Top Companies Report

4. Avon

July 11, 2011

New York, NY

212.282.5000

www.avoncompany.com

Sales: $7.7 billion


Sales:

$7.7 billion for cosmetics, toiletries and fragrances. Corporate sales: $10.8 billion. Net income: $590 million.


Key Personnel:

Andrea Jung, chairman and chief executive officer; Charles Cramb, vice chairman, developed market group; Charles M. Herington, executive vice president, developing market group; Lucien Alziari, senior vice president, human resources & corporate responsibility; Geralyn R. Breig, senior vice president; Bob Briddon, senior vice president and president, Asia Pacific; Jeri B. Finard, senior vice president, global brand president; Nancy Glaser, senior vice president, global communications; Donagh Herlihy, senior vice president and chief information officer; John Higson, senior vice president, global commercial operations; Jorge Martinez Quiroga, senior vice president and president, North America; Srdjan Mijuskovic, senior vice president and president, Central and Eastern Europe; Kimberly A. Ross, executive vice president and chief financial officer; Anna Segatt, senior vice president and president, Western Europe, Middle East and Africa; John F. Owen, senior vice president, global supply chain; Kim Rucker, senior vice president, general counsel and corporate secretary; Mike Schwartz, senior vice president, global insights and marketing intelligence.


Major Products:

Color Cosmetics—Avon Color, Jillian Dempsey Professional, Smooth Minerals and Anew Beauty; Skin Care—Anew; Fragrance—In Bloom by Reese Witherspoon, Outspoken by Fergie and Patrick Dempsey Unscripted; as well as fragrances through special partnerships with designers Christian Lacroix, Herve Leger and Ungaro; Personal Care—Avon Skin-So-Soft; Avon Naturals; Hair Care—Advance Techniques; Mark; Liz Earle.


Platinum Serum is an addition to the Anew line.

New Products:

Skin Care—Anew Platinum, Serum, Anew Luminosity-Pro Serum, Advance Technique Lotus Shield; Sun Care—Anew Solar Advance with RepairShield Technology; Color Cosmetics—UCR Mega Impact Lipstick, Super Extend Mascara, Sonic Boost Vibrating Mascara, Pro Color & Gloss Lip Duo, Healthy Makeup, Matte Nail Enamel;Fragrance—Outspoken and Outspoken Intense by Fergie. To be launched: New skin care range (Q4 2011).


Comments:

Corporate sales rose 6% last year, thanks in large part to a 4% increase in the number of active representatives. The acquisitions of Silpada and Liz Earle also provided a lift in corporate sales.


Beauty accounted for 71% of sales last year (down from 72% in 2009 and 2008), followed by fashion (19%) and home (10%). Beauty sales rose 6%, led by an 11% increase in fragrance sales, as well as a 7% gain in color cosmetics sales and a 5% rise for personal care. However, skin care sales fell 3%.


The gain in fragrance was attributed to the launch of Outspoken by Fergie, which became the biggest fragrance introduction in Avon history. On the other hand, the decline in skin care sales has Avon working overtime to boost sales. Therefore, in developing markets Avon launched Avon Care, a comprehensive line of skin care and body products. Elsewhere, Avon Solutions was revamped with new formulas and packaging. Earlier this year, Avon launched Anew Solar Advance, which promises to repair visible sun damage. In the fourth quarter, Avon will launch a new skin care product that was inspired by genetic research on longevity.


By region, corporate sales rose 6% in Latin America to $4.1 billion. Sales in North America fell 2% to $2.2 billion; sales in Central & Eastern Europe rose 6% to nearly $1.6 billion; sales in Western Europe, Middle East and Africa jumped 14% to $1.4 billion and sales in Asia Pacific leaped 11% to $752 million. Some of the fastest growing countries and regions for Avon were South Africa (up 82%), India (65%), Central America (16%), Ukraine (12%), Colombia (25%) and the Philippines (15%).


Last year, the number of active representatives grew 4%, down from a 10% gain in 2009. To reenergize its sales staff, Avon has shifted some money away from advertising to field programs that enhance the value proposition for its representatives. For example, in the US, Avon is investing $20 million to improve sales leadership earnings.


For the first quarter of 2011, corporate sales rose 7% to $2.6 billion. Beauty sales jumped 8% with gains in all categories: fragrance (10%), color (6%), skin care (7%) and personal care (8%).


“We are pleased with the early progress against our commitment to return the business to mid-single digit revenue growth and deliver 50-70 basis points of operating margin expansion in 2011,” said Andrea Jung, Avon’s chairman and chief executive officer. “We are squarely focused on restoring growth in Brazil and Russia in the second half, and ensuring execution in gross margin improvement and cost control.”

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