An Insight into the Cosmetic Giant
 |
 |  |  |
 |  |  |
|
| | |
| | |
I. Identification
Even the pickiest critics could not put a question mark in the Body Shop's Mission Statement:
"To dedicate our business to the pursuit of social and environmental changes.
To creatively balance the financial and human needs of stakeholders: employees, customers,
franchisees, suppliers and shareholders.
To courageously ensure our business is ecologically sustainable: meeting the needs of the
present without compromising the future.
To meaningfully contribute to local, national and international communities in which we
trade, by adopting a dose of conduct which ensures care, honesty, fairness and respect.
To passionately campaign for the protection the environment, human and civil rights, and
against animal testing within the cosmetic and toiletries industry.
To tirelessly work to narrow the gap between principle and practice, whilst making fun,
passion and care part of our daily lives."<2>
But will the Body Shop do what they mean? Or what it claims in the Mission Statement is just a
flowery word puzzle and never takes effct by itself? Look back at the BSL's past, we may
find somthing. We may find out what it was trying to acheive, which in turn, may show
off its latent intention. Here, I named the history collection as "Dim Sum" because I wouldn't
couldn't cover up the whole history of the company and those events and issues in the collection
all have important meaning to its development.
Doesn't that seem to be a perfectly-planned time sheet? Saving whales, helping Romania orphans, funding Healthcare Project are really what exactly the company wants to do?If so, why it wouldn't become a non-profit organization and turn all the profits into donations? The cruel reality in the business world warns us not to trust any mercy in a business sense. Would the Body Shop become an exception?
II. Legal Clusters
If all the stories have a happy ending in the real life, then there wouldn't be any "stories". It's hard to say if Anita's Body Shop story has a happy ending but what it has been through definitely gave Anita a big headache, without which, the Body Shop's public statements of accountability would not have been composed in such prudence. But it happened that some of the charges (as stated below) were even fatal attacks to the company and it had to fight back to prove that they are in line with the EU rules as they always claimed to be. NATURAL PRODUCTS?
The Body Shop's green image tends to stand in line with the Directive 93/35/EEC (approved in June, 1993), the 6th Amendment to Council Directive 76/768/EEC (1976), which regulates the production and marketing of cosmetic goods among EU member states. According to the Article 2 of the Amendment, " a cosmetic product put on the market within the Community m ust not cause damage to human health when applied under normal or reasonably foreseeable conditions of use, taking account, in particular, of the product's presentation, its labelling, and any instructions for its use and disposal, as well as any other indication or information provided by the manufacturer or his authorized agent or by any other person responsible for placing the product on the Community market".<4>
Some of BSL's products only contain a little fraction of natural materials purchased from its Community Trade members and are mainly made of petrochemicals, synthetic preservatives, fragrances and colours. These ingredients, as some experts warned, have potentially bad effects on the skin. Consumer Reports exposed in its February,1991 issue that the Body Shop used "silk powder" in its eyeshadow, which is a powered polymer similar in formation to "nylon, polythylene and urea/formaldehyde resin". Also, for the purpose of eye-catching effects, the Body Shop used "synthetic dyes" resulting from "mass-production technology" and contains "allergenic irritants". For packaging, the Body Shop uses non-recyclable plastic containers made from petrochemicals. (Jon Entine, Green Washing, November, 19 95 ). What's more, to kill microbes, the Body Shop regularly employ a process containing radiation caused by dangerous non-renewable uranium. ANIMAL PROTECTIONIST? At present, EU has a rather strict control of animal testing. Article 4 the Directive states that, " without prejudice to their general obligations deriving from Article 2, Member States shall prohibit the marketing of cosmetic products containing ingredients or combinations of ingredients tested on animals after 1 January 1998 in order to meet the requirements of this Directive". <4> Under the proposal made by the EU Commission, the Directive bans the testing of finished cosmetic products on animals starting from 1 July, 2000 while the prohibition of testing of ingredients would be implemented in 2003. <5> Although the Body Shop identifies their products as "animal-testing free", they are facing counter evidence of their extensive use of ingredients that have been tested on animals by other companies. "They accept ingredients tested on animals before 1991, or those tested since then (if they were animal-tested for some purpose other than for cosmetics)". <6>Some Body Shop products even have animal parts such as gelatine (crushed bone). In one word, Body Shop's animal-loving image is still under suspicion. LABOUR ADVOCATE? The Body Shop promotes equal rights for workers while helping indigenous people through the Community Trade program. In fact, the company "pay their store workers low wages at or near the expected minimum wage and well below the official European 'decency threshold' for pay". Workers in Body Shops are unorganized under the company's opposition to trade unions. In this way, the company could maintain their costs at the lower level at the expense of employees being forced to "channel their grievances and demands through procedures completely controlled by the company". And this, in turn, " isolates workers and denies them collective bargaining power". <6>On the other hand, less than 1% of sales go to 'Community Trade' beneficiaries, and it was found that some of the products have been sourced from "mainstream commercial markets". The spotlight is Body Shop's trade with Kayapo Indians in Brazil for which the company was involved into a legal suit. It seems that the Body Shop was merely making use of the Kayapo Indians to build up its goodwill and social accountability. For one thing, only a small number of people are working for the company compared to the whole population of the community. For another, as the sole buyer of the nut oil, the Body Shop monopolies the market and sets prices as it will, which does nothing good to the local people's future interests. And the legal suit engendered in this trade relation at some point brought Body Shop's image to the lowest level. The company was sentenced by a Brazilian judge to pay more than $100,000 in "back wages and damages" to their ex-worker, Saulo Petean after the court concluding that the company fired Saulo Petean without justification while accusing him of misrepresentation.
