From Tokyo, Japan and New Plymouth, New Zealand – this is Down to Business English. With your hosts Skip Montreux and Samantha Vega. I learned something really interesting the other day, Skip. Oh, you did? What was that, Samantha? I assume you are familiar with the Michelin 3-star rating system for restaurants?. Of course. I live in Tokyo. Tokyo has more Michelin-starred restaurants than any other city in the world. I forgot about that. That’s been the case for quite some time I think.
For at least a decade. And you know that this rating scheme comes from the French tire maker Michelin, and dates to the early days of the automobile. Mm hm. Yes, I was aware of that. At the beginning of the 20th century, in 1900 I think, just as cars, or automobiles were starting to be mass produced, the Michelin brothers published a restaurant guide in France to encourage people to drive cars, which would help increase sales of the Michelin tires. Very good Skip — that is completely correct.
But do you know what each star signifies, or represents? Hm. I have always been under the impression that one star meant good, two stars very good, and three stars very, very, very good. No? Well this is what I discovered recently. The rating is all based on whether or not the restaurant is worth driving your car to. Really? Yes. One star means the restaurant is good in its category. Two stars indicates the restaurant has excellent cooking and is well worth a detour for.
And three stars denote exceptional cuisine that is worth making a special journey for. Hm. All related to whether or not the food justifies the drive. Very clever. I thought so. You know, I always thought it was quite brilliant of Michelin TIre to introduce that restaurant guide. A great way to increase the demand for tires by encouraging people to go for a drive. Very original thinking on their part and today Michelin is the second largest tire company in the world.
Are they, I didn’t know that. They are. Is this our topic today? The history of Michelin Tire? No actually, it isn’t. Today I want to report on a company who, like Michelin, was very original in their approach to business when they first opened their doors. But unlike Michelin, they have fallen on hard times today. And which company would this be? The Body Shop. Oh, the skin care and cosmetic company? And perfume. They are not performing well these days? Not at all.
In fact they have gone into bankruptcy in North America and entered into administration in the UK. Hundreds of Body Shop stores are being shut down and thousands of employees have lost their jobs. That is awful. It is. And that’s the focus of my report today. Do you want to get into it? I most certainly do. Then let’s do it. Let’s get D2B … Down to Business with Beauty in Distress. What went wrong at The Body Shop?
You know Samantha, there was a time in my life that The Body Shop was my go to place for buying presents for girlfriends. Your ‘go to’ place? Yeah. It was always easy to buy some kind of body lotion or perfume there. I could never go wrong. I would always find something nice. Well, as nice as Body Shop products are, I think that your anecdote is more of a testament to what a lazy present-buyer you are. Okay, true. But it did make present-buying painless.
So, now you say the Body Shop has declared bankruptcy. They have, and it is quite the fall from grace. The Body Shop was one of the first, if not the first business model that embraced the concept of brand activism. Brand activism. Where a company takes a stand on a social or environmental issue and promotes it through their products? That’s a good definition of brand activism.
In fact The Body Shop’s official brand purpose is “We exist to fight for a fairer, more beautiful world … We drive purpose as well as profit” Hmm. So profit is secondary to the issues they are fighting for. Mm, supposedly. Well, why don’t you take us through a brief history of the Body Shop. A brief history? That is easier said than done. Oh, it is a complicated story? I don’t know if ‘complicated’ is the right word. But it is certainly eventful. Well just give us the pertinent information.
Sure. The Body Shop was founded in 1976 by Anita Roddick and her husband Gordon, in Brighton in the United Kingdom. Oh, it was co-founded by a husband and wife team. Yes, although the original product line and vision of the company mainly came from Anita. In other words the whole idea of creating a line of ethically sourced skin and haircare products was her brainchild. Actually no, it wasn’t. She copied the entire idea from a store she had once visited in Berkley, California in the early 1970s.
You’re kidding. I’m not kidding. Everything from the name to the logo to the packaging to the color scheme of the shops. Even the concept of selling products in refillable bottles — she borrowed all of those ideas from this store in the US. How did she manage to get away with that? Let’s just say that this was the 1970s, long before the internet. Ah, the US Body Shop wasn’t even aware of the UK version. Hm, probably not.
Roddick’s only goal in 1976 was just to run a local shop in Brighton that sold products that she liked. She did not intend on creating a sensational, billion dollar brand. But that is what she ended up doing. Yes it is, which is quite amazing as neither she nor her husband knew anything about running a business. No business experience? None. They basically just did what they thought was right and lucked into a very profitable niche market. And that niche market was?
A base of customers who had eco-friendly leanings and wanted to support activist causes. And The Body Shop fit that description? It did. As you already mentioned, their products and packaging used natural ingredients and were not full of chemicals that harmed the environment, like traditional cosmetic products at the time. That ticks the eco-friendly box. Another attraction, and this was major for consumers, was that Body Shop products were not tested on animals.
