5. Avon Products
New York, NY
www.avoncompany.com

Corporate Sales: $11.3 billion

Beauty Sales: $8.5 billion

Key Personnel: Sheri S. McCoy, chief executive officer; Charles M. Herington, executive vice president, developing market group; Fernando J. Acosta, senior vice president and president, Latin America; Bob Briddon, senior vice president and president, Asia Pacific; John Higson, senior vice president and president, Europe, Middle East and Africa; Jorge Martinez Quiroga, senior vice president and president, North America.

Major Products: Skincare, color cosmetics, personal care, hair care and fragrance including Anew, Anew Clinical, Anew Genics, Clearskin Professional, Avon Solutions Avon Color, Jillian Dempsey Professional, Smooth Minerals, Anew Beauty Skin-So-Soft, Avon Naturals, Foot Works, Advance Techniques, Outspoken by Fergie, Mark., Liz Earle, Tiny Tillia.

New Products: Super Drama Mascara, Skin So Soft Bath Oil, Jon Bon Jovi Unplugged for Her and Unplugged for Him, Anew Clinical Pro Line Eraser Treatment, Outspoken Intense by Fergie Fragrance, Anew Genics Treatment Cream, ExtraLasting Makeup, Advance Techniques Frizz Control Lotus Shield.

Comments: Revenues more than doubled to $11.3 billion—the corporate net sales figure for 2011—during former CEO Andrea Jung’s reign, but 2011 also marked her last year as the head of the world’s leading beauty direct seller, and sales are now on a downward trend. Following multiple scandals and news stories—from possible corruption in China to an attempted, but refused, takeover of the company by Coty, Inc., Avon has not always made the front page for its business acumen. Key now to future success is getting the company back on track—and that will be left to its new CEO, Sherilyn (Sheri) McCoy, who joined the team in April. Jung retained the position of executive chairman (she has now resigned). Many other key executives have left the company, while others have signed on to try and improve its course.

Sheri McCoy takes the helm at Avon.

Sales rose 4% in 2011, due mostly to a favorable foreign exchange rate. The number of active representatives fell 1% to 6.4 million. Beauty product sales, which accounted for 73% of corporate revenue last year, rose 5%, although unit sales declined 1%. The company blamed slower-than-expected growth due to weaker macro-economic conditions. Still, all beauty segments reported an increase in dollar sales. Fragrance increased 7%, color cosmetics increased 5%, personal care rose 4% and skincare increased 3%. Anew Genics showed promise as becoming one of the largest skin care launches in Avon’s history.

By region, North American sales were the weakest, falling 6% to $2.1 billion. Unit sales declined 10% and the number of active representatives declined 8% to about 420,000.

Developing markets gave Avon strength. Latin America sales rose 11% to $5.1 billion, while unit sales increased 2% and the number of representatives rose 3%. Sales in Mexico improved 17% and sales in Brazil rose 6%.

Sales in Central and Eastern Europe were flat at nearly $1.6 billion. Units and active representatives declined 6% and 2%, respectively.

Western Europe, Middle East and Africa reported a 5% gain in sales to $1.5 billion. Unit sales increased 1%, while the number of active representatives rose 4%—which is why Avon’s sales rose in the region, according to the company. While the company made headway in South Africa, results were hurt by declines in the UK.

Sales in Asia Pacific fell 4% to $942 million. Last year, the results of Asia Pacific and China were managed as a single operating segment. After years of growth in China, revenue there fell 20% last year, but Avon said it is focused on improving representative productivity, which will hopefully turn things around.

In the fourth quarter, Avon reported gains in mass-market beauty share for the first time in three years.

Avon’s hoping its new Bon Jovi fragrances will be a hit.

Battling issues such as increases in labor and commodity costs, pricing strategies and management problems, in 2011, Avon took on an in-depth assessment of its long-range business plan in order to improve performance, with a focus on long-term sustainable, profitable growth. It is also looking into technological and service model enhancements for its representatives.

While Avon rebuffed Coty and positioned McCoy at the helm, a turnaround is not yet visible on the horizon. For the first quarter of 2012, corporate sales fell 2% to $2.6 billion. Beauty sales declined 1%—color was flat, fragrance and skincare declined 1%, and personal care was down 2%.

In July, the direct seller announced that Jon Bon Jovi would be its newest fragrance partner. The rocker will appear in ads for both Unplugged for Her and Unplugged for Him.

Avon’s second-quarter revenue was no better than its first, and the company took on additional debt. Total revenue of $2.6 billion decreased 9%, or down 1% in constant dollars. Total units declined by 4% and price/mix increased 3% during the quarter. Active Representatives were down 3%.

Avon Beauty sales declined 9%, or were flat in constant dollars. Fragrance was down 8%, color was down 9%, and skincare and personal care both declined by 10%. McCoy stated: “Avon’s second-quarter financial results are not good and they reflect the complex challenges that Avon faces. We are working to stabilize the top-line, improve cost structure and cash generation, and instill a more disciplined culture of accountability.” However, she remained hopeful, adding, “We will also put the consumer and representative back at the center of our business and ensure our associates are engaged and aligned. It will take time, but I am confident that we can turn the business around and reach a point of sustainable growth.”

Setting its sights on developing regions, in August, Avon announced plans to launch more than 300 products across various categories in India this year.

In its efforts to not only rebuild its growth but also its reputation both internally and externally—and its staff—Avon has made several key personnel appointments in the last few months.

At press time, Avon announced that Andrea Jung will step down as executive chairman and board member, effective December 31, 2012, and will continue as a senior advisor to the board. Fred Hassan, currently lead independent director, will succeed Jung as non-executive chairman on January 1. Hassan is a managing director and partner at Warburg Pincus and the former chairman and chief executive officer of Schering-Plough Corp.