15 EU member states including: · Austria · Belgium · Denmark · Finland · France · Germany · Greece · Ireland · Italy · Luxembourg · Netherland · Portugal · Spain · Sweden · United Kingdom
Treaty III. Geographic
Clusters
The Body Shop global empire ( INformaton from the BSL's shop locator): Andorra, Antigua, Australia, Bahamas, Bahrain, Belgium, Bermuda, Brunei, Canada, Cayman Islands, Cyprus, Denmark, Faroe Islands, Sabah, Sarawak, Finland, France, Germany, Gibraltar, Grand Cayman, Greece, Holland, Hong Kong, Iceland, Indonesia, Ireland-North, Ireland-South, Italy, Japan, Korea, Kuwait, Luxembourg, Macau, Malta, Mexico, New Zealand, Norway, Oman, Philippines, Portugal, Qatar, Saudi East & Central, Saudi West, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, U.A.E., U.K., U.S.A., West Malaysia
Tariffs and Taxes[IMTAX}
Import Standards[IMSTD]
Liscensing[LICEN]
a. Directly Related to Product: Yes Packaging
b. Indirectly Related to Product:No
c. Not Related to Product: No
d. Related to Process: No
The European cosmetic, toiletry and perfumery industry, as a whole, keeps to prosper and take the lead in the world market. In 1998, the retail sales reached nearly 44 billion ECUs (US$37.4b) and the manufacturing output is two times that of Japan and one-third more than the USA. The whole industry employs over 150,000 Europeans and an additional 350,000 in retail, distribution and other related fields. <7> With this reference, The Body Shop financially seems very healthy. By the end of 1999, The Body Shop International possessed 1,730 stores spanning 49 markets around the globe. Ninety percent of this whole is composed of franchised stores if a little fraction of the company-owned is excluded. In this way, Anita could watch over her empire much more easily but at the price of a handsome amount of " exceptional and restructuring costs". The chart below indicates the Body Shop's overall strength.
2000 1999 Change Worldwide Retail Sales US$904.7m US$874.7m +3% Turnover US$471.6m US$433.0m +9% Profit before Tax* US$44.9m US$34.9m +29% Earnings Per Share* 15.3c 10.0c +53% Dividends 8.1c 8.1c __ Net Assets US$173.5m US$162.9m +US$10.5m Number of Stores 1730 1663 +67Exceptional and restructuring costs is not included, the dollar amount is converted from pounds at the rate of 1:1.4256 and the data and the chart come from the Body Shop's Annual Report. <2> Let's go to the Body shop's regional markets. Since the BSI has its headquarter in UK where it is also originated, understandably the UK & Ireland sector shared the biggest pie in the recent past.
2000 1999 Change Retail Sales US$250.9m US$244.6m +3% Turnover US$195.9m US$176.6m +11% Operating Profit US$12.3m US$8.1m +51% Data is converted into dollar amount at the rate of 1:1.4256. See the Body Shop's Annual Report. <2>There's two items that are comparable: Retail Sales and Turnover. It's obvious that this sector remains strong with the rate of gains (change) above the total level. Indeed, the large number of company-owned stores (138 out of 286) in this sector and BSL's home-selling program-the Body Shop Direct contributed most to the 11% increase in Turnover. The evidence could be found in lists that I would present later: the sector's comparable store sales (only sales from the stores) are 2% down on the previous year, which means increase in other channels: during the year of 1999, The Body shop served 900,000 customers through 95,000 home parties.
