CORPORATE BRAND MANAGEMENT

AND REPUTATION

MASTER CASES

Beauty and the Beast:

The Acquisition of The Body Shop by
L’Oréal

By:
Sophia Collischon
Katharina Löw
Jannike Törnqvist

2018
First Edition
Student Case Papers
Corporate Brand Management and Reputation: Master’s Cases

The “Corporate Brand Management and Reputation: Master’s cases” is a case series
for applying the case method of teaching and learning in higher education. The cases
are relevant to brand strategists in private and public sector organizations, as well as
academics and students at universities, business schools, and executive education.

The cases are written by groups of master’s students as a course project. The specially
developed case format is defined as: “A management decision case describes a real
business situation leading up to a question(s) that requires assessment, analysis, and a
decision reached by discussion in class. The alternative approaches and recommendations
from the class discussion are followed by a description of the choices made by the case
company. This description is then discussed by the class.”

The student groups select the topics of their case providing updated and relevant
insights into the corporate brand management. The cases can be used as “written
cases” (handed out and read in advance, later to be discussed in class) and/or as
“live case” (presented by the teacher following a discussion in class). Each case
includes teaching notes, visuals with speaker’s notes, learning objectives, board
plans, and references.

The mission of the series is “to develop cases for discussion providing insights into the
theory and practice of corporate brand management and reputation, with the intent of
bridging the gap between academic teaching and managerial practice.”

The series is a result of co-creation between students and teachers at the elective
course Corporate Brand Management (BUSN35 – five-credit course/eight-week half-
time studies), part of the master’s program International Marketing and Brand
Management at Lund School of Economics and Management, Sweden. The cases
represent the result of the intellectual work of students under the supervision of the
head of course.

Although based on real events and despite references to actual companies, the cases
are solely intended to be a basis for class discussion, not as an endorsement, a source
of primary data, or an illustration of effective or ineffective management. The cases
are free to be used and are to be cited following international conventions.

Editor
Mats Urde
Associate Professor
[email protected]

Head of master’s course Corporate Brand Management (BUSN35), part of the

master’s program International Marketing and Brand Management.
Lund School of Economics and Management
 Beauty and the Beast:
The Acquisition of The Body Shop by L’Oréal

WRITTEN CASE

The authors prepared this case solely as a basis for class discussion and not as an endorsement, a source of primary data, or an
illustration of effective or ineffective management. Although based on real events and despite occasional references to actual
companies, this case is fictitious and any resemblance to actual persons or entities is coincidental.
 M A N A G E M E NT D E C I S I O N C A S E

19 – 2018
MARCH 14, 2018

SOPHIA COLLISCHON
KATHARINA LÖW
JANNIKE TÖRNQVIST

Beauty and the Beast: The Acquisition of The Body Shop

by L’Oréal
It is early morning on a rainy day in 2006, and the senior brand manager at L’Oréal
is on his way to the office. As he sits in the train taking him to Clichy, he skims through
some newspaper headlines that comment on the recent acquisition of The Body Shop by
L’Oréal: “Activists call Body Shop boycott”, “Did green goddess Anita Roddick sell out
when she sold up to L’Oréal?”. He is already aware of the critique that is issued by
both industry experts and animal rights activists. Thus, he is concerned about the two
clashing brand identities of mother and daughter brand and the resulting loss of
reputation for the newly acquired brand. As he steps into his office, he reflects about
the current situation:

Industry Background
The cosmetic industry is described as a lucrative, innovative and fast paced
industry in which L’Oréal, Procter & Gamble and Unilever are the three biggest players.
It is a vital part of the world economy in terms of its contribution to the global GDP.
In 2006, the global cosmetics market grew by estimated 4,9 percent and the industry
generated approximately $230 billion in sales globally. However, over the last decade
a change of consumer demands within the industry have been recognized. As such,
consumers are increasingly concerned and aware of environmental issues and show
growing interest in cosmetics products containing natural ingredients free of animal
testing. Ethical consumption has been existing for centuries, and refers to
considerations when choosing products and services with regards to animal welfare,
labor standards and personal health concerns. However, the trend has increased
considerably in the beginning of the 21st century. Therefore, a growing number of
cosmetic brands try to attract consumers by promoting ethical and sustainable values
and consumption.

