2017 report - naturaeco.com · 6 7 Natura &Co 2017 . introduction Natura was founded in São Paulo...

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2017 report

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it's time to co_

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connectcollaborate

comprehendconvergecocreate

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Who we are

In September 2017, Natura and Aesop united with The Body Shop. In February 2018, the companies assumed a new identity under the Natura &Co corporate brand. We are a global cosmetics group driven by purposes that go beyond the manufacture and commercialization of its products. We are present in 72 countries on all continents. The multi-channel group uses direct selling, stores, franchises, department stores, wholesale distributors and e-commerce to market its products. We have more than 18,000 direct employees engaged in the development of three iconic brands in the beauty world.

These are three pioneering companies, committed to generating positive economic, social and environmental impact and strongly driven by similar values since their inception. Our strengths are complementary in terms of markets, channels and product categories, and we share the same fundamental values when it comes to corporate conduct. Our portfolios consist of products that are natural in origin, and we value traceability and sustainability in sourcing ingredients, promoting the preservation of biodiversity, fair trade with suppliers, the elimination of animal testing, and the measurement of production impacts (which includes the neutralization and reduction of carbon emissions), as well as support for education.

We are gradually aligning our practices, in a manner coherent with our shared history of transparency, and this 2017 report describes the first steps in this union. In this publication we present the characteristics of the group, as well as the performance highlights for each of the companies during the year.

Natura &Co 2017 . introduction

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Natura &Co 2017 . introduction

Natura was founded in São Paulo in 1969 and is present in nine countries – Argentina, Bolivia, Brazil, Chile, Colombia, France, Mexico, Peru and the United States. The company has 1.7 million consultants in Latin Ameri-ca, 6,400 employees, 26 company stores and a growing e-commerce business, the Rede Natura (Natura Network). More than 80% of the com-pany’s formulas are vegetable, and its relations with some 5,300 families in the sourcing of biodiversity assets encourage production techniques that contribute to keeping 257,000 hectares of forest standing. In 2014, we became the first publicly traded company to receive B Corp certi-fication, for having a business model capable of generating a positive impact on society.

Aesop was founded in 1987 by Dennis Paphitis in Melbourne, Australia, with the aim of developing high quality products from botanical and scientifically proven ingredients. It has direct operations in 23 coun-tries through 209 signature stores (bearing the signatures of globaly re-nowned architects), department stores, local distributors and a digital platform serving 14 countries. The operation has some 1,800 employees focused on developing high quality retail, with close attention to each detail – from the formulation of the products to the in-store experience. In 2017, the Aesop Foundation was created to guide our philanthropic efforts, while we continue to enhance the measures adopted to reduce environmental impact.

The Body Shop was created by Anita Roddick in 1976, in Brighton, Eng-land, and is guided by the vision that business can be a force for good. At the end of 2017, the brand was present in 68 countries with 3,049 stores (of which approximately 1,000 are company-owned and 2,000 are franchises), and 33 e-commerce websites. It has 7,000 direct sales consultants, and 10,000 direct and 12,000 indirect employees. The com-pany’s global CSR strategy, its Enrich Not Exploit™ Commitment, shares its attitudes towards products, people and the planet. It includes The Body Shop’s most ambitious campaign to date, Forever Against Animal Testing, calling for a complete ban on animal testing in the cosmetics industry. Among its other objectives, it also strives to connect economi-cally vulnerable people with international trade through the Community Trade programme.

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Natura &Co 2017 . index

Natura &Comessage from the Board of Directors Natura &Co around the world governance

results and strategy financial performanceenvironmental highlightssocial highlightsstrategyconsumers

our businesses in 2017 message from the CEOs

Natura highlights major launches

The Body Shop highlights major launches

Aesophighlights major launches

credits

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2226283032

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505258

606268

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Natura &Co 2017 . message from the Board of Directors

In the world, we are experiencing intense times. In spite of the apparent resumption of economic vitality, inequality continues to present a systemic threat which will tend to increase because of the impact of new tech-nologies on employment, intensifying social pressures. This uncertain environment creates room for isolationist ways of thinking, such as the setbacks in the Paris Agreement, a global effort to combat climate change. In contrast, countries previously criticized for their un-trammelled and reckless production, are now emerging as active participants in debates on how to reconcile economic activities with en-vironmental conservation, even though they still have a long way to go.

From left to right:Luiz Seabra,Guilherme Leal,Roberto Marquesand Pedro Passos

The beginning of a new era

What matters to us is to show that companies should be transformed into forces for positive social change. That they should change from being vehicles for the creation of private wealth to instruments aimed at the public good”.

Anita Roddick, 2000 social activist and founder of The Body Shop

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Amidst these impediments to civilization, that pose a threat to the fu-ture of mankind, in 2017 we lived through a process that transformed our history as a company: we created a group of companies that, for decades, have been doing business in a new way. Natura, Aesop and The Body Shop have joined forces in Natura &Co, a global cosmet-ics group which is unique in that it comprises businesses that share a common vision and a strong sense of purpose. We believe in the transformation of the global economy and in the power of sharing, in its many facets. In the sum of strengths, and in the power of differ-ences. In connection, in comprehension and in collaboration for the co-creation of solutions capable of driving a positive transformation in the world.