Then it comes to the comparisons of the respective performance of the BSL's four big regions: Region Shops Opening Sales (+/-) Turnover (+/-) Sales Sales (Stores) (Region) UK& Ireland 286 9 US$25.9m +3% US$195.9m +11% -2% 28% Americas 410 -4 US$217.5m +1% US$141.8m +2% +2% 24% EU& MidEast 636 33 US$244.1m +5% US$82.5m +21% +1% 27% Asia Pacif. 398 29 US$192.2m +5% US$50.3m +4% 0 21% Data is converted into dollar amount at the rate of 1:1.4256.See the Body Shop's Annual Report. Store sales is of comparable store sales.<2>From what we've got above, apparently, the UK & Ireland region still leads the head. However, other regions are gaining strength and follow close behind. The second runner goes to the EU & Middle East region. This region is made up of 27markets,with head franchises in France, Germany and Austria. 37 out of the total 636 stores are company owned. This region has the highest turnover rate, resulting from the 33 shop openings. The 5 point gains in Retail Sales versus only 1 point of that in Comparable Store Sales (net store sales) suggests that customers in this sector tend to buy products through mail order or Body Shop Directive instead of going to the traditional stores. After a short depressed start, the region of the Americans is now running the third. This region includes Canada and the U.S. and 245 of the total 410 stores are company owned. The closure of 4 stores in this sector addressed the need to adjust the pace to open new shops, which has benefit the whole sector in terms of reducing reconstruction costs. The last sector, Asia Pacific holds 13 markets across North East Asia, South East Asia and Australasia. This sector has the potential to catch up with large increase in Retail Sales and stable Comparable Store Sales. I found one interesting point in the BSL's global store listing: BSL seems to place more stores in rather wealthy countries than in relatively poor countries. For example, up till February 2000, BSL had 275 stores in U.K., 120 in Canada, 280 in the U.S., 78 in Germany, and 55 in Greece. In Antigua, Gibraltar there's only one store and indigenous areas that BSL is currently trading in for the raw materials has no stores. Is this contradictory to BSL's claim to "make the indigenous people better off"? Or trading for raw materials is the only way to make these people better off?
Trade barriers, in a sense, are structured to protect domestic industries although they have different functions. There are cases in which the poor or developing countries would play games with tariffs, tax, licensing and other trade hurdles to baby-sit their fledging cosmetic industries. In Korea, cosmetics, together with some other products, "typically require additional testing or certification from the relevant ministries before they can be sold in Korea, which can result in considerable delays and costs"<8>. In Brazil, wholesale dealers of imported cosmetic products now having the same tax obligation as Brazilian manufacturers. In Lebanon, there is a 21% increase in tariff on last year's 34%. In China, an application for verification of labeling should be 90 days prior to the submission for inspection and "testing assesses conformity to standards and specifications often unknown or unavailable to foreigners and not applied equally to domestic products".<9> There are also cases in which wealthy or developed countries would fight each other for bigger market share. Look at the "labeling" issue. EU Council Directive 80/181 requires "metric-only", while the US requires both metric and inch/pound. The incompatibility intends to create multi-million dollar costs for the need of separate packaging, labeling and warehousing, etc. In January 1997, the U.S. industry, including the Cosmetic, Toiletry, and Fragrance Association(CTFA) filed complaints on the trade barriers against SELA (Latin-American Economic System).
Complaints on Trade Barriers Filed Regarding SELA Member Countries<10>
(By country and category)
1996
Country Tariffs/
Customs Sanitary and phytosanitary/
Certification Intellect. Property Discr.Tax/ Domestic Subsidies Import Restrict. Export Subsidies Total
Argentina 4 1 3 - 2 - 10
Bolivia - - 1 - - 1
Brazil 5 2 +1 1 - 10/+1
Chile 4 5 1 1 - 3 14
Colombia 1 - 2 2 1 - 6
Costa Rica - - 2 - - - 2
Dom. Rep. - - 2 - - 2
Ecuador 1 1 2 1 2 - 7
El Salvador - - 2 - - - 2
Guatemala - - 2 - - - 2
Honduras - - 2 - - - 2
Mexico 5 8 3 2 3 - 21
Nicaragua - - 2 - - - 2
Panama 1 1 3/+1 - - - 5/+1
Paraguay - - 3 - - - 3
Peru 1 - 2 - - - 3
Trin.&Tob. 1 1 - - - - 2
Uruguay 1 - 1 1 - - 3
Venezuela 3 2 2 2 - - 9
Total 27 21 10 10 10 3 106
Note: A "plus" sign ("+") following a number indicates a comment praising the country's policy change to its trading regime on the issue at hand.
The information was tabulated by the SELA Permanent Secretary, and reflects the categorization of the editors rather than the USTR.
Trade barriers affect not only in money terms, but also have a direct or indirect influences on the environment they are taking effects. People's needs or even their life style of one country may be hurt or changed by the import/export restrictions set by the other country. In a word, it's a complicated issue, and as long as trade and different interests exist, they won't disappear overnight.