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Company Background of L’Oréal
The story of L’Oréal begins in Paris, France, in 1909, when chemist Eugéne
Schueller, the founder of L’Oréal, develops one of the first formulas for hair dyes. With
research and innovation in its DNA, the company that has started off selling the
product to Parisian hairdressers has grown into one of the biggest brands worldwide.
Over the years, several product launches, acquisitions and opening subsidiaries foster
the growth and success of L’Oréal.
In 2006, L’Oréal owns 19 brands which are sold globally. The product brands are
divided into different product categories, which vary in positioning, target customers
as well as price level. Professional Products such as the private label L’Oréal Professional
and Kérastase are professional, high class products which target hairdressers and
beauty salons. Consumer Products like L’Oréal Paris or Garnier can be positioned as
affordable products distributed on the mass market. L’Oréal Luxe, the premium-price
luxury brands consolidates high-end, prestigious brands such as Lancôme and Giorgio
Armani Perfumes. Lastly, Active Cosmetics targets health conscious consumers and
dermo-cosmetics with brands such as Vichy and La Roche-Posay.
L’Oréal’s approach to marketing communication resembles typical industry
standards. This includes cooperations with models and celebrities to endorse products
and whose appearance matches the current beauty ideal of a slim body type, perfect
skin and a flawless appearance (see Exhibit 1). Marketing communication revolves
around singular products and their features to beautify the consumers, rather than
communicating the corporate values of the organisation. Back in 2006, L’Oréal’s
mission has been to develop beauty products that give customers “the right to be
beautiful day after day”1. The company strives to fulfil this promise by focusing on
their highly regarded core values revolving around:

• Safety
• Quality
• Efficacy
• Sincerity

As such, the cosmetics brand can be characterized as a value-driven company,

aiming towards an approach that beauty is “fun, affordable, fulfilling, genuine and
generous”2.

Company Background of The Body Shop

In 1976, environmentalist Anita Roddick has established the ethical, high quality
cosmetic brand The Body Shop. The first store has opened in Brighton, UK, in 1976 and
soon after the launch the brand has become popular among both ethical and
conventional consumers. The core values lay the foundation for all of The Body Shop’s
operations and consist of the following:

1 L’Oréal Group (2006). Annual Report 2006 [PDF] Available at: http://www.loreal-
finance.com/eng/annual-report-2006 [Accessed 23 February 2018]
2 L’Oréal Group (2006). Annual Report 2006 [PDF] Available at: http://www.loreal-

finance.com/eng/annual-report-2006 [Accessed 23 February 2018]

Corporate Brand Management and Reputation | MASTER CASE SERIES 3

 • Against Animal Testing
• Support Community Fair Trade
• Defend Human Rights
• Activate Self Esteem
• Protect our Planet

The brand uses natural ingredients in its products while acting highly transparent
to gain the trust from its stakeholders. The mission statement reflects this commitment
and strives “to dedicate [...] business to the pursuit of social and environmental
change.”3. Their core values and mission are recurring themes within their marketing
communication. Instead of pursuing industry standards, their advertisement can be
interpreted as a form of rebellion against unattainable beauty standards and the
promotion of their ethical and sustainable behavior (see Exhibit 2).
In the years to come, The Body Shop has started to grow rapidly, opening two
franchises every month while simultaneously being involved in public activism. It has
become the first commercial company to start a collaboration together with Greenpeace.
With the strong vision and leadership from Roddick, several successful campaigns
have been launched, catching public attention and reaching out to people worldwide.
‘Against Animal Testing’ has been one of the more prominent initiatives and has
ultimately led to changes in the European law regarding cosmetics and animal testing.
The customer base has been constantly growing due to high levels of trust, a good
reputation and loyal customers that shared the same values as the company.
After Anita Roddick has decided to take The Body Shop public in 1984, she has
realized the challenge of running a public company. Rapid growth and new
shareholder demands for profit have made the CEO feel like losing control. Moreover,
the strategic focus of the company has started to shift away from emphasizing
sustainable practices towards a more profit-oriented approach. Consequently, Anita
Roddick has felt that she was not able to handle the increasing pressure and started
searching for potential buyers.

