Roddick, who mixed make-up with morals

WHEN the first Body Shop opened in 1976, squeezed between two funeral parlours, it seemed an impossibly exotic addition to Britain’s dowdy high streets. No one else was selling cocoa body-butter or banana shampoo, all soaked in colour with packaging to match. Anita Roddick, the fiery founder, was a hippy-capitalist, the product of a generation that believed there was more to business than just business. From the start the Body Shop was a crusade, first against animal testing and later against exploitation in the poor world.

Now it is a worldwide brand, with over 3,000 shops in 66 countries, including about 270 in Britain. But it is struggling, and its parent company, the French cosmetics giant L’Oréal, which bought the Body Shop a decade ago, wants to offload it. L’Oréal’s like-for-like revenues rose by 4.7% in 2016, whereas the Body Shop’s increased by just 0.6% (to €921m, or $975m). On a reported basis, the Body Shop’s revenues fell by 4.8%.

What went wrong? Partly, the chain is a victim of its own success. Its stand against animal testing and for ethical consumerism was novel and exciting 40 years ago, especially to younger shoppers. But now this is mainstream stuff. The European Union banned all cosmetics tested on animals four years ago.

The Body Shop has thus become much less distinctive. Mere supermarkets now stock similar products, and a host of imitators have reworked its formula for a new generation. Lush, for instance, packs in millennials with its mix of raucous music, heavily tattooed staff, Intergalactic Bath Bombs and Karma Kream body lotions. It is also more political than the Body Shop, campaigning on everything from refugees to fracking. Its sales reached a record £574m ($877m) in 2015.

And whereas the Body Shop’s products might have been “natural enough” for the 1980s, that’s no longer good enough, argues Lainey Sheridan-Young, a branding expert at IW Capital. More consumers now demand products without the synthetic substances that the Body Shop still uses. Neal’s Yard, by contrast, has most of its products approved by the Soil Association, an organic certifier, and was the first high-street retailer to be accredited as carbon neutral. The “natural” end of Britain’s cosmetics market is growing by about 10% a year, according to Organic Monitor, a research outfit, but the Body Shop is missing out.

Squeezed by rivals who are variously cheaper, trendier, more political and more wholesome, the new owner of the Body Shop will have a choice, argues Harsha Wickremasinghe of Livingstone, an M&A advisory firm. It could take the brand back to its agitprop roots. Or it could make it a more colourful addition to the supermarket shelves. Either would need a lot of investment. But given the goodwill that still attaches to the Body Shop brand, there may be plenty of wild argan oil left in the bubble bath yet.