Via Financial Times

At the Lush factory in Poole, on the south coast of England, workers pour luminous powders on to boards, ready to be chopped and shaped into soaps and things that go bang in the bath.

The smell is vivid and intensely sweet; Willy Wonka’s factory spiked with the throat-clenching grasp of citric acid. The products will be sold in the British cosmetic group’s 900 shops, equally pungent high street fixtures from High Wycombe to Hong Kong.

Bath bombs are still Lush’s best-selling range after 30 years of production. Sales of its shampoo bar, created so long ago that the patent to the solid block has expired, are booming. Like most Lush products — largely plastic-free, vegan and made without animal testing — its time has come.

Lush carries, in modern corporate speak, “purpose” — something other brands are frantically trying to gain as consumers become conscious of how their products are made and marketed.

How to Lead – Soaps are pressed by hand at the Lush factory in Poole, Dorset. 04/11/2019 - Photograph by Sam Frost ©2019 - www.samfrostphotos.com
Soaps are pressed by hand at the Lush factory in Poole © Sam Frost/FT

But this just elicits an eye roll from Mark Constantine, Lush’s co-founder and chief executive, sitting in his office above the original shop in the seaside town that still serves as a product laboratory. “I am a capitalist,” he says. “I just don’t choose to embark on some parts of it. The strange thing is how long we have been doing this. Nobody much cared. Now suddenly everyone cares.”

Mr Constantine founded Lush with six colleagues in 1995 with guiding principles over environmental and social responsibility. But he also made sure that even socially conscious moves had a commercial reason. Packaging is about two-thirds of the cost of the product, he says, which means that if you make goods without plastic “the customer likes that and you can make better payments, have better quality ingredients, all the luxuries we have in this company”.

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Lush feels tightly managed for a company set up by supposed former hippies, although Mr Constantine, 67, says a period in his youth living in the woods was more about homelessness than hippiness. The company made a pre-tax profit of £23.4m last year, down from £73.5m the year before. Lush has no debt, and it expects group revenues to rise by 34 per cent to £545m in 2019.

Has Lush ever been approached by private equity groups with big, debt-backed cheques? “Yes, but by taking modest dividends, by having modest salaries but good bonuses, then you don’t need lots of borrowing because you’re either generating [money] or not.”

Instead, the company has set up a shared ownership plan, divesting 10 per cent of shares to an employee trust. This will rise to 35 per cent, sold at a fixed rate of five times pre-tax profit. The owners still take decent dividends — £2.25m paid last year — but the structure encourages them to work harder: “If you increase profits and the business, your pot increases with the ratio, but it will not have a limitless greed factor, which will damage the business.”

How to Lead – A bath bomb fizzes in the Lush cosmetics shop in Poole, Dorset. 04/11/2019 - Photograph by Sam Frost ©2019 - www.samfrostphotos.com
A bath bomb fizzes in the Lush cosmetics shop in Poole, Dorset © Sam Frost/FT

One thing slightly rankles him: “Is it aggressive enough? I don’t know. This is all very lovely, this virtuous circle. But does it create enough drive and dynamism to be successful with our secret plan? I don’t know.”

Lush’s secret plan is not all that secret. It is, in fact, emblazoned on a large board behind him: make products for every need; be number one in every category; create a cosmetic revolution to save the planet. The company’s structure tries to answer all three. “This is a reasonable model for a modest form of capitalism.”

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Retail is a tough business. But tighter commercial conditions have not stopped Lush’s social purpose. The company pays fair wages, and gave £15m last year to charities. Mr Constantine plans to give £11m this year — “in hundreds and thousands, to get into the right hands to go as far as possible”, pointing to the impact of just £6,000 in the hands of the late Anita Roddick, who started The Body Shop.

Before Lush, he had been friends with Roddick as well as a supplier — she bought his first business for £6m before they fell out. Two decades later, Lush had the chance of buying The Body Shop. He worried about the challenge. “I think they need to close 1,000 shops, and I couldn’t do that. We have a similar turnover with a third of the shops. The dynamic of retail is changing.”

How to Lead – Removing lumps from powders by hand at the Lush factory in Poole, Dorset. 04/11/2019 - Photograph by Sam Frost ©2019 - www.samfrostphotos.com
A worker removes lumps from powders at the Lush factory in Poole © Sam Frost/FT

Mr Constantine is still a believer in physical retail. “We do about 15 per cent on the internet. So that could be stronger. But footfall hasn’t fallen for us, and we’re very well supported by our customers.”

Mr Constantine is worried about the economic environment, however. “I have been in recessionary thinking for 18 months . . . All the banks are pulling back. They’re expecting a downturn. Nearly everyone I’m speaking to has got a problem, especially in retail. But we’re fine. We’ve got such modest borrowings.”

Unlike many retailers, Lush does not do many one-off sales or spend much on advertising. But it remains a “campaigning brand”, Mr Constantine says, having attracted controversy with attacks on fox hunting, and using shop windows to criticise undercover policemen. “I really don’t mind if there’s a backlash because people need to understand.”

Mr Constantine is wearing a badge that says “Merry F**king Brexit” but he has held back from using shops to campaign against the UK leaving the EU, despite the company having already spent more than £1m in additional costs. Overseas workers comprise about half of its UK factory, and some production is already moving to Germany. Brexit, he says, is “anti business. I believe in freedom of movement, capital, goods.”

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He is equally passionate about finding the next big seller: seaweed-based lip scrubs and flannels are “intriguing”. He gets excited about a “vinyl” record made of soap that plays “Happy Birthday”. How these will fit into the secret master plan even Mr Constantine seems unsure — it’s “mixing that technicality with a bit of fun” — but he is enjoying himself. Which may well be the unwritten fourth point on the plan. “We’re now in our 60s,” he says,” but we want to carry on. It’s exciting to be able to invent things.”

Three questions for Mark Constantine

Who is your leadership hero?

I really admire Paul Smith. He has built a substantial international business without losing any of his class. He is not stupidly outspoken or egotistic but discreet and modest. He is very British and I really like wearing his clothes.

If you were not a CEO/leader, what would you be?

I would have indulged my studies of bird song more and probably become an academic in bioacoustics; perhaps worked in Cornell University in the US, where the bulk of this research is done.

What was the first leadership lesson you learnt?

Jim Coulfield, an old boss, would clean the toilets alongside me and my colleagues. He would suggest we all did it together and anyone who wasn’t willing got fired.