4. Avon

New York, NY
www.avoncompany.com

Beauty Sales: $7.6 billion
Corporate Sales: $10.7 billion

Key Personnel: Andrea Jung, chairman and chief executive officer; Charles Cramb, vice chairman, chief finance and strategy officer; Geralyn R. Breig, senior vice president and president, North America; Jeri B. Finard, senior vice president, global brand president; Bennett R. Gallina, senior vice president, Asia Pacific, China, Western Europe, the Middle East and Africa.

Major Products: Color cosmetics—Avon Color and Beyond Color; Skin care—Anew; Bath and body—Naturals and Skin-So-Soft; Hair care— Advance Techniques; Avon Wellness; Fragrances; Mark. New Products: Ultra Color Rich Plumping Lipstick, Supershock Mascara, Anew Clinical Derma-Full X3 Facial Filling Serum, Unscripted, U, Avon Bond Girl 007 and Spotlight fragrances, Ultra Color Rich 24K Lipstick.

Comments: An increased international sales force—up 7% to 5.8 million representatives—and a larger allocation for advertising (overall advertising expenditure of nearly $400 million in 2008 was almost three times the amount invested in 2005) both contributed to Avon’s 8% rise in corporate sales last year, which reached a record $10.7 billion; foreign exchange contributed three percentage points to the revenue growth. Beauty accounted for 72% of net sales in 2008.

Investments in sales representatives and advertising not only helped the world's largest direct seller strengthen its brand image, it also enabled the company to command higher price points for many of its most innovative products. Avon invested $200 million on its sales representatives, including improving commission structures and creating a program that allows reps to also earn income by recruiting other reps. Approximately 70% of the incremental spending on advertising went to campaigns in Russia, China and the UK.

Revenue grew in all segments, except North America, which was slowed by economic conditions and lack of consumer confidence. However, sales in developing and emerging markets around the globe more than made up for it. Beauty was the driving force in 2008 sales, with a sales increase of 10% in all sub-categories; fragrance grew 9%, color grew 11%, skin care, 10% and personal care, 8%.

Patrick Dempsey 2 features a brown glass bottle with a hint of sage green, shaped to reflect strength and intimacy. The packaging juxtaposes bold orange, deep brown and stark black for a stronger, richer effect.

In comparison, in 2007, Beauty sales increased 15%, with fragrance up 20%, color up 16%, skin care, 6% and personal care, 21%.

The Latin American region topped out as Avon’s No. 1 territory, ringing up sales of $3.9 billion.

Although 2008 sales of Beauty products in North America declined by 1%, the region still ranked second with $2.5 billion.

Central & Eastern European sales reached $1.72 billion. Helping to boost the bottom line were sales in Russia, which grew 8% (attributed to additional reps), as well as growth in other markets in the region, such as Ukraine with a growth of over 20%.

Active representatives also accounted for boosting sales in Western Europe, Middle East & Africa to $1.4 billion, with Italy and Turkey taking the lead.

Asia Pacific accounted for sales of $8.9 million. (Total revenue increased for 2008 due to foreign exchange. Revenue growth in the Philippines of almost 20% was due mostly to increasing representatives.)

China brought in $351 million, owing to an increase in representatives, but partially offset by a lower average order.

In 2008, its final year of a three-year restructuring program, Andrea Jung, Avon’s chairman and chief executive officer said the company had emerged stronger than ever. Cost cutting, innovation and image enhancement were, and continue to be, pronounced goals; the company also focused on developing a smaller range of better performing, more profitable products. Avon’s Global Ambassador, actress Reese Witherspoon, came on board, joined by additional fragrance “stars” including Unscripted by Patrick Dempsey, U by Ungaro and Bond Girl 007. Growth in Skin Care was attributed to the continued strengthening of Avon’s Anew brand, which grew 20% in 2008, reaching total sales of $900 million for this single brand alone.

In February 2009, Avon announced that it expected higher than anticipated savings and benefits —nearly $900 million— from its original corporate restructuring, product line simplification and strategic sourcing, and announced a follow-up restructuring program, targeting annual savings of about $200 million. The original restructuring program is expected to deliver total savings of approximately $430 million by 2011-2012. The company also announced plans to reduce its work force by 7% (3,000 jobs) over the next four years.

Avon reported second-quarter 2009 total revenue of $2.5 billion, 10% lower than that of 2008’s second quarter, but up 5% on a local currency basis as foreign exchange pressured growth by 15 percentage points. Beauty sales in the second quarter of 2009 were 10% lower versus the prior-year period, but increased 5% on a local-currency basis, in which fragrance, color cosmetics, personal care and skin care grew 8%, 7%, 6% and 1%, respectively.

Of the various global regions, secondquarter revenue was positive only in China, where it grew 15% year over year on continued strength of the direct-selling business.

Avon is updating its Anew skin care franchise this fall with the launch of Anew Reversalist, a new anti-aging range targeting women in their 40s.

In September, Avon announced that president Elizabeth Smith had made the decision to leave the company, after five years, “to pursue her long-time leadership aspiration to be a chief executive officer.”

In October, Avon announced it had added to its celebrity portfolio, signing on Black Eyed Peas vocalist Fergie, for a yet-to-be named fragrance due to launch next year.