We are also experiencing intense times in our companies, albeit more predictable than those the world has been experiencing. We believe, however, that in Brazil and worldwide, new forces will enable us to overcome separation, indifference and alienation, in the pursuit of a common good, of a fairer society aware of its commitment to future generations. To repeat the truly inspiring phrase of Insead professor of Global Management Joe Santos, “globalisation allows us to use the whole world for the purpose of creating something new”.

With Natura &Co, we are seeking this something new and expressing our profound confidence in the transformational potential of a new, more humane and systemic form of globalisation, of value creation for our companies, for society and for the planet.

In this historical moment filled with so many risks, it is our understand-ing that companies have both the opportunity and the duty to re-spond to society’s call to help drive major transformations. This was always one of the ideals that we shared with Anita Roddick, the found-er of The Body Shop and a pioneering voice in insisting that business should assume the responsibility of being a force for good.

In the same way that we pay tribute to the legacy left by those who built the companies united in Natura &Co, we celebrate the future that we are beginning to build. In 2017, while still in an initial stage of inte-gration, our businesses produced excellent results. Natura revitalized its presence in the Brazilian market, gained share in key categories and continued to grow its operations in Latin America. In parallel, Aesop maintained its accelerated expansion in the retail trade in large ur-ban centres on all continents, exceeding the milestone of 200 com-

pany-owned stores. And The Body Shop, whose integration into the group began in September, contributed with its best Christmas per-formance in recent years.

This is only the beginning of a long journey. In 2018, we are going to consolidate the basis of our group and in so doing build the en-vironment which will enable the business to gain momentum. Close to completing 50 years in business, we feel as if we are just starting. Natura &Co takes our dream of internationalization to the next level. Now, we will be able to drive a positive impact in 72 countries on every continent, accelerating the exchange of knowledge and taking our brands to new consumers.

Just as we believe in the power of shared values, such as a passion for cosmetics and a passion for relationships, embodied in our Reason for Being, WellBeingWell, we recognize the creative power and the wis-dom contained in differences. With this renewed, diverse and multi-cultural energy, intensified by collaboration among three businesses, we will be more capable of generating even greater and better eco-nomic, social and environmental results.

Antonio Luiz da Cunha Seabra . Co-ChairmanGuilherme Peirão Leal . Co-Chairman Pedro Luiz Barreiros Passos . Co-ChairmanRoberto Marques . Executive Chairman

Natura &Co 2017 . message from the Board of Directors

Roberto Marques,Carla Schmitzbergerand Peter Saundersduring Board of Directors meeting

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Natura &Co around the world

The geographical distribution of

the 72 countries we operate in

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ArgentinaBermudaBoliviaBrazilCanadaChileColombiaMexicoPeruUnited States

AMERICAS

AustriaBelgiumCyprusCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHollandHungaryIcelandIrelandItalyLatviaLithuaniaLuxemburgMaltaMonacoNorwayPolandPortugalRomaniaRussiaSloveniaSpainSweedenSwitzerlandTurkeyUnited Kingdom

EUROPE

BahrainJordanKwaitLebanonOmanQatarSaudi ArabiaUnited Arab Emirates

MIDDLE EAST

BruneiHong KongIndiaIndonesiaJapanMacauMalaysiaMyanmarPakistanPhilippinesSingaporeSouth KoreaSri LankaTaiwanThailandVietnam

ASIA

AustraliaNew Zealand

OCEANIA

EgyptBotswanaNamibiaSouth AfricaMarocco

ÁFRICA

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local distribution . Bolivia

in 21 countriessignature stores, department stores, local distributors

countries23 209

signature storescounters99

in department stores

stores3,000+

countries68stores in direct selling

7,000+

in the United Kingdom and Australiaconsultants

ArgentinaBermudaBoliviaBrazilCanadaChileColombiaMexicoPeruUnited States

AMERICAS

AustriaBelgiumCyprusCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHollandHungaryIcelandIrelandItalyLatviaLithuaniaLuxemburgMaltaMonacoNorwayPolandPortugalRomaniaRussiaSloveniaSpainSweedenSwitzerlandTurkeyUnited Kingdom

EUROPE

BahrainJordanKwaitLebanonOmanQatarSaudi ArabiaUnited Arab Emirates

MIDDLE EAST

BruneiHong KongIndiaIndonesiaJapanMacauMalaysiaMyanmarPakistanPhilippinesSingaporeSouth KoreaSri LankaTaiwanThailandVietnam

ASIA

AustraliaNew Zealand

OCEANIA

EgyptBotswanaNamibiaSouth AfricaMarocco

ÁFRICA

Natura &Co around

the worldl Natura

l The Body Shop

l Aesop

stores26

countries5

company owned stores

19 in Brazil 1 in Argentina 1 in Chile

2 in the United States 3 in France

relationship selling

million1.7 consultants in Latin America

. Argentina . Brazil . Chile . Colombia . Mexico . Peru

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Natura &Co 2017 . governance

Board of Directors

Natura &Co 2017 . governance

Governance

The corporate governance struc-ture has been adapted to support the integration of Natura &Co. Natu-ra’s Board of Directors was expand-ed to ten members, its international character reinforced by the arrival of Canadian Peter Saunders, for-mer CEO of The Body Shop, who will contribute with his extensive knowl-edge of the recently incorporated company and his broad retail and international experience.

Another important change was the creation of the function of Execu-tive Chairman of the Board, a po-sition held by Roberto Marques, a board member since April, 2016. He has broad international experience at companies such as Johnson & Johnson and Mondelez Internation-al. The three founders of Natura, Luiz Seabra, Guilherme Leal and Pedro Passos, remain co-chairmen of the Board, to ensure a proper balance between business expansion and alignment with the company’s pur-poses and essence.

