The Body Shop’s fair trade suppliers are worried they could be left with more than US$1m worth of beauty ingredients as the company faces an uncertain future.
The beauty retailer, which filed for administration of its UK and German arms last week, works with 18 community fair trade partnerships around the world via its own scheme.
Several suppliers told The Guardian they could be left with hundreds of thousands of dollars worth of unpaid and unordered stock if the company goes under.
This financial loss would impact families from the Amazon and Africa in low income and remote areas.
Although the suppliers have no written contract with The Body Shop, they have produced an agreed amount of product for the business for a long time – some for more than 20 years.
Most of the fair trade community projects do not directly supply the business but they sell their ingredients to intermediaries.
These include oil refiners or one of the business’ 20-plus cosmetics and beauty product manufacturers.
The producers are concerned that if manufacturers are not paid by administrators, then they in turn will not be paid.
“It is a worry,” the head of one community producer group based in Africa told The Guardian.
“We are all affected, whatever the changes coming up.
“It is going to affect the whole supply chain.”
The Body Shop’s UK business is trading as usual and administrators from restructuring firm FRP said creditors would be kept informed as the process moves forward.
Any supplier debts will be lined up behind many other creditors, it added.
What has happened to The Body Shop?
The Body Shop’s UK business collapsed into administration on 13 February, placing nearly 2,000 jobs at risk.
Some of the British chain’s 200-plus UK stores are rumoured to be at risk of shuttering to help reduce costs.
FRP Advisory is keeping the UK business open during the restructuring process.
The Body Shop’s German arm also filed for bankruptcy on 18 February at the Düsseldorf District Court.
It employs over 350 staff members and runs 66 branches across the country.
Offloading parts of the company’s European and Asia business is said to be part of a wider strategic plan to bolster The Body Shop’s operations in other key markets.
Private equity firm Aurelius only bought The Body Shop three months ago for £207m – a fifth of the price previous owners Natura & Co paid for it in 2017.
However, the beauty retailer’s trading over the festive period and early January is rumoured to have been weak.
The company is also rumoured to have insufficient working capital.
Former owner Natura & Co has also contacted Aurelius over alleged unpaid bonuses of up to £3m to former employees.