Avon’s new boss sees upside abroad despite past failures
The makeup maker hopes to grow its global brand, but will it veer too far from its principles?
There’s something inelegant, a touch déclassé, about the way in which the carving up of Avon Products Inc. has been relegated to a news brief: a paragraph here, a paragraph there. New York investment firm Cerebus Capital will end up with 80 per cent of the company’s North American operations, which it will take private and — here’s the boiler-plate language — manage with a view to improving operating performance and long-term value.
We won’t know until January just how Cerebus intends to execute such a Herculean transformation. We do know that Cerebus will additionally invest $435 million (U.S.) through a stock purchase in Avon Products, with its far more promising international divisions spread throughout Europe, the Middle East, Africa, the Asia Pacific and Latin America. Avon Products will remain publicly traded.
The announcement that the company’s North American operations, its very beginnings, will be hived off in this manner seemed awfully brusque and not at all in keeping with the reputation of the company David McConnell founded nearly 130 years ago.
It wasn’t called Avon. And the signature catchphrase “Ding dong, Avon calling,” wasn’t coined until the 1950s. But its central precept even at its founding in 1886 was to let loose an army of women selling Little Dot perfume sets (three fragrances and an atomizer) to the woman at home.
The elaborately named Persis Foster Eames Albee (Mrs.), a 50-year-old homemaker from Winchester, N.H., was the first sales agent for the California Perfume Co. Fragrances with such beguiling names as Cotillion and Trailing Arbutus and Heliotrope would extend the perfume line, followed by cosmetics and skin care.
McConnell had been a bookseller. Those Little Dot cologne sets were the freebie enticements. Smart McConnell dumped those heavy books in favour of smartly dressed women eager for pocket money. In a little more than a decade, 5,000 women had signed on to become door-to-door sales agents.
In later years, the company would pump out fresh brochures every two weeks with the latest product offerings. The sample-toting sales representatives were almost always women, working part time, building their “territory” — commonly consisting of 100 or so homes.
Avon wasn’t the first company to master the art of direct selling. But it was the first to capitalize on the notion of deploying income-seeking women as a sales force. The sellers were never employees, thus Avon, as it was formally named in 1939, was able to inexpensively capitalize on the concept of women working for themselves, albeit without the benefits that accompanied full-time employment.
It would be hard to overstate the company’s cultural impact, particularly through the early post-war era as the Avon concept dovetailed with at-home mothers eager for their biweekly cup of tea with the Avon lady.
Forty years later, CEO Jim Preston acknowledged that the company had been slow to acknowledge a huge societal shift: women had stormed into the workplace. When the Avon lady came calling, there was an ever-increasing chance that no one would be there to greet her.
The sense of panic that set in is evident in the company’s herkyjerky efforts to grow beyond its direct-selling roots, most notably with the 1979 acquisition of Tiffany & Co. and a painful foray into health care. Both businesses were later sold off, as investment analysts sniped that they weren’t much interested in such grand strategies and would prefer that the company spin cash the old-fashioned way.
Those who may have long forgotten that Avon is still with us may be surprised to hear that the company today has six million sales representatives. As a point of comparison, consider that the company had 1.7 million reps in 1994. Growth has been nurtured internationally and not always successfully: South Korea, Bolivia, France and Vietnam are all markets that have been closed in recent years.
There’s still considerable upside. Sales in Latin America last year at $4.2 billion were almost four times that of money-losing North America and represented half of the company’s overall sales.
The North American financial picture has been grim for years. Last year, Avon suffered a $72.5-million loss on sales of $1.2 billion. There will be a heavy does of skepticism that Cerebus can turn that around. If it can’t, a great piece of corporate history will come to a close, launched when Mrs. Persis Albee went about in horse and buggy with her perfume samples.
“I know of no line of work so lucrative, pleasant and satisfactory as this,” she once said. It does sound like a bit of paid-for advertising, doesn’t it?
No matter. In its day, Avon was a wonder. jenwells@thestar.com