Each of the three companies has its

own CEO and Executive Commit-tee, as a guarantee of autonomy.

Group Operating Committee

The Group Operating Committee (GOC) was created with the objec-tive of streamlining the develop-ment of Natura &Co. This comprises the CEOs of the three companies, representatives of key areas (Fi-nance, Human Resources, Strategy and Business Development, Legal, Innovation and Sustainability, Oper-ations and Corporate Governance) and the Chief Transformation Of-ficer, Robert Chatwin, responsible for all matters concerning Natura &Co or more than one of the brands.

The GOC is led by the Executive Chairman of the Board, Roberto Marques, and is aimed at driv-ing dynamic solutions for Natu-ra &Co. For this reason, the option was made for a structure in which some members play a dual execu-tive role, maintaining their attribu-tions in the businesses.

Antonio Luiz da Cunha Seabra

Guilherme Peirão Leal

Pedro Luiz Barreiros Passos

Co-Chairmen

Roberto de Oliveira Marques

Executive Chairman

Carla Schmitzberger

Fábio Colletti Barbosa

Gilberto Mifano

Marcos de Barros Lisboa

Peter Bryce Saunders

Silvia Freire Dente da Silva Dias Lagnado

Directors

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Natura &Co 2017 . results Natura &Co 2017 . results

The year which marked the union of Natura, Aesop and The Body Shop, 2017 saw strong growth in sales, EBITDA and income (including four months of The Body Shop’s results from September). Moreover, cash generation in the period was robust, while net debt ended the year at 3.0 times EBITDA, well below the initial forecast of 3.6. These numbers reaffirm Natura &Co’s potential to generate great results.

Financial performance in 2017

EBITDA margin (% net revenue)

Net income margin (% net revenue)

17.7%

6.8%

consolidated ebitda (R$ million)

29.6% Annual growth rate

free cash flow generation (R$ million)

consolidated net revenue (R$ million)

consolidated net income (R$ million)

117.5% Annual growth rate R$ 147

million

9,853

7,913

2016 2017

Annual growth rate

24.5% 2016 2017

1,344

1,742

2016 2017

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470

308

670

2016 2017

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Natura &Co 2017 . results Natura &Co 2017 . results

1. At constant exchange rate. 2. Excluding Brazil.

8.3%7.8%

Brazil . net revenue (R$ million)

5,575

2017

Annual growth rate

4.5% 2017

Brazil . ebitda (R$ million)

21.8% Annual growth rate

net revenue (R$ million)

2017

Annual growth rate1

7.8%

7,690

ebitda (R$ million)

706

net revenue (R$ million)

2017

Annual growth rate1

30.3%

Annual growth rate1

2.2%

111

Annual growth rate1

2017

ebitda (R$ million)

2.2%

Latin America2 . net revenue (R$ million)

292

2017

Latin America2 . ebitda (R$ million)

27.6%

net revenue

2017 2016 2017

ebitda margin

1,257

Natura Aesop

2,108

2017

18% Annual growth rate1

Annual growth rate1

2017

21.3% Annual growth rate1

1,525EBITDA margin (% net revenue)19.8% EBITDA margin

(% net revenue)15.7%

EBITDA margin (% net revenue)22.6%

EBITDA margin (% net revenue)13.8%

The Body Shop3

3. The Body Shop joined Natura &Co in September 2017 therefore annual net revenue and EBITDA values are not included.

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Natura &Co 2017 . results

Environmental highlights

In 2014, Natura became

the first publicly traded

company to be made a

B Corp, joining a global

network that associates

economic growth

with the generation of

social and environmental

value. In the first half

of 2017 Natura renewed

its certification,

while including Aesop

indicators. Its final

score increased by 11%

(reaching 120 points

out of a possible 200).

Organic alcohol protects biodiversity in BrazilNatura’s entire perfumery line uses only organic alcohol. The company started using this ingredient in 2006, and, two years later The Body Shop also adopted it for some products. Both companies have the same supplier: Native, which grows sugarcane without the use of burning, crop defence products or chemical fertilizers. This sustainable cultivation has enabled 340 animal species to return to their natural habitat in Brazil’s Atlantic Rainforest.

5 million people are alreadysupporting The Body Shop’s campaign This is the number of signatures the Forever Against Animal Testing campaign (further information on page 52) had gathered by March 2018. The Body Shop has never tested its products on animals and, in 1989 started campaigning to ban this practice. Since it was founded, Aesop has never used animal testing, while Natura eliminated tests on animals in 2006.

261,000 hectares of forest conserved Natura’s partnerships with communities in the Amazon incentivize sustainable production techniques that help conserve 257,000 hectares of forest in the region. Whereas The Body Shop is active in protecting the environment in Asia through its Bio-Bridges project (further information on page 57). These corridors conserve more than 4,000 hectares of forest land.

for4 years

B Corp

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Natura &Co 2017 . resultsNatura &Co 2017 . results

Social highlights

million reais raised for education through the Instituto Natura and the Aesop Foundation

38.6

The profit from Natura’s Crer Para Ver (Believing is Seeing) line of non-cosmetic products, launched in 1995, is channelled into projects to improve the quality of education (in Brazil, these funds are managed by the Instituto Natura). In 2017, R$ 35.7 million was raised in Latin America, benefiting more than 2,400 schools in the region. In parallel, the Aesop Foundation, created in 2016, partners with philanthropic organizations to cultivate written and verbal skills among young people. Last year, investment totalled AU$ 1.2 million (around R$ 2.9 million).

