What Is Avon Products’ Current Position In The Direct Selling Beauty Market And What Are Its Future Plans?

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AVP: Avon Products logo
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Avon Products

The global beauty and personal care market reached $426 billion in annual sales in 2015 and the market is currently growing at 5% annually. The global direct selling industry also grew by 5% during the same period to reach $131 billion. Beauty and personal care is the top direct selling category contributing around 30% of total direct sales. Avon is currently the leading global direct selling beauty company with ~$6 billion in net sales. In 2015, the direct selling sales force increased by 4% to reach around 100 million representative sellers out of which Avon’s representatives comprised of 8% of this sales force.

avp global spread

(Source: Avon Investor Presentation)

Avon’s Current Initiatives

After selling off ~80% of its underperforming North American business to Cerberus Capital and receiving a total investment of $650 million from them, Avon has started implementing strategies to streamline operations and cut costs.

  • The company has reduced $421 million in net debt since Q1 2015.
  • Transferred pension and other liabilities worth $230 million to the Avon North America.
  • The company aims for a $70 million cost savings in 2016.
  • In January, Avon announced a targeted cost saving to the tune of $350 million over the next three years.
  • Avon’s product strategies comprise three important pillars:
    • Focusing on the growth of the top 40 brands that is responsible for ~80% of its revenues
    • Simplifying its product portfolio by consolidating disjointed brands under a common umbrella.
    • Taking steps to minimize the impact of inflation in the top markets.

Have more questions about Avon Products (NYSE:AVP)? See the links below:

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Avon Products

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