What happens when an ethical brand gets bought by an international conglomerate? Anecdotal evidence suggests that such mergers often make for uneasy alliances, and the recent woes of The Body Shop offer another clear example of why these takeovers tend to fail to provide the benefits that the companies expect—and even can lead to the detriment and closure of one or both of them.

For The Body Shop, which was founded in the United Kingdom in the 1970s with an explicit ethical foundation, a series of sales to larger conglomerates have left it underfunded and facing bankruptcy in several of the 80 countries in which it once operated. The first sale took place in 2006, when L’Oréal sought to leverage The Body Shop’s appeal to consumers interested in cosmetics that were never tested on animals, relied on recycled packaging, and promised ethical operations, as confirmed by the company’s B-Corporation certification.

About a decade later, the Brazilian conglomerate Natura paid more than $1 billion to purchase rights to The Body Shop’s products and retail locations and digital channels. During the pandemic years, direct-to-consumer sales boomed, but thereafter, the ownership company noted the strong negative headwinds it was facing. Such concerns apparently were the source of yet another corporate sale, this time to an asset management group called Aurelius.

Seemingly reflecting its focus on managing assets, instead of maintaining ethics, Aurelius (at the time of writing) still had not paid the full purchase price for its acquisition. Furthermore, it engaged in a practice called cash pooling, in which it took the strong holiday-season earnings achieved by stores located in different countries and placed all of them into a single global account. But once those monies went into the global account, they were no longer available to support the ongoing operations in the individual countries, including paying creditors and suppliers.

A company cannot last for very long without money to pay its bills. Thus, in both the United States and Canada, The Body Shop is bankrupt and closing dozens of stores. In the United Kingdom, its home market, nearly half of all retail locations have shut down, and approximately 300 jobs have been cut from its headquarters. The outlook and implications in other nations, including Germany, Australia, Ireland, and Denmark, look similarly dire.

In the past, some other ethical brands have sought explicit protections to ensure their social commitments remain a priority before they will go forward with a sale, as Ben & Jerry’s did before it agreed to be purchased by Unilever. But even in that case, the international expansion and profit goals of the global corporation have come into conflict with the ethical stances preferred by the independent board that runs the peace-pursuing ice cream brand. For The Body Shop, its customers, and its employees, this example likely feels discouraging. Should it discourage other ethical brands and international conglomerates considering mergers as well?

Discussion Questions

1. Can ethical priorities of one party align with global growth and profit motives of another party when two companies join forces?

Sources: Sarah Butler, “The Body Shop Files for Bankruptcy in the US and Canada,” The Guardian, March 10, 2024; Eva Rothenberg, “The Body Shop Shuts Down All US Operations, Closes Dozens of Stores in Canada,” CNN, March 10, 2024; Judith Evans, “Ben & Jerry’s vs. Unilever: How a Star Acquisition Became a Legal Nightmare,” Financial Times, October 11, 2022