The raw material supplier communities number some 36,000 people Together, Natura and The Body Shop work with 65 communities that supply raw materials, incentivizing production techniques that promote sustainable local development. The Body Shop’s pioneering Community Trade programme has been in place since 1987 and has now spread to 23 countries, prioritizing ingredient sourcing from economically vulnerable families. Natura has used Brazilian biodiversity ingredients since 2000 (from the launch of its Ekos product line) and develops supply chains that place value on the standing forest.

1.7 million consultants Natura and The Body Shop work with direct selling. Since 1974, this has been Natura’s main business. Currently the company has 1.1 million consultants in Brazil and 600,000 in the other countries of Latin America. Known for its retail outlets, The Body Shop also has more than 7,000 consultants in its The Body Shop at Home network, launched in the United Kingdom in 1994 and now active in Australia too.

18,000 people work at Natura, Aesop and The Body Shop

Present on five continents, the Natura &Co team is naturally multicultural. { {

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Natura &Co 2017 . strategy

We have the opportunity to consolidate a global cosmetics group, with businesses whose voca-tion is to create quality products based on nat-ural ingredients, to take into account the inter-dependence between finance, society and the environment. Their robust trajectories, originat-ing in different geographies, are complement-ed by their diversified strengths. This creates an apt environment to drive the growth of a beauty and personal care group with a presence in all key markets and product categories.

The implementation of the Natura &Co gover-nance and management structure will be a ma-jor focus for 2018. We intend to inspire a spirit of autonomy and enterprise in each operation, while simultaneously nurturing a culture of in-terdependence aimed at capturing synergies, best practices and gains in the allocation of re-sources to benefit all the businesses.

Our strategy

NATURA . We will further extend the implantation of the strategic directives that produced the robust results achieved in 2017:• Revitalization of direct selling• Repositioning of the Natura brand• Strategic review of brand architecture• Multichannel buying experience• Strengthening our position in Latin America• Expansion to developed and developing markets• Digitalization

AESOP . We will continue to grow and build the business in new and existing countries, maintaining our successful course of the last five years:• Develop a strong omnichannel presence that pro-

vides high levels of customer service• Continue to build and reinforce culture and devel-

op a strong learning organisation• Cash generation to finance expansion and devel-

opment of backend capabilities to support the growing business

• Strengthened social and environmental activities

THE BODY SHOP . 2018 will mark the beginning of a new chapter for The Body Shop. It is our understanding that there is great growth potential based on the operation’s strengths. The transforma-tion plan involves:• Rejuvenation of the brand• Optimization of retail operations• Improvement in operational efficiency• Enhancement of the omnichannel experience• Redesign of organizational structure

Natura &Co 2017 . strategy

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More conscious and demanding consumers

Because of their background and ambitions, the Natura &Co brands connect with a new consumer pro-file: aspirational consumers, defined basically as people with a taste for products linked with responsi-ble consumption and brands that show socioenvironmental concern. Knowing the benefits products and services offer is not enough for them. They want to know about ev-erything the companies do – and how they do it.

According to a study conducted in 2016 among 22,000 people in 22 countries by the consultancies Globescan and BBMG, aspirational consumers represent about 40% of the global market and are relevant not just because of their significant numbers, but because they are able to balance materialism, sustainabil-ity and social values in their con-sumption patterns. Moreover, they make a point of cultivating their own style (they want to be different) and are capable of influencing cultural standards and other social groups.

The survey listened to people aged between 18 and 54 years, divided

between millennials (born between 1982 and 1998) and generation X (born between 1962 and 1981). In emerging countries, such as China, India and South Korea, the aspira-tionals account for half of the pop-ulation – in Brazil, the group rep-resents 42% of the market. Another trend identified was the existence of more generation X aspirational consumers in the developed na-tions (34% compared with 26% of millennials in the United Kingdom, for example). In Brazil, 55% of aspi-rational consumers belong to the millennial generation.

Immersed in uncertainty and a state of crisis, in which capitalism is ques-tioned because of inequality and the damage it can do to the ecosystem, brands need to show that they are a force for positive transformation. Since their origin, Natura, Aesop and The Body Shop have genuine-ly wanted to offer their consum-ers products and services that can transform people, relations and the planet. Now, together in Natura &Co, they will join forces to strengthen their ties and expand opportunities among the aspirationals.

Natura &Co 2017 . consumers

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Our businesses in 2017

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Natura &Co 2017 . message from the CEOs

Natura &Co was born as a promise for business and for the world. The fruit of the union of three pioneering compa-nies, committed to generating positive economic, social and environmental impact, combining multiple brands, channels and geographies, our busi-nesses are today at different stages of maturity and, more importantly, boast diverse and complementary types of expertise. This gives us the opportu-nity to take greater advantage of the strengths of each part. There is great-er power to be had in the &, in work-ing together in these businesses and with these purposes, than we could achieve separately.

