Avon is calling for influencers
New owner wants its sales team to create an online presence,
The Avon lady has a new potential savior.
After years of unsuccessful turnaround attempts at Avon Products Inc. by activist investors, private equity and different leaders, a Brazilian cosmetics company has set out to rescue the 134-year-old direct seller.
Natura & Co., upon closing its $2 billion (U.S.), all-stock acquisition of Avon last week, aims to at last modernize a company in which representatives still rely largely on paper brochures and door-to-door visits to sell lotion, lipstick and items as diverse as jewelry and vitamins.
Until recently, Natura had little presence outside its home country.
The company, which sells cosmetics mainly in Brazil via a direct sales force, is now one of the biggest global competitors in beauty, with expected revenue of $10 billion a year and operations in 100 countries.
“Everybody is used to, ‘Dingdong, Avon calling,’ ” said Rebekah Testar, who sells Avon in the U.K. and oversees a network of more than 9,000 representatives. “A lot of people still even like the brochure. But we have to change with the times.”
Natura’s goal: turn Avon’s nearly five million representatives into online influencers who sell makeup and lotion on social media, through mobile apps and even in their own physical retail shops. Meanwhile, the company says, its pairing with Avon will slash costs and allow Natura to expand its own brand globally.
Avon faces a host of challenges. The company for years has been under pressure from the rise of online beauty sales, which it was late to embrace. A decade ago, Avon had $10 billion in annual sales and its stock traded around $30 a share. By the end of 2019 it had endured a stretch of annual losses and split off its North American business, and its yearly sales were set to fall below $5 billion. On Jan. 2, the day before Natura’s acquisition, the shares closed at $5.60.
Avon’s long-term decline, and e-commerce competition that is hurting the global directsales industry, make the prospect of a recovery murky, Bernstein analyst Ali Dibadj wrote after the sale. The deal, he said, is a way “to dull the pain” of those dynamics.
Natura’s direct-selling business, a pricier brand than Avon, is profitable and fast-growing. The company also owns Aesop, a high-end beauty retailer it took over in 2016, and the Body Shop retail chain it acquired the following year. It had revenue of about $2.4 billion for the first nine months of 2019.
“We can accelerate the deployment of that digitization through a lot of the learning that will come through Natura,” said Natura Executive Chairman Roberto Marques, who oversees the heads of each of the company’s business units.
Avon Chief Executive Jan Zijderveld, a former Unilever PLC executive who had been on the job less than two years, is being succeeded by Angela Cretu, a 20-year Avon veteran.
Representatives need to be able to conduct business on their smartphones, while creating an online presence that will help them reach consumers beyond their local networks of friends and family, Mr. Marques said. Avon also could develop a physical retail presence as Natura has done. Natura has roughly 450 stores in Brazil, 400 of which are operated by consultants.
“A lot of those things were happening, but now they can happen faster,” he said in an interview.
Natura, in turn, views Avon as a springboard to global expansion. In Brazil, roughly onethird of Natura consultants are also Avon reps. Natura envisions expanding its namesake brand into some of Avon’s markets, tapping an existing network of sellers while sharing supply-chain-network and back-office functions.
Natura isn’t taking over Avon’s operations in the U.S. In 2016, Avon split in two and sold 80% of its North American business to private-equity firm Cerberus Capital Management.
Last year, Cerberus and Avon agreed to sell the struggling North American business for $125 million to LG Household & Health Care Ltd., a South Korean consumer-goods company.
Mr. Marques said Natura, which operates dozens of Body Shop stores in the U.S., would be open to expanding further into the U.S. but not by way of Avon. He said the Brazilian company at one point considered a deal that would have included Avon’s North American business, but decided against it.
Ms. Testar, the Avon representative, said changes already under way at Avon have helped her expand her business. Until about two years ago, Avon shipped products to representatives, who then distributed them to customers. Now, goods are shipped directly to the customer.
The reluctance of older representatives to embrace new technology, coupled with Avon’s struggle to put a digital system in place, has slowed the company’s recovery, Ms. Testar said. “Now other representatives will have the confidence to jump on board,” she said. “It will take time.”