The Acquisition
The Body Shop has faced difficulties to find suitable buyers. This has mostly been
due to its franchisee and the ownership of brick-and-mortar stores, a rare occurrence
for most brands within the cosmetics industry. However, in 2006 the French cosmetic
giant L’Oréal has approached The Body Shop with an offer. Before L’Oréal’s takeover,
Roddick has made arrangements to ensure that the ethical principles would still be
respected.
The acquisition has provided opportunities for both sides: On the one hand, The
Body Shop has seen the acquisition as an opportunity to gain access to L’Oréal’s well
established supply chain as well as satisfying shareholder demands for profit. On the
other hand, for L’Oréal, adding a brand with a unique identity and sustainable
business model to its portfolio has facilitated the entrance into a rapidly growing niche

3The Body Shop (2017). About Us. Available Online:

http://www.thebodyshop.co.nz/AboutUs/DameAnitaRoddick [Accessed 23 February 2018]

Corporate Brand Management and Reputation | MASTER CASE SERIES 4

market of environmentally conscious consumption. As stated above, consumers have
become increasingly concerned about environmental, ethical and social issues
resulting in a new demand for sustainable cosmetics products. The acquisition has
been a great opportunity for L’Oréal to gain access to the profits from the new emergent
market. Ultimately, the deal has been made for $1.2 billion, The Body Shop has been
delisted from the London Stock Exchange and has become a part of the French
cosmetic brand in 2006.

The Situation after the Acquisition

The acquisition now causes plenty of negative media attention and public
criticism. Press coverage revolves around the different corporate identities, the
conflicting philosophies and the clashing corporate values. The public, especially
social activists, industry experts and ethically minded consumers are thus concerned
about the future of The Body Shop. This is especially since L’Oréal’s activities in animal
testing lead to a direct conflict with The Body Shop’s core values. Moreover, the former
being partially owned by Nestlé, one of the most criticized companies in the world,
does not improve the situation.
Even though Anita Roddick does not consider the sale as a ‘sellout’ but rather as
a chance to change the industry from the inside, the public is feeling betrayed by the
management’s decision to sell The Body Shop. As a result, the cosmetics group is
currently facing a financial downfall through boycotts of The Body Shop and thus
impacts on sales and customer loyalty, as well as reputational issues. According to the
daily issued BrandIndex, the brand’s ‘buzz’ rating has dropped 10 points after the
acquisition, ‘general public impression’ and ‘satisfaction’ have also fallen drastically.
These developments lead to the question how L’Oréal should address this issue.

The brand manager of L’Oréal approaches you with three potential strategies in
order to maintain the strong corporate reputation of The Body Shop despite the
criticized acquisition. The strategies are:

• Strategy 1:
Placement of The Body Shop as an independent business unit within L’Oréal
• Strategy 2:
Changing L’Oréal’s core values and adjusting their mission statement to
become more appealing to conscious consumers
• Strategy 3:
Alignment of The Body Shop’s marketing communication with L’Oréal’s

Taking the role of L’Oréal’s Executive Team, how would you evaluate each strategy
and why?

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Exhibit 1 Example of L’Oréal’s Marketing Communication

Exhibit 2 Example of The Body Shop’s Marketing Communication

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