New York, NY
Sales: $6.9 billion
Sales:$6.9 billion for cosmetics, toiletries and fragrances. Corporate sales: $9.9 billion. Net income: $531 million.
Andrea Jung, chairman and chief executive officer; Elizabeth A. Smith, president; Charles Cramb, vice chairman, chief finance and strategy officer; Lucien Alziari, senior vice president, human resources; Geralyn Berg, senior vice president and global brand president; Bennett R. Gal- lina, senior vice president, China, Western Europe, the Middle East and Africa; Nancy Glaser, senior vice president, global communications; Donagh Herlihy, senior vice president, chief information officer; Charles M. Herington, senior vice president, Latin America; John Higson, senior vice president, Central and Eastern Europe; Srdjan Mijuskovic, senior vice president, global sales; John F. Owen, senior vice president, global supply chain; Kim Rucker, senior vice president and general counsel; James Wei, senior vice president, Asia Pacific.
Janice Teal, chief scientific officer and group vice president, R&D.
Chief Scientific Officer:
Advance Techniques Salon Professional Hair Care, Anew Skin Care, Anew Beauty, Color Cosmetics, Fragrance, Foot Works, Liiv Botanicals, Mineral Makeup, Skin-So-Soft.
The Anew skin care collection expanded this year. New products include: Anew Clinical Advanced Dermabrasion System, Anew Clinical Expression Line Filler, Anew Clinical Professional Stretch Mark Smoother, Anew Rejuvenate 24 Hour Eye Cream, Anew Rejuvenate Dial-A-Glow Anti-Aging Moisturizer SPF 15, Anew Ultimate Age Repair Day SPF 25, Anew Ultimate Age Repair Elixir, Anew Ultimate Age Repair Night Cream and Anew Ultimate Contouring Eye System.
Other new products are:Christian Lacroix Noir, Christian Lacroix Rouge, Derek Jeter Driven Black, Flower by Cynthia Rowley, Petal by Cynthia Rowley, Foot Works Watermelon Collection, Ideal Shade Smooth Mineral Makeup, In A Wink Instant Eyeshadow Sheets, Jillian Dempsey for Avon Professional Collection, Liiv Botanicals, Pro-To-Go Lipstick, Skin-So-Soft Bug Guard Plus IR3535 Expedition SPF 30, Skin-So-Soft Fusions Body Moisturizer, Smooth Mineral Blush, Smooth Mineral Eyeshadow, SuperShock Mascara, Ultra Color Rich Mousse Lipstick.
This past year marked a turning point for Avon, with a new tagline, “Hello Tomorrow,” as well as the final phase of the company’s turnaround plan. Beauty revenue increased 15% in 2007, and according to Avon, its growth rate has more than doubled over the past two years. Personal care sales rose 21%, while skin care increased 6% with new anti-aging breakthroughs in the Anew line.
With the rebranding and relaunch of its flagship Avon Color line, the company reported 16% growth in the color cosmetics category. In fragrance, the launches of Rouge and Noir by Paris designer Christian Lacroix contributed to 20% growth in this category.
By region, North America—which consists largely of the U.S. business—recorded a 3% increase in total revenue to $2.6 billion for 2007. The gain was attributed to growth in active representatives and recruiting advertising.
Revenue for Latin America jumped 20% in 2007 to $3.3 billion. According to the company, the increase benefited from progress in most markets, particularly from growth of approximately 30% in Brazil, Colombia and Venezuela. Revenue in Mexico was flat for the year.
In Western Europe, the Middle East and Africa, total revenue increased 16% to $1.3 billion. The rise was attributed to growth in Turkey and the UK—revenue growth for Turkey was over 35%, while the UK saw a boost of 10% in revenue.
Sales in Central and Eastern Europe rose 19% to $1.6 billion, with growth mainly attributed to Russia—20%, to be exact. Asia Pacific reported an increase of 5% to $850.8 million, with a 30% boost from the Philippines. Declines in Japan and Taiwan offset the total.
In 2007, Avon launched a global integrated marketing campaign called “Hello Tomorrow,” supporting both the brand and the direct-selling channel. As part of “Hello Tomorrow,” the company signed actress Reese Witherspoon to a multi-year contract as Avon’s first-ever global ambassador.