V. Environment
ClustersListen to the story happened to a woman in northern Ghana who is involved in the shea (a slow growing fruit tree indigenous to the wooded African savannah south of the Sahel) butter trade. At the beginning of the story, she was trying to survive in a men-dominated society. She had responsibilities for both family and work. She hardly knew a word in her lifetime and was treated in business for lack of necessary knowledge and professional skills. She dreamed of using electricity and running water. She barely had enough to eat and her children suffered from Beri-beri (dietary deficiency disease) without absorption of enough protein. She had to walk a long way to get water because transport network didn't pass by her village. Then Anita Roddick, the founder of The Body Shop came to this desperate woman. She took her into the Tungteiya Shea Butter Association, an association that is made up of women from villages around Tamale in northern Ghana and receives healthcare and technical assistance from development organizations. The woman began her work with other women and they were given two weeks working on The Body Shop's order. They got paid afterwards by an export agent and the payment was based on the production costs and each other's labor. Now the woman's life has changed. She gets water in a well nearby. She goes to training workshops to learn basic business courses. She could work at home while taking care of her own children. She is more socially conscious and relatively independent with better economic and living conditions. All of these would not have happened without The Body Shop's continuous contributions to Community Action Fund (In 1998/99 the amount was US$8553.6whereas the minimum daily income for average rural family is 92.7c to121.2c). This development fund intends to improve the social and economic status of the local women by setting up schools, nurseries and other convenience facilities. The direct trade with The Body Shop gave both parties benefits: women in northern Ghana gained greater control over their destinies while the company itself expanded its market and prompt up its international attraction. However, this seems to be a fair tale fabricated by The Body Shop itself, as some people voiced. In their arguments, The Body Shop used astutely the marketing tool and statistic trick to cover up its greedy global ambition. This is what The Body Shop reported, " …in the financial period 1996/7 we had twenty two active Community Trade suppliers, and increase from nineteen in 1995/6 and from eleven in 1994/5. The value of raw materials and accessories purchased from Community Trade suppliers has risen from US$1,178,152 in 1992/3 to nearly US$2,850,000 in 1996/7." The table goes like this:
Year Number of active Community Trade members 1996/7 22 1995/6 19 1994/5 11Here, The Body Shop didn't supply us with any percentile data without which we couldn't possibly have an idea of the practical meaning beyond those digits. In fact, only 1% of The Body Shop's annual sales goes to "Community Trade" beneficiaries, which represents only 0.16% of the turnover. The Body Shop even brought some of these products from mainstream markets instead of sourcing them from indigenous peoples. The alarm would not ring off until the Brazilian Kayapo case was exposed. The Body Shop was then trading with a small group of Kayapo Indians for nut oil to be used in its hair conditioners. It was then accused of exploiting the Amazon rainforests, lying about the formulate (only 1.5% of their Brazil nut hair conditioner contains nut oil which is far from the "main-ingredient level"), contaminating the original culture of the Kayapo reserves and unjustifiably dismissing one of its local employees. Is the Body Shop's success indeed a "marketing plot"? Could the pattern of Community Trade/Fair Trade/Alternative trade, whatever they are called, maintain the balance between commercial profits and social good? Those questions would not be addressed without the consultation of the current development of the whole. Community Trade, Fair Trade, or Alternative Trade, basically, means the same-"a system of trade that enables us to bypass large corporations by providing a framework for trade without oppression or exploitation". According to the report edited by the "Fair Trade Resource Center", there are altogether 34 accessible Fair Trade producers in the world and most of them are settled in only several counties in Asia and Africa with Indian and Kenya having the largest number of producers (six). This hardly represents a trend. Another report coming from the same source, on the other hand, presents us an irony side of Fair Trade-"In 1997, Traidcraft's sales in the UK generated total payments to producers in developing countries of $4.5 million. This supported over 1.35 million days of work for those producers".
Deforestation[DEFOR],General[HABIT]
VI. Other
Factors<1>The Queen of Bubble Bath, by Jon Entine http://www.brazzil.com/p19dec96.htm
<2>The Body Shop's UK Site. http://www.uk.the-body-shop.com/uk/aboutus/methodology.pdf
<3>This text is copied directly from http://www.greenatworkmag.com./July_A'00/cover.htm See the full article in Green@Work
<4>http://altweb.jhsph.edu/science/pubs/ECRAM/ecram07.htm
<5>http://www.cec.org.uk/pubs/we/we00/we0014.htm#4
<6>http://www.mcspotlight.org/beyond./companies/bs_ref.html
<7>Colipa-the Industry's Voice in the European Union, by Rory Macmillan, Communications & Information Manager, Colipa. http://www.atalink.co.uk/csb2000/html/art_tradeb_colipa.htm
<8>http://ww.mocie.go.kr/work/what/Tariffs/htm
<9>http://www.usconsulate.org.hk/usca/trade/sprpt/2000/nte.htm
<10>SELA Antenna in the United States N 32, January 1997 http://lanic.utexas.edu/project/sela/eng_antena/engant32.htm