Co-constructing the future

From left to right, David Boynton, João Paulo Ferreira and Michael O’Keeffe, at the new Natura administrative headquarters in São Paulo

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In this respect, Natura’s major contribution to the group is the ca-pacity to mobilize its network of 1.7 million consultants. Revitalized in 2017, the Relationship Selling model made a decisive contribution to our excellent results in the year. We reached our highest ever con-sultant loyalty rate in Brazil, driving gains in market share and leader-ship in the perfumery, body and gift categories. In addition to Brazil, we are the leaders in direct sales in Argentina and in Chile, and are growing at an accelerated rate in Mexico. Our challenge now is to step up the implantation of this successful strategy, further integrat-ing operations in Latin America and boosting the invigorating digital transformation in our business model.

Aesop celebrated 30 years of existence in 2017. During this time, we have developed a buying experience that carefully nurtures each point of contact in the relationship with customers, be it products, stores or people. Since we joined Natura five years ago, we have quadrupled our revenue and number of stores, and extended our direct presence from eight to 23 countries. In 2017, 38 company-owned stores were inaugu-rated, as were new operations in Austria and the United Arab Emirates. Aware that retail excellence is our key differential, we are focused on maintaining these quality standards while continuing the intensive ex-tension of our activities to new cities and countries. Similarly, we are striving to evolve in offline/online integration and in cash generation capacity to finance our great expansion potential.

The most international of our brands, The Body Shop is present in 68 countries on all continents. Even more noteworthy is the company’s activist spirit, which for 40 years has mobilized communities around social and environmental issues. With an evolving multichannel expe-rience, The Body Shop experienced 9% growth in e-commerce, with a 6.6% increase in direct sales. Our consumer loyalty program Love Your Body Club grew its active loyalty customer base by 23% and we ended 2017 with a total of 3,049 company-owned and franchised outlets. Be-coming part of Natura &Co marks an exciting point in our history. The Body Shop is a well-loved global brand with strong values and ethics. These aspects of the brand are very important to us and to our cus-tomers, and being part of Natura &Co, we know that these things are really valued. We are currently undergoing a transformation, which involves rejuvenating the brand, optimizing the retail operation,

enhancing the multichannel experience, improving operational effi-ciency and evolving in the ways in which we work and take decisions.

The powerful combination of our companies creates a multichan-nel, multibrand purpose-oriented cosmetics group, with comple-mentary knowledge and strengths and a global presence. Beyond the prospects of geographical expansion and gains in efficiency, this opens incredible avenues of opportunity, which we will begin to capture in 2018. We are building a group culture, based on auton-omy and interdependence. It is our conviction that Natura &Co will drive significant growth in our companies, enabling us to continue to expand the impact of our business activities as a positive force for the evolution of society.

David Boynton . The Body ShopJoão Paulo Ferreira . NaturaMichael O’Keeffe . Aesop

Natura &Co 2017 . message from the CEOsNatura &Co 2017 . message from the CEOs

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Natura in 2017

Natura employees in meeting with Beauty Consultant(on the right)

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2017 highlights

Natura &Co 2017 . NaturaNatura &Co 2017 . Natura

Natura relaunches its direct selling modelWe implemented a major movement to revive the essence of our direct selling, which was renamed Relationship Selling. The goal is to enable consultants to develop pro-fessionally, to feel part of a community and to find ways to generate a positive impact through cosmetics and relations. The novelties include a growth plan and the possibility of becoming a Business Leader (developing a group of consultants) or a Beauty Entrepre-neur. In 2017, productivity per consultant increased and the loyalty survey* recorded its best result ever (33.9%). In 2018, the new model is being introduced in the other countries in Latin America.

The power of Brazilian originalityLaunched in March 2017, the Casa de Perfumaria do Brasil (Brazil's Perfumery House) campaign presented Natura as the brand which best translates Brazilian originality and irreverence in fragrances. We have 20 essential oils from Brazilian biodiversity which, combined with some 2,500 ingredients from global perfumery, result in unique olfac-tory paths. We have an exclusive perfumist, and our product lines use only organic al-cohol (made from sugarcane cultivated without burning and without crop defence or chemical products). At the end of the year, Natura resumed its market share leadership in Perfumery in Brazil, according to Kantar Worldpanel.

* Loyalty is an indicator the measures the consultant’s satisfaction with the brand, the intention to continue her relationship with Natura and how much she would recommend the company to someone

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We reached the R$ 1.2 billion mark in business in the AmazonOne of the commitments in our Sustainability Vision was to do R$ 1 billion in business in the Amazon region by 2020 (cumulative volume from 2012). The good news is that we reached this landmark in 2017, ending the year at R$ 1.22 billion – more than 20% over the initial target. This was made possible by the Amazônia Program, launched in 2011, which orientates investments in research, innovation and the formation of sustainable production chains.

The City of São Paulo gains two Natura spacesIn August, we inaugurated our new administrative headquarters (above), NASP (acronym for Natura São Paulo). The building comprises open spaces with lots of glass, created to facilitate the integration of 1,600 employees, and it was built sustainably – including a green roof that intensifies thermal insulation. Casa Natura Musical, opened in May, is a show venue. Among other acts, it showcases artists in the Natura Musical program, which in 13 years has supported more than 1,300 cultural products.

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CONVERGENCEConsultants reduce online/offline barriers

In Brazil, around 500,000 con-sultants (45% of the total) are already using the Natura con-sulting application, which pro-vides access to information about their activities, including purchase statistics and dis-tance training. Moreover, more than 160,000 of them have al-ready created virtual stores on the Rede Natura (Natura Net-work), a portal enabling con-sumers to buy product online.

