5. Avon Products
New York, NY
www.avon.com
Beauty sales: $6.1 billion
Corporate sales: $8.7 billion
Key Personnel:
Andrea Jung, chairman and chief executive officer; Elizabeth A. Smith, president; Charles W. Cramb, vice chairman, chief finance and strategy officer; Brian C. Connolly, executive vice president, global sales strategy; Lucien Alziari, senior vice president, human resources; Geralyn R. Breig, senior vice president and global brand president; Harriet Edelman, senior vice president, business transformation and chief information officer. Bennett R. Gallina, senior vice president, China, Western Europe, the Middle East and Africa.
Avon is one of the largest color cosmetics manufacturers in the world.
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Products/Brands:
Avon Color, Avon Anew, Avon Skin So Soft, Avon Solutions, Advance Techniques, Avon Naturals, Avon Wellness, Avon Fragrance and Mark.
New Products:
Anew Beauty Age-Transforming Foundation SPF 15, Anew Ultimate Age Repair, Skin So Soft Fusions Dual Softening Body Wash, Anew Alternative Intensive Eye Cream, Anew Clinical Plump and Smooth Lip System, Anew Retroactive+ Youth Extending Cream SPF 25 Day, Anew Retroactive+ Youth Extending Cream Night Instant Pedicure, Glazewear lipstick, Derek Jeter Driven.
Comments:
Thanks to a multiyear restructuring program launched in 2005, Avon executives say things are looking up. Corporate sales rose 7%. Sales of cosmetics, toiletries and fragrances increased nearly 9%. By business segment, Beauty (cosmetics, fragrances, skin care and toiletries) accounted for 70% of sales. Last year’s growth was unexpected and was attributed to an 80% increase in advertising to $249 million. To fund this investment, Avon focused on reducing its cost base, with a first-year savings of $100 million. Furthermore, Avon revamped its business structure by unveiling a new, global business model.
Reese Witherspoon is the newest Avon spokesmodel.
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By region, North American sales rose 2% to more than $2 billion. The gain was a result of a larger average order from representatives partially offset by a decline in the number of active representatives. Sales in Latin America surged 21% to more than $2.7 billion, due to growth in active representatives and units sold, as well as favorable foreign exchange, primarily in Brazil, and the fourth quarter acquisition of its Colombian licensee—a country that added eight points to the region’s sales growth. In contrast, a 6% sales decline in Mexico was blamed on a drop in active representatives.
Western Europe, Middle East & Africa reported a 6% jump in sales to $1.1 billion due to a rise in active representatives and strong gains in Turkey and the U.K. Meanwhile, sales in Central and Eastern Europe rose 8% to $1.3 billion thanks to gains in Russia, partially offset by declines elsewhere, notably Poland. Sales in Asia-Pacific (excluding China) fell 7% to $810 million, due to weakness in Japan and the closure of Indonesian operations early in the year. In contrast, sales rose 3% in China to nearly $212 million.
In July, Avon reported second-quarter total revenue up 12% over last year to $2.3 billion. Sales of beauty products rose 14% and active representatives increased 9%, the results of a corporate restructuring program geared toward investing large amounts in both advertising and boosting representative strength. Andrea Jung, chairman and CEO, reported that sales of beauty products recorded double-digit growth for a fourth consecutive quarter, powered by growth in all categories: fragrance (+21%), personal care (+19%), color cosmetics (16%) and skin care (4%).
In the second quarter, Avon increased its advertising spending 74% to $93 million, compared with the same period last year, and launched its “Hello Tomorrow” campaign, focusing on the company’s flagship products, anti-aging lines and the recruitment of representatives. Due to these investments, however, second-quarter operating profit of $187 million was 17% lower than the $225 million for the same period in 2006. The company also continued its share repurchases.
In North America, second quarter revenue was flat, but active representatives increased 4%. The average size of an order declined over the same period last year.
In Latin America, second-quarter sales grew 22%, with growth in all markets of the region. Markets in Brazil, Colombia and Venezuela each increased revenues by 30%. Even Mexico was up 3% after several quarters of decline.
Sales grew 13% in Western Europe, Middle East and Africa on continued strength in Turkey, where revenue rose over 30%, and in the U.K., where revenue increased almost 10%. Central and Eastern Europe recorded a 15% jump in sales, due to continued strong growth in Russia, where revenue rose in the mid-teens. Asia Pacific revenue increased 3%, with revenue in Japan remaining flat with that of the previous year. Revenue in China, however, was up 36% due to continued expansion of the company’s direct-selling business. At the end of June, Avon China had more than 240,000 active representatives and more than 400,000 certified sales promoters. Units sold were 19% higher than in the same period last year.
Derek Jeter Driven is a hit for Avon,
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In September, the company instituted several management changes to further strengthen turnaround efforts, specifically in the areas of product line simplification and strategic sourcing, projected to deliver total annual benefits of more than $400 million to help fuel growth. Elizabeth Smith, formerly executive vice president and president, North America, was appointed president, Avon Products, Inc. Charles Cramb, formerly executive vice president, finance and technology, and chief financial officer, was appointed to the position of vice chairman, chief finance and strategy officer. Andrea Slater, formerly the president of Avon U.K., was appointed to the position of president, Avon U.S.
The company’s also taken the celebrity route, signing an appealing, high profile, new Avon representative. Oscar-winning actress Reese Witherspoon, also a dedicated mom known for her down-to-earth style and warmth, signed on in August as the company’s first ever global ambassador. In this newly created role, Witherspoon will serve as the Honorary Chairman of the Avon Foundation, focusing on breast cancer, domestic violence and emergency relief initiatives, and will be the spokeswoman for Avon’s beauty brands and sales representatives.
Avon currently markets to women in more than 100 countries through more than five million independent Avon sales representatives.
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