How Is Avon Trying To Regain Its Position In Latin America?

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Avon’s most important business region, Latin America, has come under significant pressure due to economic turmoils in several markets. As a part of its strategic initiatives to make a turnaround in its overall performance, Avon is trying to address the issues and revive sales in Latin America.

Current Scenario In Latin America

Latin America contributes close to 55% of Avon’s total revenues and hence it is one of the most crucial regions for the company in terms of operation. After enjoying a leadership position in the Latin American beauty market in the past due to the popularity of direct selling in the region, Avon’s performance in the region is currently dampened primarily due to the economic crisis which has weakened the spending propensity on beauty products, Brazil’s IPI taxes, and the pricing and product mix challenges. Brazil is the most important region for Avon within Latin America and Brazil’s weak average orders and spending challenges are one of the biggest factors towards the setback Avon faced in Latin America.

avp latin amaerica 201402015

Source: Avon’s Annual Report 2015

For the first six months of 2016, Avon’s revenues in Latin America fell by ~16% year-on-year to $1,391 million and its operating profit declined by ~27% and stood at $145 million.

Some Recovery Measures In Latin America

  • The company is implementing strategic pricing in markets such as Mexico and Brazil in order to cater to the lower purchasing power on account of the economic slowdown.
  • It is investing significantly on the active representative training and retention in the region–aiding the representatives in building their businesses, providing them with the required channels to reach out to customers. There is a group of 1.6 million representatives in Brazil who are actively working towards this end.
  • In 2014, Avon forged strategic alliances with KORRES, a Greek skincare brand, and Coty, a French beauty and personal care company, to boost sales in Latin America, specifically Brazil. The company is trying to push the higher end products of KORRES through the retail channel as well.
  • Avon is progressing with the digitalization of its order management process and though it will be done in stages, it made significant progress with this, so far, in Brazil.

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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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