ENTREPRENEURSHIPFranchises: a new form of Relationship Selling

Consultants who have worked with Natura for over a year and have high sales volumes can now become Beauty En-trepreneurs. With this system, they sign a franchise contract and can open Aqui Tem Na-tura stores, with exclusive vi-sual identity and commercial support. By the end of 2017, more than 50 consultants had already become franchisees, with sales outlets on commer-cial streets and in small shop-ping arcades.

FOR THE ATMOSPHERECarbon Neutral program completes 10 years of existence

In 2007, we assumed the commitment of a one third decrease in our greenhouse gas emissions by 2013. We achieved the target, and by the end of 2017, some 900,000 tonnes of carbon emissions had been avoided (and all the emissions we cannot avoid are neutralized by offsetting pro-jects). Our current challenge is another one third reduction in emissions by 2020.

COMMON PURPOSEConsultants continue to drive improvements in education

Since it was created in 1995, profits from the Crer Para Ver (Believing is Seeing) line have been invested in education-al projects in Brazil and Latin America. Like Natura, the con-sultants forgo their profit from selling this non-cosmetic line (products such as exercise books, pencils and gifts). In Bra-zil, 28% of them commercial-ized at least one Crer Para Ver product in 2017 – a new pene-tration record.

CORPORATE IMAGENatura's reputation is on the rise in Latin America Latina

The Spanish consultan-cy Merco, which elects the companies with the best reputations in the countries in which it operates, recog-nized all Natura’s operations in Latin America. We came in first place in Brazil and were also listed in Argentina (8th), Peru (13th), Chile (18th), Mexi-co (25th) and Colombia (25th) – a country in which we climbed 75 places compared with 2016, a record among the companies assessed.

OPEN DOORSExpansion of Natura Stores reaches other countries

In the course of 2017, we opened our first stores in Ar-gentina (in Buenos Aires) and in Chile (in Santiago). We also inaugurated a second point of sale in the United States, in New Jersey, and in Paris, France – and at the begin-ning of 2018, we inaugurated our third store in the French capital. In addition to the sev-en units overseas, we have 19 stores in Brazil, located in shopping malls in the states of São Paulo and Rio de Janeiro (14 were opened in 2017).

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Tododia Ameixa e Flor de Cerejeira With a new positioning which made its media debut in June, the Tododia line invites women to reconnect with their bodies (bypassing social impositions). The items with the fragrance Ameixa (Plum) and Flor de Cerejeira (Cherry Blossom) were the first ones launched using this new concept. They include BB Multibenefit Moisturising Body De-odorant Base, which hydrates and evens out the tone of the skin.

Ekos Patauá Our new line of hair products comes from the fruit of the patauá palm tree from the Ama-zon. The patauá fruit provides a high quality oil that has been used by women in Acre to care for their hair for many generations. Through a series of studies we discovered that the oil extends the growth phase of the strands. Ekos Patauá has six items, including the scalp tonic and shampoo, which sold out rapidly. In respect for nature’s timing, the line was temporarily unavailable until our partnering communities were able to harvest the fruit again.

Major launches in 2017

Deo Parfum K In October 2017, we launched K, the first deo parfum in the Kaiak family of products, one of our main per-fumery lines. The masculine fragrance inaugurated a new olfactory path for Natura, called intense aromatic, in which the fresh and aromatic characteristics of Kaiak blend with woody notes; this composition brings high quality ingre-dients, known as OrPur (“pure gold”). Co-created by three professionals (Sonia Constant, Claudio de Deus and Veronica Kato – Natura’s exclusive perfumist), K was one of the Casa de Perfumaria do Brasil highlights in the year.

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Chronos revitalizing platform Recent research has shown that stress and pollution impact skin quality. To pro-tect it from this daily ag-gression, the Chronos facial care line launched two prod-ucts employing exclusive technology: Concentrado Revi talizante (Revitalizing Concentrate) and Fluido Multiprotetor (Multiprotec-tion Fluid). They repair deep damage, stimulating the skin’s natural defences and helping decelerate the ap-pearance of wrinkles, blem-ishes and acidity.

Faces From its relaunch in February 2017, the Faces make up line proposed the discussion of questions of identi-ty, gender and prejudice. Packs were renewed and the portfolio was expanded. The products are easy to use, practical to carry around and, as the campaigns under-score, are for anyone regardless of gender – such as the lipsticks on the picture.

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The Body Shop em 2017

The Body Shop in 2017

The Body Shop, Natura and Aesop colleagues commemorate the union of the companies in Littlehampton, England

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Natura &Co 2017 . The Body ShopNatura &Co 2017 . The Body Shop

2017 highlights

We are Forever Against Animal TestingIn June 2017, The Body Shop launched its biggest campaign ever, Forever Against Animal Testing. The campaign, launched alongside long-time partner Cruelty Free International, aims to end animal testing in cosmetics globally by calling on the UN to enact a global con-vention. The campaign petition received three million signatures in the first three months. Our aim is to gather eight million signatures to deliver to the UN in 2018, and to achieve this we are promoting the campaign globally (including through a “pet protest” at the UN in January). We were the first global company to campaign against animal testing.

We celebrated 30 years of our Community Trade programmeThrough our Community Trade programme we work with over 15,000 people in 23 countries. Created in 1987, the initiative is at the heart of our business, and around 95% of our products contain raw materials from at least one of the 31 communities in our programme. In 2017, we added five new Community Trade supply chains to our portfolio, including mango producers in India and moringa seed oil producers in Rwanda, bringing around 2,400 economically vulnerable people into international trade for the first time.

