January 01, 2012
Natura: Blending Being Well with Well-Being
by Barbara Seale
Click here to order the Direct Selling News issue in which this article appeared.
Few businesses do what Natura does—intentionally integrating environmental concerns and social responsibility into business decisions, all while achieving enviable growth, even in a sluggish economy.
In the first nine months of 2011, Natura’s consolidated net revenue increased 9.5 percent over the same period of 2010, and the number of consultants selling the Brazil-based company’s cosmetics and toiletries increased by more than 16 percent.
When Natura reports its results to shareholders—its stock trades on Brazil’s BOVESPA stock exchange—it doesn’t stop with finances. Annual reports and quarterly press releases also discuss the company’s social and environmental performance. For example, by the end of the second quarter of 2011, Natura reported that it had reduced greenhouse gas emissions by 5.2 percent from a year earlier. When it lags behind on one of its commitments, it reports that, too. It hoped to reduce water consumption, but fell short of that goal. The company reports those shortfalls because of its commitment to transparency.
It all ties back to the company’s Reason for Being: to create and sell products and services that promote well-being and being well. That’s not just a clever turn of a phrase. Natura CEO Alessandro Carlucci explains that well-being is the relationship people have with themselves and their bodies, while being well describes relationships with other people and also with nature.
“When we share our results in an annual report or presentation, we show many kinds of results,” he says. “Our main objective is to offer opportunity for our salespeople. If you read our beliefs—what we value as a company—you see that we believe that our results depend on the value that our whole business generates. Our responsibility is not only to shareholders. We take our economic results into consideration, but also socioeconomic results. We try to align all of them. It’s in the DNA of the company.”
Guided by Beliefs
It all started in 1969 when Antonio Luiz da Cunha Seabra opened his Natura store and laboratory in São Paulo. It launched its first line of men’s products in 1970 and expanded into women’s cosmetics and fragrances two years later. Because direct selling reflected the company’s belief in the importance of relationships—and because it made good financial sense—the company soon settled on the direct sales model and started gathering consultants. In a pioneering move that heralded its commitment to environmental conservation, Natura began offering product refills in 1983. Today about 20 percent of sales come from refills of body creams, perfumes and other products, reducing the product’s environmental impact by half. Customers save money, too—20 to 30 percent. Everybody wins.
Since the beginning, Natura executives have recognized that the company’s environmental, social and business interests were intertwined. So to them, the only way to run the business has been to set clear goals for each. The objectives in each area of emphasis aren’t always in exact balance, Carlucci says, but he views the struggle as a huge motivation to innovate.
Take product development, for example. Before Natura launches any new product, it considers all the criteria any company would—customer demand, gross margin and economic benefits to consultants, for example. But it also factors in the product’s environmental impact. Natura requires that any new product have less environmental impact than existing products have. For example, the CO2 emissions generated during the manufacture and delivery of a new lipstick must be lower than the average of the existing products in its category. It’s a stringent requirement, but it’s absolute. If a new product can’t live up to requirements, it won’t become part of Natura’s product line. But the company has refined its processes so well that it frequently launches new or improved products.
For example, a highlight of 2011’s third quarter was the launch of the new product line VôVó, which celebrates the bond between grandparents and grandchildren with an “Album of Memories” product to encourage storytelling and the creation of a family tree—reflecting the company’s focus on being well. In the third quarter Natura launched 69 new products. Combined with the 40 products launched in the first six months of the year, the number of product launches in the first nine months of 2011 totaled 109. Included in that number was the beginning of the relaunch of the Natura Ekos line, which features improved formulas and packaging that strengthen the connection the products enjoy with Brazil’s biodiversity. The relaunch of that line was on schedule to be complete by year’s end.
Natura headquarters in Cajamar, São Paulo, Brazil.
Natura sources many of its products from the Amazon and surrounding areas.
Many Natura products use ingredients from the Amazon rain forest. In fact, when any product includes Amazonian ingredients, the company strives to source other ingredients from the Amazon as well. And true to form, Natura doesn’t just take from the forest. It gives back. Through its Amazon Program, it supports sustainable development of the ingredients it uses as well as ongoing economic benefits to the local residents who grow them.
“When we are developing new products, we have around 30 communities consisting of 2,000 to 3,000 families there already supplying Natura with local ingredients,” Carlucci notes. “We want to increase their profits, so we continue to use them. We contact them and ask for authorization to study the ingredients where they live in the forest. Then, when we develop products, we buy from them, pay a fair rate for the ingredients and share some of the profits from the products.”
