British beauty brand The Body Shop is on the market for £600m after its owner, L’Oreal, put it up for sale earlier this year.
There are two companies currently bidding for the high-street stalwart: CVC Capital Partners — the former owner of Formula One motor racing — and Italian investor Investindustrial, which owns a stake in Aston Martin.
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This week, Sky News revealed that a third company could be in the bidding for the British brand – a Chinese healthcare company, Renhe Pharmacy Co.
Why is the brand up for sale and what could the new owners do to transform it?
Beginning and 2006 sale
The Body Shop was founded by the late Anita Roddick and her husband back in 1976 as an ethical beauty brand that notably didn’t test its products on animals.
L’Oreal bought the brand for £650m back in 2006, but hasn’t been able to make much of the company since then.
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By GlobalDataSales fell by five percent last year at its 3,000 stories in 66 countries around the world.
Why has The Body Shop been struggling?
Charlotte Pearce, retail analyst at GlobalData believes the company has fallen behind because of a lack of innovation in the beauty side of things.
Pearce said:
While the retailer has focused on its ethical trading and sustainability, it’s failed to adapt to the growing health and beauty market where competition is rife. We’ve seen high street stores such as Topshop and New Look invest in their beauty ranges and The Body Shop hasn’t been able to keep up with the competition.
While The Body Shop’s heritage is strong, it needs to work on its brand perception; it’s not known as a brand which is innovative and new, and it’s failed to keep up with market trends – contour sticks, kits and palettes were a strong trend in 2016, and these are nowhere to be seen in The Body Shop’s range.
Which are the companies that want to buy The Body Shop?
1. CVC Capital Partners
CVC is a private equity firm based in Europe. It recently acquired the Swiss watchmaker Breitling for an undisclosed amount, however, the deal supposedly values the brand at more than $874.6m.
This wouldn’t be the first beauty purchase for the company either. Two years ago, CVC bought a majority stake in a German beauty retailer Douglas, in a deal worth almost $3.3bn.
According to Sky News, CVC has enlisted the help of Emmanuel Osti, former boss of the French cosmetics brand L’Occitane and ex-Debenhams chair Rob Templeman to assist with the bid for The Body Shop.
2. Investindustrial
The Italian private equity firm has been quite open about its bid to own The Body Shop. Its founder, Andrea Bonoumi, said: “We are trying (to buy it) and if we manage to do so, we hope a woman will lead it.”
The woman in question is thought to be Cristina Scocchia, the former head of L’Oreal Italy, should the company succeed in its acquisition bid.
3. Renhe Pharmacy
The latest addition to this list, Renhe Pharmacy, recently made an enquiry about participating in the auction of the store.
However, some analysts believe this is an odd pairing and would make a radical departure from Renhe’s strategy.
As well, China is notorious for refusing to continue to test cosmetics products on animals.
This would be difficult for a company like The Body Shop, which was founded on an attempt to bring an end to this cruel practice.
What should The Body Shop’s new owners to do to make it a success?
The Body Shop is still run on an old legacy, and though it has a loyal customer base, it isn’t seen as a luxury choice.
“It’s mostly seen as a shop for gifting and low-value items – its body butters and body lotions for example,” said Pearce.
One way it can improve on this, is to make its stores more immersive and improve the shopping experience.
Customers [could then] browse for longer periods of time and increase their overall spend with the brand. With premium retailers such as Jo Malone and Liz Earle offering in-store treatments, there is more that The Body Shop could be doing to raise its profile and improve the customer experience.
As well, there is a lot to be said to becoming an innovative brand, particularly in the overcrowded beauty space which is seeing a lot of influence come from YouTubers and bloggers.
Pearce added:
For The Body Shop to turn its business around, the retailer needs to become a brand which is on-trend and innovative, especially in terms of its make-up, and should, therefore, invest more in this as we’ve seen a trend in consumers trading up and indulging in these premium beauty products. The retailer could also improve its brand perception through its social media, using social influencers to raise its presence and shift the focus from its well-known heritage to its innovation and trendiness in the health and beauty sector.