Remember, this is in the mid 70s and all other cosmetic brands tested their products on animals. Which nicely ticks the activist box. And as The Body Shop grew, the more and more they got involved with other social causes. They even aligned themselves with Greenpeace and Amnesty International. Two very big names in activist circles. So let me ask you Samantha, was all of this just a well thought out marketing strategy, or was the ethos of the company sincerely founded in activism?
Anita Roddick certainly would say it was their ethos. And her motivation for starting and running a business was to make the world a better place. But at the same time, she had a lot of critics. Yeah, I have to say that I’m a bit skeptical too. Maybe if you are just running a small, local shop and your only aim is to put a roof over your head you can have that kind of ethos.
But to expand your business into a global company, I think there is just too much money on the line to not make the business and profitability the focus. And expanding is exactly what the Roddicks did. In less than a decade of opening the original Body Shop in 1976, there were 138 shops operating globally, 87 of them outside of the UK. Mm. That is rapid expansion. It was. Then in 1984, the Roddicks took The Body Shop public and listed the company on the Unlisted Securities Market.
Not the London Stock Exchange? I’m not sure I am even aware of the Unlisted Securities Market. The Unlisted Securities Market was a smaller exchange set up by the London Stock Exchange for companies that were too small for the LSE. But eventually the Body Shop did end up on the London Exchange. So in a little over 10 years the Roddicks went from one small, local shop in Brighton to being multimillionaires. As they were the majority shareholders with 27% of the stock, they sure were.
Nice. But it wasn’t all smooth sailing. Before they could enter the US market they had to deal with the pesky problem of the original Body Shop. Right. The one in California that Anita had stolen all their ideas from. How did they manage to deal with that problem? An old fashioned pay off. They paid the owners of the original Body Shop $3.5 million for the rights to the Body Shop name, logo, and everything else Anita had copied off them. And the California company took that pay off?
After looking at what it would cost them in legal fees to fight the Roddicks, they felt they had no other choice. That seems pretty heavy handed. There is no doubt it raised some eyebrows about the UK Body Shop’s true ethos. And there were other controversies as well. Like what? In 1994, the Business Ethics magazine published an exposé on The Body Shop. It was titled “Shattered Image: Is The Body Shop Too Good to Be True?”.
Among other things it reported that Body Shop products were not as ethical as they claimed. And was that true? Were the products not ethically sourced? Well, The Body Shop did their best to make sure the exposé was not published, so they were worried about something. But eventually it did get published. It did. It was even picked up by the New York Times. The result being Body Shop shares fell 50%.
Wow, so this exposé was indeed damaging to The Body Shop’s reputation and thus their profitability. They did take a big financial hit but eventually the share price recovered. The damage to their reputation however, was more serious and long lasting. The shine was off their activist brand image. And that image took a further hit in 2006 when very suddenly, with very little warning, Anita Roddick, sold The Body Shop to L'Oréal for £650 million. L'Oréal? The world’s largest cosmetic company?
Not only that, but L'Oréal is the exact opposite of the Body Shop in terms of animal testing and environmental practices. Yeah, it is a very traditional corporation. Body Shop customers must not have been very pleased by that development. It was a shock to say the least, The Queen of Green selling out to big old corporate L'Oréal. The Queen of Green? That was how people referred to Anita Roddick.
Okay. So w hat would have possessed the Queen of Green to sell to a company that has virtually the opposite business philosophy? Roddick claimed that she went through with the sale because she thought The Body Shop could be a Trojan Horse inside L'Oréal and influence them to stop testing on animals. Oh yeah. So, how much did she make from the sale? She and her husband pocketed £130 million. Ha hah, I suspect that was a bigger motivator for them.
And did The Body Shop become the Trojan Horse she hoped it would be inside of L'Oréal? Did L'Oréal change their approach to the cosmetics businesses? The bottom line is no. The Body Shop lost their core customer base after L'Oréal took over. According to the market research firm YouGov BrandIndex, customer satisfaction with The Body Shop plummeted by nearly half after the acquisition and it never really improved. Not the direction L'Oréal was hoping to go. Not at all.
After pouring money into more global expansion, and after some ineffective attempts at rebranding, L'Oréal gave up on the Body Shop and sold it to the Brazilian cosmetic company Natura & Co. for £880 million in 2017. So they actually made a profit. They did. But moving forward, Natura struggled with operations and after six years of trying, they resold The Body Shop to the European equities firm Aurelius for £207 million late last year. Wow, a loss of £670 million for Natura. Pretty devastating.
And I’m guessing that with Aurelius being an equities firm, their plan from the beginning would be to restructure the company. Cut the losses and salvage what they could. And that is what happened. As of March 1 of this year, The Body Shop ceased operations in the US, closed a quarter of their stores in Canada, another 75 shops in the UK, and all the Body Shops in Germany, Denmark, Belgium, and Ireland have gone bankrupt. Tragic. How could such a powerful brand end up like this Samantha?