Profit sharing supports a sustainable project in the community, and residents must extract ingredients in a sustainable way to continue to be eligible. Introducing local populations to ways to preserve the forest while also making a good living is a major shift; people traditionally cut down trees to sell for wood or to clear land for cattle. These widespread practices have contributed to the rain forest shrinking over the years. By contrast, Natura’s program teaches a sustainable alternative that is good for both the forest and its inhabitants.
“It’s a way to generate profit for them and also show them that the trees and forest have value beyond wood for furniture,” Carlucci says. “We are giving them the opportunity to use their surroundings in a way that is good for the environment.”
Some of the major beneficiaries of Natura’s focus on sustainability are the company’s consultants. Last year their numbers grew throughout the business, reaching 1,362,000, up 16.3 percent from a year earlier. In Brazil, the company’s largest base, consultants numbered 1,131,000 strong, an increase of 14.9 percent over the previous year. In international operations, the base grew by 23.2 percent to reach 230,000 consultants.
Those consultants stick around, too. Many top sellers have been with the company for more than two decades, and consultants report a remarkable 95 percent satisfaction rate. Carlucci believes that many factors contribute to retention, but two are at the top.
“First, customers want to buy our products,” he says. “We offer good value, so they are easier to sell than other products from our competition and provide consultants with a nice profit. Second—and most important to me—our consultants feel they really belong to a community, that they are part of a company that wants to offer excellent products and generate value for society, the environment and their community. They are engaged with the philosophy of the company. We try to treat them as people, not just numbers.”
Natura consultants can decide to sell products only, or they may choose to both sell products and recruit, train and coach new consultants. Natura supports them as they build their business. Both types of consultants typically sell one-on-one. Carlucci notes that they may show products at parties, but they are trained to show products to individuals.
The corporate office works hard to support relationships among consultants and customers as it provides information on the company and its products. Consultants have embraced its investment in e-commerce sites, placing some 90 percent of orders over the Internet. But Carlucci believes the technology door has barely been opened.
“We are only touching the potential in the use of technology,” he says. “It will be our main area of investment in the next five years. First, we will invest in digital and mobile technology. We think we have huge potential if we can connect our customers and consultants with mobile technology. We also want to invest in social media technology to enhance the relationships. We all belong to a community, though we are not always connected. Facebook and other social media sites offer a huge opportunity.”
Natura’s strategic vision to support society and the environment as it creates economic opportunity and a good return for investors has created consistent growth and a strong presence in its marketplace. Carlucci says that Natura is the largest Brazilian manufacturer of personal hygiene products, perfumes and cosmetics. It leads the direct sales sector in Brazil and ranks third globally. In financial terms, it ended 2010 with net revenues of R$5.1 billion, an increase of 21.1 percent over 2009. In Brazil, some 49 percent of consumers say they prefer Natura cosmetics. And the brand holds a 23.6 percent share in its target market.
Products from the relaunched Natura Ekos line.
Brazil currently produces most of Natura’s results; nevertheless, the company continues to invest internationally.
“We have developed our management systems, completing the international leadership framework at both our regional headquarters in Buenos Aires, Argentina, and in other countries where we operate,” Carlucci reports. “In this scenario, Latin America has gained increasing importance in our results. To meet our expansion plans in the region, we decided to start local production through partners in Argentina, Colombia and Mexico.”
Besides enhancing service to consultants and improving the margin of international operations, this new production and distribution system will reduce CO2 emissions by 70 percent. This means a reduction of almost 2 percent in total Natura emissions.
Carlucci adds, “All manufacturing will respect Natura sustainability principles. It is important to mention that the selection process for these new suppliers used not only technical and economic criteria, but also social and environmental criteria.”
Carlucci is bullish on the company he leads. He believes that as the corporate staff, consultants, customers, vendors and society work together, they can achieve great things in the world.
“It is with great happiness that I can say that, with the numbers we have achieved, we realize that the work we do every day is going well on three pillars on which our business is based: the social, the environmental and the economic,” Carlucci says. “Of course this does not only depend on us—on Natura. We have such a strong and significant network of relationships with our stakeholders that, step by step, day by day, we reach the objectives of all those who share the same values.”