Ms. Witherspoon now serves as the honorary chairman of the Avon Foundation, as well as the spokeswoman for Avon's beauty brands and sales representatives. As part of this multi-year agreement, Ms. Witherspoon is also involved in product development initiatives, and appears globally in Avon advertising, websites and in the company’s brochures.
The company also has partnered with personal finance expert Suze Orman as a special personal finance advisor to the Avon representatives to offer money management advice and strategies for success. A first of its kind in the direct selling industry, the program will involve nearly 500,000 Avon representatives in the U.S., with plans to expand globally in the future.
Mark—Avon’s brand for the younger set—also tapped a new face for 2007, Lauren Conrad, star of the MTV show “The Hills.” Ms. Conrad (better known as LC) appears in the brand’s “magalog” (a combination magazine and catalog) and is involved in both beauty and fashion initiatives for Mark.
Avon plans to launch an exclusive collaboration with the Finnish textile and clothing design company Marimekko in a color collection that will debut in the U.S., Europe, Mexico and Asia in the fourth quarter of 2008. The company also recently revealed the news of its collaboration with the James Bond entertainment franchise to create a new signature Bond Girl 007 women’s fragrance for fall 2008. British actress Gemma Arterton, who plays the role of Agent Fields in the upcoming Bond film, will be the face of the new fragrance.
This past year, Avon revealed plans to restructure its U.S. distribution operations to enhance service to its representatives, improve operating efficiencies through new technologies and achieve other cost savings that can be reinvested in business growth.
The initiative, which is part of the company’s previously announced multi-year turnaround plan, includes the building of a “state-of-the-art” distribution center in Zanesville, OH that will open in 2009. The facility site is approximately 50 miles east of Columbus, OH. It will employ in the range of 500 people when fully operational and will have capacity to ship 50% of U.S. sales volume.
Avon also said that it will phase out its current distribution branches in Newark, DE, and Glenview, IL, with the closures expected to be completed by mid-2009 and mid-2010, respectively, with a combined loss of approximately 620 positions.
Avon said that it expects to invest approximately $150 million in capital expenditures relating to the new distribution center and for technology and equipment upgrades in other branches. The company plans to upgrade and modernize its Atlanta-based distribution center, and is evaluating options for investing in a new warehouse management system for the Pasadena site.
In Western Europe, Avon plans to reconfigure the manufacturing facility in Neufahrn, Germany, leading to reduced positions. Additionally, the company said that it will consolidate some distribution operations in Continental Europe to its distribution center in Alcala de Henares, Spain. In line with this, Avon said that it would phase out its current distribution branch in Neufahrn by early 2009.
In Latin America, Avon said that it plans to build a new distribution center in Brazil to meet increasing demand in that key growth market. The company said that it is evaluating potential locations for the facility, and expects to announce a decision in 2008. The new distribution center will feature advanced order-picking technology to improve productivity and order accuracy, along with automated systems that will streamline work flows, resulting in cost efficiencies and improved service to representatives.
Avon said that it expects the new Brazilian facility to open in 2010. When fully operational, it will employ approximately 1,300 and have capacity to ship 70% of Brazil's overall unit volume. In line with this, the company said that it plans to phase-out its current distribution site in Sao Paulo, Brazil during 2011. Approximately 1,700 people are currently employed at that facility.
Also in Latin America, Avon announced plans to close its manufacturing facility in Guatemala in late 2008 and transfer production to its existing plant in Celaya, Mexico. The company said that it will continue to operate its distribution facility in Guatemala.
Final Stages of Restructuring
In 2007, Avon announced the final initiatives of its restructuring program under its turnaround plan that commenced in late 2005. The company now expects to achieve annualized savings of approximately $430 million once all initiatives are fully implemented by 2011-2012, compared to the original objective of $300 million. These savings are projected to reach $300 million in 2009. The company now anticipates total costs to implement the restructuring initiatives to be approximately $530 million instead of $500 million, of which the company will have recorded approximately $460 million through the fourth quarter of 2007 and the remainder by the end of 2009.
According to Avon, as a result of the initiatives, approximately 4,000 positions would be impacted globally, with a net reduction totaling approximately 2,400 positions when the initiatives are fully implemented.
For the first quarter of 2008, corporate sales rose 14% to $2.5 billion. Sales of beauty products jumped 17% and included increases in all categories: fragrance grew 20%, color was up 15%, personal care rose 15% and skin care increased 13%, according to Avon. Net income in the first quarter of 2008 was $185 million.