Ding Dong! "Avon Calling..." As one of the world's first global cosmetics companies, Avon established itself as a household name in the 1950s and 1960s with a worldwide network of door-to-door salesladies. More recently the company was overtaken in sales by the likes of L'Oreal, but the Avon organisation remained one of the world's largest direct sellers of cosmetics products with local operations in 60 countries and distribution in more than another 20. As a brand, it has over 6m active individual representatives worldwide, ranking #2 globally in direct selling behind Amway. However, since 2016 it has been two separate entities. A new management team installed in 1999 successfully dragged the company's image upmarket after years of decline, with the result that sales and profits boomed in the first half of the 2000s. Mid-decade, though, performance began to slow dramatically, with recessionary forces dragging down sales in developed markets. The group continued to develop in newer economies like Brazil and Central & Eastern Europe, but was plagued by accounting problems and allegations of bribery. In 2012, Avon rebuffed a $10.7bn takeover bid from Coty. Yet within three years, that self-confidence appeared misplaced. Following a steep decline in US sales, Avon launched a strategic review which led to the sale of its operations in North America, under the name New Avon, to private equity investor Cerberus. Revenues were at that point around $1.2bn. The original Avon Products entity continued to manage all other global markets. Revenues were $5.6bn in 2018, including around $1.3bn from Brazil, its single biggest market. However performance in both businesses remained weak. In 2019, Korean company LG Household & Healthcare announced plans to acquire New Avon for just $125m. Soon afterwards, Brazilian direct seller Natura sealed a separate deal to acquire the international Avon Products business for $2bn in stock. Natura's international Avon Products business is led from London by CEO Angela Cretu. New Avon - now The Avon Company - is led from New York by CEO Paul Yi.
Capsule checked 14th July 2020
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Recent stories from Adbrands Update:
Adbrands Daily Update 22nd May 2019: Natura confirmed agreement of a deal to acquire Avon Products in an all-stock deal that values the troubled direct selling pioneer at $2bn. Avon shareholders will end up with around 24% of the combined company. The deal will strengthen Natura's position across Latin America, Asia and Europe, and potentially opens up a partnership with LGH&H of South Korea which agreed to acquire Avon's US licensee last month.
Adbrands Daily Update 26th Apr 2019: In a dramatic expansion of its international footprint, LG Household & Healthcare - a sister company to LG Electronics - announced a deal to acquire New Avon, the struggling US licensee of the global Avon business. The stated price tag was $125m, representing a loss for private equity owner Cerberus, which paid $170m for the business three years ago. LGH&H is South Korea's second largest beauty and personal care business. Though it sells small quantities of its leading products in North America, the vast majority of revenues are generated in Asia, primarily in the domestic market. This push into North America - where Avon manages a network of some 250,000 sales representatives - marks a major escalation in its global ambitions. The company will continue to license the Avon brand from its owner Avon Products, now headquartered in the UK. New Avon had previously been in negotations with Natura of Brazil; that company is continuing discussions with Avon Products.
Adbrands Daily Update 25th Mar 2019: Natura Cosmeticos of Brazil has held preliminary talks to acquire both of the two separate companies formed from the 2016 break-up of Avon Products. This could involve the acquisition of US-based New Avon, privately owned by investment fund Cerberus, as well as the publicly traded entity from which it was spun off, which continues to operate the Avon business outside North America. Its biggest individual market is Brazil, accounting for close to a quarter of sales. Natura is one of Avon's biggest regional direct selling rivals and has also established a significantly larger physical retail footprint with the acquisition of The Body Shop. Investors were not enamoured with the idea, marking down the shares of both Natura and Avon Products in early trading.
Adbrands Weekly Update 8th Feb 2018: Sheri McCoy stepped down as CEO of Avon Products after a difficult five years in which the company's share price has steadily declined, despite the spin-off of the brand's struggling US division as a separate company. McCoy is succeeded by Jan Zijderveld, previously president of Unilever's Europe division.
Adbrands Weekly Update 18th May 2017: Ads of the Week: "Overpromises". Top marks to Avon and to agency Santo for skewering all those ridiculous promises offered by mainstream beauty manufacturers. This is a deliciously sharp parody of every cosmetics ad you've ever seen. How surprising that it comes from what we might previously have regarded as tired old Avon. Perhaps this marks the new rejuvenation of that slimmed-down company.
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