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