group share.180 -479 2.0 % 17.860 . 50% 16 .6 % (1) Non-allocated = Central group expenses.Table 2: Operating profit by branch and division (2007) €M 2006 By operational division Professional Products Consumer Products Luxury Products Active Cosmetics Cosmetics divisions total Non-allocated(1) Cosmetics branch total The Body Shop Dermatology branch(2) Group 443 1. As % of total sales.6 % 19.437 2.827 % of sales 2007 21.5 % 20.4 % 17.5 % 20.9 % 16.0 % 3.8 % 18.e.582 844 256 3.3 % 16.6 % 19.423 58 59 2.9 % 16.701 64 62 2.1 % 2.1 % 16.0 % 8. stock option expenses and miscellaneous items.541 % of sales 2006 20.0 % 20.1 % €M 2007 502 1. fundamental research expenses.1 % 21.0 % 19.

36 1639 2.8 % + 11.827 .471 17 .541 .2 % +13.Table 3: Consolidated Profit and Loss In €m Operating profit Financial expense and income Sanofi-Aventis dividends Share in net profit (loss) of equity affiliates Pre-tax profit excluding non-recurrent items Income tax excluding non-recurrent items Minority interests Net profit excluding non-recurrent items after minority interests (1) EPS (2) (in euros) Net profit after minority interests Diluted net profit per share (group share) (€) Diluted average number of shares 2005 2266 -64 172 -1 2370 -730 -1 1639 2006 2.9 % +30.656 3.723.120 218 -1 2.896 .833 2007 2.220 606.6 2.638 .35 4.803 -1 1.38 630892470 615.061 2.98 3.3 % +9.0 % +28.856 -1 2.039 Change:2006-07 +11.9% 2.182 250 2.012.

34 37 Reuters (2008). Retrieved April 4.5 Yr.39 RO I .97 52-Week Low: €74.58 BETA: 1.32 Dividend 5 Year Growth Rate: 16.asp 18 .reuters. Growth Rate 18. 2008.74 ROA . 11.com/stocks/balanceSheet.us.00 EPS .PA (Paris) Financial Statistics: Current share price as of Apr-4-2008: € 81.5 Yr.5 Yr.83 R OE . Avg.47 52-Week High: €99. Avg.61 Payout Ratio (TTM) 31. 20. Avg.25 P/E Ratio: 18. L'Oreal & The Body Shop stocks. 15.Appendix 4: L'Oreal's Recent Share Price37 Recent Share Price Trend: L'Oreal SA OREP.5 Yr. from http://stocks.

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