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Strong sales at Ramadan and Christmas The main The Body Shop Asia-Pacific franchise market, Indonesia, grew 14%. This was driven by sales of facial products and by some special dates. We had our largest Rama-dan gift sales ever, with a 37% increase — the end of the fasting period for Muslims is marked by the exchange of presents. Sales at Christmas increased by 15%.

Digital transformation in Europe Online sales in Europe increased by 18%, accompanied by a growth in profit. This result was driven by improvements in personalized merchandising and performance marketing. We have implemented a customer conversion plan and have optimized carriers and services we use across the region, such as implementing collection points in the UK and Sweden.

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AROUND THE WORLD Stores and e-commerce in new countries

We saw additional The Body-Shop growth in EMEA (Europe, Middle East and Africa), after entering two new markets. In November, we opened our first store (above) and e-com-merce site in Cyprus. And in Slovenia we launched an on-line store before Christmas – the physical sales outlets are scheduled to open in 2018.

AT HOMEThe Body Shop at HomeTM grew 32%

The Body Shop at HomeTM, our direct selling channel in the United Kingdom and Austra-lia grew 32%, generating an impressive profit margin. We invested in our recruitment strategy and increased pro-motions for members of the brand’s direct selling teams, as well as introducing a new affil-iate programme and investing in advertising on social media.

FAN CLUB First anniversary of Love Your Body Club in North America

In April, we celebrated the first anniversary of the Love Your-Body Club (LYBC) in North America. Upon joining LYBC, clients can get points and receive rewards based on their purchases – or donate the proceeds to charity. We reached 1.5 million members in the United States and Can-ada – 124% above target. The average amount per transac-tion for Canadian members is 36.51 dollars – 14.49 dollars more than non-members of the club.

DIGITAL LIFEThere are 13 million of us on social media

In 2017, we reached and engaged more clients dig-itally worldwide. Our social network community is ro-bust, with around 13 million people. Searches for the brand grew by 8% and traf-fic on The Body Shop pages grew by 20%. We also post-ed 20% growth in our active customer base and in the number of Love Your Body Club members.

NEW PATHSBio-Bridges helps conserve species

We launched the World Bio–Bridges Mission, a programme dedicated to protecting en-dangered species. Through the programme we raised money to build Bio-Bridg-es – corridors that reconnect healthy forests, enabling iso-lated endangered animals to reproduce. For the time being, we are present in Vietnam, In-donesia, Malaysia and India. A good example of the need for this work is the Tapanuli orangutan. The species was discovered recently in our bio-bridge in Indonesia. It is the rarest endangered monkey in the world.

GOOD DEBATESTBS Talks addresses engaging and inspiring topics

We’re passionate about inspir-ing our employees and tell-ing them about our priorities. TBS Talks, our livestream pro-gramme (which is often also open to the public), discusses questions that matter to us. In 2017, we celebrated wom-en’s achievements globally in a debate on International Women’s Day. We also held discussions on modern slav-ery, climate change and our Community Trade program.


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Shade Adjusting Drops To complement the beauty of diverse skin tones, we created a product that is as simple as it is innovative. Just add one drop to your make up base to create your own exclusive tone. The Shade Adjusting Drops have an infusion of English rose water and organic aloe vera sourced from our Community Trade partner in Mexico.

Almond Milk & Honey This body care line was formulated for dry, sensiti-ve skin. Enriched with ingredients from our Community Trade partners – almond oil from Alicante, Spain, and honey from the Sheka tropical forest in Ethiopia (one of the UNESCO Biosphere Reserves) –, Almond Milk & Honey is good for the environment and your skin.

Amazonian SaviourTM Multi-Purpose Balm The inspiration for our balm be-gins in the Amazon forest. It is enriched with Community Trade organic babassu oil from producers in Maranhão, Brazil. Made with just nine na-tural-origin ingredients, the product is 100% vegetarian, with no silicone, colouring agents, mineral oil or fragrance. The balm also contributes to our Bio-Bridges programme that supports endangered species.

Ginger Shampoo Indicated for dry hair or dandruff, this shampoo has become popular worldwide – one is sold every four seconds. With ginger oil from Sri Lanka, it cleans and soo-thes the scalp. The formula includes organically produced honey from breeders in Beza Mar in Ethiopia, hel-ping to preserve the forest.

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Aesop in 2017

Aesop store in Duke of York Square, London,inaugurated in 2017

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2017 highlights

Natura &Co 2017 . AesopNatura &Co 2017 . Aesop

Austria and the United Arab Emirates: two new countries in 2017 We inaugurated our first signature store in Austria, in the historical centre of Vienna (above). The space is influenced by Austrian buildings from the 1920s – inspired in particular by the work of the architect Adolf Loos (1870-1933). For Aesop’s entry into the Middle Eastern market, we partnered with the distributor Ahmed Seddiqi & Sons, which has a strong presence in the United Arab Emirates. In December we opened a point of sale inside Bloomingdale’s (famed North American department store chain) in The Dubai Mall, one of the largest malls in the world.

Yet another year of store openings and revenue growthIn 2017, Aesop revenue grew 30.3% over 2016. Like for like sales growth of retail stores was 17%. Growth strategy has been a measured mix of penetrating deeper in existing mar-kets and entering new markets. We opened 33 signature stores during the year, reaching a total of 209 units in 21 countries. Together with e-commerce, these signature stores account for 65% of Aesop revenue – the remainder comes from 99 Aesop points of sale in department stores.

