NATURA 2017 ANNUAL REPORT 2017 ANNUAL REPORT THE NATURA 2017 ANNUAL REPORT is part of Natura’s results disclosure process. On the same date that it was released, April 20, 2018, we published a report in print format (which is also available online) with Natura &Co’s highlights for the year. This group of companies was formed in September 2017, when The Body Shop was united with Natura and Aesop. Except when otherwise stated, the financial information in this annual report refers to Natura, Aesop and The Body Shop. The scope of the indicators for non-financial information only covers Natura’s activities in Brazil and in its International Operations. In 2018, we initiated the integration of the three companies’ environmental and social impact strategies. Further information in Parameters for the preparation of the Natura 2017 Annual Report HERE. 1 2017 ANNUAL REPORT Our Essence GRI 102-16 REASON FOR BEING Our Reason for Being is to create and sell products and services that promote well-being/being well. well-being is the harmonious relationship of the individual with himself, with his own body. being well is the empathetic, successful and pleasurable relationship of an individual with other people, with nature, and with the whole. BELIEFS Life is a chain of relationships. Nothing in the universe stands alone. Everything is interdependent. Natura believes that valuing relationships is the foundation of the great human revolution in the pursuit of peace, solidarity, and life in all of its manifestations. Continuously striving for improvement develops individuals, organizations,and society. Commitment to the truth is the route to enhance quality in relationships. The greater the individual diversity, the greater the wealth and vitality of the whole system. The pursuit of beauty, a genuine aspiration of every human being, should be free of preconceived ideas and manipulation. The company, a living organism, is a dynamic set of relationships. Its value and longevity are connected to its ability to contribute towards the evolution of society and its sustainable development. VISION Due to our corporate behavior, the quality of the relations we establish and our products and services,we will be a group of brands with strong local and global expression, identified with the community of people committed to building a better world through a better relationship with themselves, with others, with the nature of which they are a part, with the whole. 2 2017 ANNUAL REPORT Message from the Board of Directors 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 From left to right: Luiz Seabra, Roberto Marques, Pedro Passos and Guilherme Leal 3 Roberto Setton Roberto 2017 ANNUAL REPORT Message from the Board of Directors The beginning of a new era GRI 102-14 Antonio Luiz da Cunha Seabra, Guilherme Peirão Leal, Pedro Luiz Barreiros Passos (Co-Chairmen) and Roberto de Oliveira Marques (Executive Chairman) In the world, we are experiencing intense times. In spite of the apparent resumption of economic vitality, inequality continues potential of a new, more humane and systemic form of to present a systemic threat which will globalisation, of value creation for our companies, for tend to increase because of the impact society and for the planet. of new technologies on employment, In this historical moment filled with so many risks, it is our intensifying social pressures. understanding that companies have both the opportunity and the duty to respond to society’s call to help drive major This uncertain environment creates room for isolationist transformations. This was always one of the ideals that we ways of thinking, such as the setbacks in the Paris shared with Anita Roddick, the founder of The Body Shop Agreement, a global effort to combat climate change. and a pioneering voice in insisting that business should In contrast, countries previously criticized for their assume the responsibility of being a force for good. untrammelled and reckless production, are now emerging as active participants in debates on how to reconcile In the same way that we pay tribute to the legacy left by economic activities with environmental conservation, those who built the companies united in Natura &Co, we even though they still have a long way to go. celebrate the future that we are beginning to build. In 2017, while still in an initial stage of integration, our businesses Amidst these impediments to civilization, that pose a threat produced excellent results. Natura revitalized its presence to the future of mankind, in 2017 we lived through a process in the Brazilian market, gained share in key categories that transformed our history as a company: we created and continued to grow its operations in Latin America. In a group of companies that, for decades, have been parallel, Aesop maintained its accelerated expansion in doing business in a new way. Natura, Aesop and The Body the retail trade in large urban centres on all continents, Shop have joined forces in Natura &Co, a global cosmetics exceeding the milestone of 200 company-owned stores. group which is unique in that it comprises businesses And The Body Shop, whose integration into the group that share a common vision and a strong sense of purpose. began in September, contributed with its best Christmas We believe in the transformation of the global economy performance in recent years. and in the power of sharing, in its many facets. In the sum of strengths, and in the power of differences. This is only the beginning of a long journey. In 2018, we are In connection, in comprehension and in collaboration going to consolidate the basis of our group and in so doing for the co-creation of solutions capable of driving build the environment which will enable the business to gain a positive transformation in the world. momentum. Close to completing 50 years in business, we feel as if we are just starting. Natura &Co takes our dream We are also experiencing intense times in our companies, of internationalization to the next level. Now, we will be able albeit more predictable than those the world has to drive a positive impact in 72 countries on every continent, been experiencing. We believe, however, that in Brazil accelerating the exchange of knowledge and taking our and worldwide, new forces will enable us to overcome brands to new consumers. separation, indifference and alienation, in the pursuit of a common good, of a fairer society aware of its Just as we believe in the power of shared values, such as commitment to future generations. To repeat the truly a passion for cosmetics and a passion for relationships, inspiring phrase of Insead professor of Global Management embodied in our Reason for Being, WellBeingWell, we Joe Santos, “globalisation allows us to use the whole recognize the creative power and the wisdom contained world for the purpose of creating something new”. in differences. With this renewed, diverse and multicultural energy, intensified by collaboration among three businesses, With Natura &Co, we are seeking this something new and we will be more capable of generating even greater and expressing our profound confidence in the transformational better economic, social and environmental results. ✧ 4 2017 ANNUAL REPORT Message from the executive chairman Focus and mobilization GRI 102-14 João Paulo Ferreira 2017 was a landmark in Natura’s almost 50 years of existence. Amidst a complex economic environment, we achieved impressive results based on two important postures: focus and mobilization. We were clear and disciplined in executing priorities and in allocating resources for our strategy, generating a positive spiral that engaged all of our employees in our cultural transformation. This enabled us to understand how we need to work together to build the organization that we want, one that is capable of responding to our present and future challenges. In the second half of the year our results demonstrated how Roberto Setton Roberto this movement has begun to take effect. We grew in the last two quarters of the year in Brazil, recovering market share and resuming leadership in key categories, such platform, and almost 600,000 are connected via our as perfumery, body care and gifts. Moreover, Natura has Consulting app. We believe there will be exponential growth maintained its accelerated pace of expansion in the other in the use of technology in all Natura operations, which countries in Latin America. We are the leaders in direct should become our main competitive differential in the selling in Brazil, Argentina and Chile, and we are growing coming years. strongly in Mexico. Our net revenue reached R$ 7.7 billion, up 7.8% over the previous year, while Ebitda totalled R$ 1.5 We are also maturing in our multichannel approach. billion, an increase of 21.3% compared with 2016. Our online businesses practically doubled in size in 2017, and we expect the same to happen in retail, which is at One of the fundamental elements in our strategy was an earlier stage. Currently we have 26 stores, three of the revitalization of our direct selling model, which which in France, two in the United States and one each in we now call Relationship Selling. We made our Argentina and Chile. Thanks to these initiatives, we have consultants the central focus of our decisions, achieving adapted our portfolio for the North American market and our highest loyalty rate since measurement of this now, supported by The Body Shop’s global experience, we indicator was begun, as well as increasing market share.