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Thursday, March 23, 2006

Trend: Big Companies Buy Smaller Values Brands

Colgate on Tuesday became the second multinational corporation in a week to buy a small company with a social responsibility message. It bought 84% of Tom's of Maine, the all-natural personal care brand based in Kennebunk, Maine, for $100 million. All-natural personal care products represent a $3 billion market that's growing 15% per year, according to Colgate.

Friday, French cosmetics giant L'Oreal bought London-based retailer The Body Shop, a personal care chain known for its avoidance of animal testing and its support for human and animal rights causes.

Consumers have shown they are willing to pay a premium for "natural" products from values-oriented companies that make them feel good, and big marketers want a piece of the profitable trend.

What they're buying:

Tom's of Maine. The top-selling natural oral-care brand also sells such products as lemongrass soap and calendula shaving creams made with natural and biodegradable ingredients. Maintaining those standards was key to getting a deal done, said founder Tom Chappell in a phone interview.

One such standard was keeping the company in Maine. "Staying here is smart from Colgate's perspective" said Kate Chappell, who founded Tom's with her husband in 1970. "They are respecting the fact that we have a unique approach to creating efficacy with natural ingredients and a total values approach to doing business."

The Body Shop. L'Oreal CEO Lindsay Owen-Jones said in a statement that L'Oreal paid $1.1 billion for the 2,085-store chain for its "distinct culture and values" and growth potential. Founded by Anita Roddick in 1970, it was a pioneer in environmentally friendly packaging and animal testing standards.

Ben & Jerry's. Unilever (UL) bought the flavorful ice-cream brand in 2000 for $326 million, and it has lost some of its social edge since. But last year new president Walt Freese promised to up the social message. He started with the company?s first TV ad campaign in a decade. Rather than touting its Chunky Monkey or Chubby Hubby flavors, the ads promoted family farms, a dairy source for Ben & Jerry?s ice creams.

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