By  on September 2, 1994

LONDON -- The Body Shop International is digging in its heels.

The company is sticking to its business practices and strategies despite a barrage of negative publicity over an alleged breach of ethics and an expected onslaught of competition in the U.K. from The Limited's Bath & Body Works chain.

Critics have accused the Body Shop of cultivating a false image as a socially conscious and environmentally protective company. The Body Shop has heatedly denied the charges.

"I read and re-read what has been written about us, and there isn't a lot of substance," said Gordon Roddick, chairman, to WWD Wednesday during one of his first interviews on the controversy. "People are waiting for a huge explosion to happen from all this, and all there is is a damp squib."

"If you are trying to change things you are usually quite noisy, and we have from time to time been very noisy in the press," Roddick said of the Body Shop's controversial approach to cosmetics marketing. "I guess this time the press wants to be noisy with us."

Body Shop appears unshaken. It has not bothered to go on the offensive with its own publicity campaign or special promotions at the consumer level. It is not meeting with British financial institutions in an attempt to counteract the negative publicity, and it is not changing any of its business practices, Roddick said.

"We are not perfect. We've often said we've made heaps of mistakes and will continue to do so. But we try extremely hard. Who else in the corporate world tries as hard as we do in these areas?"

As for the arrival of Bath & Body Works in Britain, Roddick said Body Shop already competes with the chain in the U.S. and is not concerned. He pointed out that many U.S. retailers have failed to establish themselves successfully in the U.K., where there are fewer shopping malls.

In addition, Roddick questioned whether his newest competition -- Bath & Body Works -- can be successful with its U.S. pricing structure, which is about 20 percent higher than Body Shop's. Bath & Body Works executives could not be reached for comment Thursday.Bath & Body Works is moving into the U.K. in a joint venture with British fashion retailer Next PLC. The first store is expected to open this fall.

"I think with their products and packaging they will compete here more against Boots' Global range than against us," Roddick said. "But it will be interesting to see what they do over here, and we will watch them closely. They may show us a few good ideas."

Roddick added with a smile, "Up until now it's always been the other way around."

Investors seem to agree with the company's stance, as its shares began to recover last week following an 11 percent fall in late August. Body Shop's shares rose 12.3 cents (8 pence) on the London Stock Exchange Thursday to close at $3.45 (2.24 pounds).

This compares with a high this year of $4.06 (2.64 pounds). Roddick claimed the group's image will suffer no permanent damage from the controversy.

He said the Body Shop has spoken with many of its consumers who continue to support the company, despite the negative publicity.

The furor began following reports of a negative article about the group in the Minneapolis-based newsletter Business Ethics and the unloading of 50,000 shares in the Body Shop by Franklin Research & Development of Boston, a group that invests in socially conscious companies.

The article, by freelance journalist Jon Entine, appeared Thursday. Calls to the newsletter about the story were not returned.

Body Shop earlier this week issued a 32-page refutation -- with six supporting documents -- of Entine's claims. Body Shop said Entine alleges the group and its management "have been dishonest, hypocritical, untrustworthy and irresponsible in their business affairs."

Other allegations are that the Roddicks stole the Body Shop concept and name; its products aren't as pure or natural as claimed; its Trade Not Aid program isn't as beneficial to disadvantaged regions as the company makes it appear, and the group is the subject of a Federal Trade Commission probe.

"These are all falsehoods," the Body Shop document said.

The group said it remains committed to its Trade Not Aid program, which has a staff of six full-time employees and which bought $1.85 million (1.2 million pounds) of goods from less-developed areas last year. This was up from 600,000 pounds in 1993.Body Shop also refuted Entine's claims that its products aren't natural. The group said it tries to use natural ingredients wherever possible and that it has been a leader in product disclosure.

As for any governmental investigations, the company said it is not aware of any currently under way. The one Federal Trade Commission probe into its franchising practices occurred nine months ago and resulted in no formal proceedings, the company said.

It denied it has troubled relations with its franchisees and said it has terminated only one franchisee -- Pauline Rawle, who owned five franchises in southeastern England -- in its entire history. Rawle sued Body Shop, but a British court ruled that she had caused considerable damage to the company and should be stopped.

However, Body Shop confirmed one of the allegations -- two years ago a total of 60 gallons of shampoo and shower gel was spilled at Body Shop's former warehouse and factory in New Jersey. But the Body Shop denies that it ever had toxic emissions or spills, as Entine claims. As for the 50,000 shares, Roddick pointed out that the Franklin holding was minor compared with the Body Shop's 188 million shares in circulation.

Patrick McVeigh, a Franklin vice president, told WWD that the company sold the shares because of concerns over the expected negative publicity; because Body Shop's shares had risen 30 percent and had outperformed the market and, in turn, may have been over-valued, and because of the impending competition from Bath & Body Works.

The sale was not an indication that Franklin agreed with Entine's allegations, McVeigh stressed. Franklin currently is preparing its own report on the validity of Entine's claims, which will be finished next week. McVeigh said Franklin would buy Body Shop's shares in the future "if our study shows the claims are groundless."

-- Fairchild News Service

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