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Human Resources delivers new initiatives to strengthen people leadership and learningOur global team comprises some 1,800 people, counting office and retail staff. The Human Resources team, located in London, Melbourne and in other cities, was re-structured to create a stronger focus on our people. During the year, we implement-ed new strategies around learning and recognition. The People Matter programme, for example, drives leadership development, giving store managers the self-assur-ance they need to manage people.

The Aesop Foundation completes its first year in operation Established in 2016, the Aesop Foundation aims to improve opportunities for individuals through literacy, supporting them so they can tell their own stories. In 2017, we made contributions totalling AU$ 1.2 million to ten organizations that stimulate writing skills. These included the Sydney Story Factory, which organized workshops with underpri-vileged young people to enable them to write 20,000 word novellas. One of the young participants, Vivian Pham, exceeded expectations, producing a 93,000 word novel.

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DIGITAL INTEGRATIONNew e-commerce platform implemented

In 2017, Aesop.com launched the SAP Hybris e-commer-ce platform. Fourteen online stores migrated to this sys-tem, while another four are in the course of doing so. Cur-rently, Hybris is consolidating a number of our websites, en-suring an enhanced and safer user experience.

RELIABLE PARTNERSSuppliers take part in global ethics programme

We continue to encourage our suppliers to participate in the Sedex (Supplier Ethical Data Exchange) program-me. This collaborative glo-bal platform shares infor-mation about responsible supply chains. Three audits streamline assessments of all our suppliers (around 85% receive help from Aesop in the process).

SUCCESSIONProgramme accelerates career development for retail staff

The Retail Leadership pro-gramme identifies store staff who have leadership poten-tial and are engaged in the Aesop culture. The initiative currently involves nine partic-ipants – most of whom were retail consultants or assistant managers. Some have already taken on short-term higher duties (such as store manag-er), actively exploring the next steps in their career.

IN-HOUSE CREATIONSIn-house team designed 60% of the stores opened in the year

Aesop is known for inviting ar-chitects to design its signature stores – such as our latest spa-ce in Tokyo (above), created by

the French group Ciguë. But around 60% of the 33 Aesop signature stores inaugurated in 2017 were created by our own Retail Design team. The challenge is to build unique spaces, whilst ensuring careful cost management and mee-ting deadlines.


REDUCED IMPACTInitiatives reduce post-consumer waste generation

The Packaging team comple-ted a number of initiatives that helped to reduce the amou-nt of post-consumer waste created by Aesop products. For example, the weight of our 200 ml bottles was reduced by 14%. Online purchases are shi-pped in natural 100% recycla-ble cardboard boxes without tape or glue. The use of virgin raw materials at stores is also being reduced.

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Hwyl Eau de Parfum Aesop’s third fragrance, Hwyl Eau de Parfum, formulated in collabo-ration with the perfumer Barnabé Fillion, was launched in September. With a rich smoky and woody aroma, Hwyl is formulated with moss, spices, fresh thyme extract, cypress, vetiver extract and frankincense.

Gift kits Called “The Enigmatic Mind”, our gift kits pay tribute to social psychology experiments conducted in the 1950s to the 1970s. They include skin care and body care prod-ucts. “Perception”, for example, offers an exclusive edition of Redemption Body Balm, which combines perfectly with Redemption Body Scrub, also present in the kit.

Aromatique Room Sprays In July, we launched our first room sprays. The three fragrances were launched together: Istros, a refined, floral and smoky aroma; Olous, a vibrant mixture of green botanical and citrus extracts; and Cythera, a warm, woody and spicy fragrance.

Toothpaste August saw the launch of the first Aesop tooth-paste — this is the brand’s sec-ond oral hygiene product after its mouthwash. The formula-tion contains essential carda-mom, aniseed, mint and clove oils, as well as sea buckthorn botanical extracts and wasabi extract.

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Natura Avenida Alexandre Colares, 1.188Vila Jaguara . São Paulo . SP . Brazilnatura.com

naturaeco.com

The Body Shop Knollys House, 17 Addiscombe RoadCroydon . England . CR0 6FNthebodyshop.com

Aesop 25 Smith StreetMelbourne VIC 3065 . Australiaaesop.com

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CreditsNaturaCorporate Affairs DirectorMarcelo Bicalho Behar

Communication ManagerMilena Buosi

Report CoordinatorFábio Peixoto

ContentJuliana Bordignon

DesignCarolina Almeida

Executive productionPriscila Costa

Financial informationMárcio Bologna and Elisa Fortino

Market relationsMarcel Goya and Luiz Palhares

Brand consultingRenato Winnig and Paula Lila Drummond

Aesop Annabel White, Richard Chelotti, Sarah McKinnon

The Body Shop Kate Levine, Ellen Stirling, Maeve Atkins

Participation in this editionCreative direction and graphic design Aline Leme (The Design Boutique) Text Álvaro Almeida (Report Sustentabilidade) and Mirela Mazzola

Photography Eduardo Dulla (p. 34 and 70) Guilherme Missumi (p. 31 and 46) Natura, Aesop and The Body Shop Image CollectionMarlos Bakker (p.40, 42 and 46) Roberto Setton (p.11, 13, 36 and 39)

InfographyNewton Verlangieri

Translation Raymond Maddock

PrintingIpsis

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