There are several contributing reasons but clearly The Body Shop lost their way. They were just not able to adapt to the changing business landscape. When they first opened, they were on the cutting edge. But as times changed, as their competition increased, as their customers’ tastes evolved, the Body Shop stayed basically the same. In other words they were defeated by complacency. On a basic level, yes. And what does Anita Roddick have to say about all of this?
Unfortunately Skip, Ms. Roddick passed away in 2007 at the young age of 64 of a stroke. Oh no, really. I was not aware of that. 64 is way too young. And she passed just a year after selling to L'Oréal? Yes. One interesting footnote to her death is that when her estate was settled, it came out that she didn’t leave any of her fortune to family or friends. Hm. That is surprising. Where did the money go? She donated her share of the L’Oréal sale — around £50 million — all to charity. Incredible.
I think so. For all the criticism she received over her life for not being sincere about her activist causes, the Queen of Green seems to have gotten the last word. Good for her. And on that note, I think it is time for us to get D2V … Down to Vocabulary. First up on D2V today is the expression to fall on hard times. You can use this phrase to describe a person or a business who is going through a difficult period. Especially if those difficulties are related to money or finances.
That's correct, Skip. In the introduction of our story today, I said that The Body Shop had fallen on hard times. I was saying that The Body Shop was facing serious financial difficulties. And you can apply this expression to anyone, not just a business. Can you give us an example of that? I immediately think of Sam Bankman-Fried, you know the Cryptocurrency King who once was worth billions of dollars but went bankrupt, along with his company FTX back in 2022.
Didn’t he just get sentenced to 25 years in jail for fraud over all of that? Yes, he is in prison right now. He would be an example of someone who has fallen on hard times. Nice example. We’ve never reported on the FTX and Sam Bankman-Fried story on Down to Business English, have we? No, we haven’t as a matter of fact. Now that the whole affair has come to a conclusion, perhaps we should do that. Good idea. Do you have our next word? I do.
Next on our D2V list is the adjective ‘go-to’, as in a go-to place or a go-to person. I hear this word used a lot in business. A go-to place or a go-to person is somewhere or someone that you regularly rely on because you trust their quality and service. Whether it’s a person’s advice or a company’s products, it’s your first choice when you need something specific. In today’s report, I told Samatha that The Body Shop was at one time, my go-to place for buying presents.
I was saying that the Body Shop was a reliable place and my first choice for finding a nice gift. In a business context, a 'go-to person' is similar but refers to a trusted expert or a key player in an organization. Someone known for getting things done or for having vital knowledge. Skip, do you have any go-to people in your professional life? My accountant is a go-to person. Your accountant?
Yes. Any time I have a question about taxes or about preparing financial statements, I’ve got this guy, Watanuki-san. No matter what my accounting or tax question is, he has an answer. Two things in life every person should have. A good lawyer, and a good accountant. Hm. Well, I am halfway there. Our final item for today's D2V, is the noun brainchild. A compound noun made up of the nouns ‘brain’ and ‘child’. That’s right.
A brainchild is an idea or invention that is considered to be one particular person's creation or a product of their creative thinking. In today’s report, Skip mistakenly commented that The Body Shop was the brainchild of Anita Roddick. In other words I was assuming that all the product ideas behind The Body Shop were originally Anita’s. Which many people assume. But in truth, The Body Shop was not her brainchild. She had borrowed all the ideas from that shop in Berkley, California.
Do you know who the Winklevoss twins are? Oh, I do. Can you explain who they are to our listeners? I bet many people don’t know who they are. Cameron and Tyler Winklevoss are twin brothers who claimed back in 2004 that Facebook was their brainchild and that Mark Zukerberg had stolen the idea off of them. That’s right. They even took Zukerberg to court over it.
Actually after a lawsuit, the Winklevoss twins and a third person, Divya Narendra, received a significant settlement from Facebook, valued at about $65 million in cash and Facebook shares. Quite a lot of compensation. I guess there must have been some truth behind their claims. Would you like to help D2B reach more people wanting to improve their Business English skills? Be sure to follow D2B on Apple Podcasts, Google Podcasts, Spotify, or any place podcasts are found.
While you are there, leave a rating and a review and tell everyone how much you enjoy the show. Thank you Samantha. I learned a lot about the Body Shop from your report today. You are more than welcome Skip. It will be interesting to watch how the brand will evolve once it goes through bankruptcy proceedings. I’m sure it will continue in one form or another. I’m just hoping I can continue using it as my go-to place for gift shopping. I’m sure you will make out just fine, whatever happens.
D2B Members, the Bonus vocabulary for today’s episode will be released within the next 24 to 48 hours through your Members-only RSS feed. The words and phrases we will focus on in that Bonus D2V episode will be: denote, easier said than done, pertinent, to tick a box, and to be heavy handed. So, D2B members, be sure you are subscribed to your Members-only RSS feed to get that bonus Vocabulary episode.
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