The Strategist

L`Oreal may sell The Body Shop

02/08/2017 - 13:36

According to Financial Times’ sources, French L`Oreal Group is considering selling natural cosmetics retail chain The Body Shop. The retailer, operates in 66 countries, has shown a negative trend of financial indicators, and can be sold for € 1 billion.

A P Monblat
A P Monblat
The world’s leader of perfumery and cosmetics market L`Oreal is pondering a possibility to sell retail chain The Body Shop, acquired by the French company over a decade ago. According to Financial Times, citing its own sources, L`Oreal’s management may announce the decision tomorrow at a conference dedicated to announcement of the company's financial results for 2016. The publication claims that the French manufacturer has already started consultations with relevant representatives of Lazard bank, and intends to gain around € 1 billion from sale of the British retailer. The company itself refused to comment on this information.

According to sources, the decision to sell The Body Shop is associated with its weak financial performance. In particular, sales the British chain keep falling - they decreased to € 200.9 million for the third quarter of last year (€ 212.5 mln. in the previous year). At that, the corporation’s total results in the same quarter turned out to be better than analysts' forecasts, with revenue of € 6.15 bln.

The decision to part with the natural cosmetics manufacturer was made in spite of the latest trends in the cosmetic market. The sector is going "green", although there is some kind of gradation, from convenient cosmetics to make-up made from all-natural materials. Germany is the largest EU cosmetic market, and products, which can be attributed to the "organic" cosmetics, had been 10% more popular in 2015.

According to statistics, the younger generation is the most demanding when choosing cosmetics. Online shoppers make up the lion’s share of the total audience. This is a good opportunity for niche brands, specializing in a narrow segment of organic cosmetics, to increase sales. It has been observed that many famous brands of natural cosmetics have grown from small and medium-sized businesses. Rising demand makes brands classify their products more precisely, and to invest in research. Without these conditions it is impossible to achieve success on the global market of natural and organic cosmetics.

There is a list of products that belong to the "natural" category. The list approved by EcoCert and, among other chemicals, includes preservatives allowed to use in the organic cosmetics. The products shall be certified on their composition, raw materials cultivation technology and their geographic location, as well as manufacturing process.