Marketplace Report: L'Oreal to Buy the Body Shop

The French cosmetics company L'Oreal is poised to buy the British beauty-product retailer The Body Shop for more than $1 billion. Stephen Beard of Marketplace offers his insights on the deal to Alex Chadwick. Will The Body Shop compromise its "green" principles by agreeing to be sold?

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ALEX CHADWICK, host:

Back now with DAY TO DAY. Another day, another merger. The latest deal unveiled in London has raised a few well-plucked eyebrows. L'Oreal, the world's biggest cosmetic company, is buying the British beauty products retailer, The Body Shop, for $1 billion. Is it worth the price? Joining us from the Marketplace London Bureau is Stephen Beard. Stephen, these two are natural partners or no?

Mr. STEPHEN BEARD (Marketplace): No. I mean, you've got, they really do look like exact opposites, in fact. You've got L'Oreal, which makes things like LancĂ´me cosmetics, Garnier and Redkin shampoo. The image is obviously one of glamour and of self-indulgence; I mean, the slogan Because I'm worth it, for many sums up a kind of self-regarding, self-pampering culture. Body Shop, on the other hand, has a much worthier image, it uses natural ingredients, doesn't test its products on animals, uses recycled packaging and claims to be totally green, totally ethical.

CHADWICK: Stephen, I have to say, absolutely none of these products are at all familiar to me. I'm going to invite my radio partner, Madeleine Brand, to enter this interview, so what about this? Body Shop, why are they selling to this big multi-national and how big a deal is this?

Mr. BEARD: Well, money is the short answer, $220 million, the founders, Anita Roddick and her husband, are getting for their shares. But Anita Roddick insists that she isn't selling out. She isn't compromising her values. She's staying on with the company as a consultant. This is what she had to say in a corporate video, released today.

Ms. ANITA RODDICK (Founder of The Body Shop): I'm so excited, so excited, having L'Oreal come in and say, we like you; we like your ethics, we want to be part of you, want you to teach us things. It's a gift.

Mr. BEARD: Not so much of a gift, really, not when they're paying $220 million, but what L'Oreal gets out of this is an ethical brand, and this is a real growth sector. We've had similar takeovers before by multi-nationals, Unilever buying Ben and Jerry's, Cadbury Schweppes buying Green and Blacks, the makers of organic fair-trade chocolates, for example.

BRAND: Stephen, I'm just going to take over from Alex. This is my area of expertise. Any danger that L'Oreal could damage The Body Shop brand? I mean, this is the brand that gives us Passion Fruit Body Butter.

Mr. BEARD: That's right; I mean, that's the billion-dollar question. The big question is, people who shop at Body Shop, they do so because they support what the company stands for. If they feel that the company's now owned by a multi-national that doesn't care about fair trade or animal welfare, will they continue? The Body Shop brand could suffer.

BRAND: Stephen Beard of public radio's daily business show, Marketplace, and Marketplace joins us regularly at this time for discussions about money and business and beauty products. It's produced by American Public Media.

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