10.29.13
5. Avon
www.avoncompany.com
Corporate Sales: $10.7 billion
Beauty Sales: $7.6 billion
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Sheri McCoy, Avon’s chief executive officer, says the company is making progress toward stabilization. |
Major Products: Color cosmetics, skin care, fragrance and personal care products featuring brand names Avon Color, Anew, Skin-So-Soft, Advance Techniques, and Mark.
New Products: Avon Passion, Viva by Fergie, Mega Effects Mascara, Anew Clinical Pro Line Eraser Eye Treatment with A-F33, Anew Genics Treatment Concentrate, Glimmersticks Lip Liner, Avon Totally Kissable, Urban Splatter Nail Enamel, Naturals Spiced Orange & Ginger Body Spray, Advance Techniques Lotus Shield Frizz Control Duo.
Comments: It was somewhat of a wild ride at Avon last year, with a continuing recovery from scandals, a new CEO’s strategies, and stabilizing after rebuffs of multiple buyout offers from Coty. But while sales remained on a downward trend, the fourth quarter showed promise, and things seem to be steadying amid new technology, cost-cutting measures (Avon announced a $400 million cost-saving initiative by 2016), an enhanced managerial team and strong resolve.
Upon the release of its Annual Report, Sheri McCoy, Avon’s chief executive officer, commented: “2012 was a challenging year for Avon, but I’m encouraged to see that the overall business is showing early signs of stabilization. We have a lot of work ahead of us, but I am confident that in 2013, we will see progress against our three-year financial goals.”
Total revenue of $10.7 billion decreased 5%, or was flat in constant dollars. Total Beauty sales, which account for about 72% of business, declined 5%, or increased 1% on a constant-dollar basis, to $7.6 billion. By category, fragrance dropped 4%; color, 6%; skin care, 7% and personal care 6%.
Active Representatives declined 1% and units sold were flat.
McCoy further stated: “We are working with a sense of urgency to tackle near-term issues quickly and address longer-term challenges.”
Some improvement was seen in Latin America, particularly in Brazil, Mexico, and Venezuela, but was offset by net declines in other regions. In Europe, Middle East & Africa, there was a revenue decline in the UK due to weakened economic conditions. Redistricting problems affected the U.S., and Asia Pacific’s revenue decline was primarily due to continuing weak performance of Avon’s China operations.
Latin America contributed the bulk of total revenue—nearly $5 billion—even though total net sales declined from 2011. North America contributed $1.9 billion of total revenue; Asia Pacific, about $902 million, a decline of 4-5%.
Cost-saving measures including exiting a couple of markets, restructuring its supply chain and cutting about 1,500 jobs—all in an effort to save an eventual annual $70 million. Avon also plans to focus on its six million representatives, and provide them with an exciting product portfolio.
Approximately 70% of Avon’s business comes from developing markets, a trend that is expected to continue.
Things were looking up by the fourth quarter. Avon reversed sales declines in top markets like Brazil and Russia, attracted more sales representatives and made headway in cutting costs.
In 2013, Avon continued to boost its top management team. In May, Pablo Munoz, a former Tupperware executive, was named senior vice president and president, North America, responsible for turning around the direct seller’s North American business and returning it to profitability. Just recently, Avon appointed Brian Salsberg as senior vice president, global strategy.
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New this month, Avon Passion is touted as the direct seller’s “most luxurious scent ever,” and is packaged in what the company calls its “most ornate fragrance bottle, a faceted deep red sensual design with a studded cap.” |
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Avon says its new Mega Effects Mascara, six years in the making, is an innovative mascara package, and the Wonderbrush represents a brand new approach to mascara application. |
However, innovative products aside, at the end of the second quarter of 2013, things had not improved as much as McCoy might have hoped, as total revenue of $2.5 billion decreased 2%.
Avon Beauty sales declined 4%, or were relatively unchanged in constant dollars. North America Beauty sales declined 14%, driven primarily by skin care.
Still, McCoy said, “Our second-quarter results reflect continued progress in stabilizing Avon’s business. There is still significant work to be done to deliver sustainable performance in the near and longer term, but I’m pleased with the progress to date. We will succeed by continuing our focus on better serving Avon Representatives, creating a compelling consumer proposition, and simplifying our business to drive both top and bottom line improvements.”
In September, Avon named actress, activist and renowned beauty Olivia Wilde as the face of Avon’s “Today. Tomorrow. Always.” trio of fragrances.
