Avon

Presented to:

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Agenda of the Presentation

1. Introduction and History2. Mission and Vision Statements3. AVON Products and Brands4. SWOT Analysis5. Marketing Objectives6. Target Market, market Demand

Marketing Mix7. Financial Analysis And Ratio Analysis8. Competitor Analysis9. The Changing Marketing Strategies10. Takeaways (Conclusion)

Introduction and History

Brief OverviewMore beauty products carry the Avon

brand name than any other in the world. Sells more bottles of fragranceMore women wear Avon nail enamel. 600 million catalogues in 25 languages

offering a range of 7,500 products. 6 million women see an Avon catalogue

every 3 weeks. According to independent market

researchers, Avon sells more Products than any other manufacturer in the UK.

Women’s Empowerment Bracelet

I’m very excited to introduce the Women’s Empowerment Bracelet,” said Reese Witherspoon, Avon’s Global Ambassador. “Wearing this bracelet is a way to support efforts to save and improve women’s lives worldwide;

This bracelet is a symbol of hope and unityThe bracelet initiative was created to raise

awareness about the need to speak out against the violence that affects women around the globe.

THE EARLY YEARS In the late 1800s, David McConnell, a door-to-door book

salesman, had an idea he believed would encourage women to buy his books. Following a common trade practice of the period, he gave prospective customers a gift of perfume to arouse their interest. Before long, he discovered that the perfume was more popular than the books. He formed a new firm, which he called the California Perfume Company. “I started in a space scarcely larger than an ordinary kitchen pantry,” David McConnell noted in 1900. “My ambition was to manufacture a line of goods superior to any other and take those goods through canvassing agents directly from the laboratory to the consumer.” McConnell based his business upon: 1) consumable products sold directly to the consumer, 2) an image of the company that captured the beauty and excitement of the state of California, and 3) a national network of sales agents he had organized during his years as a bookseller.

Introduction and History

AVP is a US cosmetics, perfume and toy seller founded in 1886 as the California Perfume

Company founded by then 28-year-old David H. McConnell markets in over 140 countries across the world

The first product produced was called the Little Dot Perfume Set and included five fragrances: Violet, White Rose, Heliotrope, Lily-of-the-Valley, and Hyacinth

In October 1939, the name was changed to Avon Products

Stock Symbol: AVP CEO: Andrea Jung Total Directors: 10    Women

Directors:  5     Percentage Women Directors:  50%

Employees: 42,000 Type: Public listed on the New York Stock

Exchange in 1964. Headquarters: 1345 Avenue of the

AmericansNew York, NY 10105

ANDREA JUNGCHAIRMAN AND CHIEF EXECUTIVE OFFICER

AVON PRODUCTS, INC.

CHARLES CRAMBVICE CHAIRMAN, CHIEF FINANCE &

STRATEGY OFFICER, AVON PRODUCTS, INC.

LUCIEN ALZIARISENIOR VICE PRESIDENTHUMAN RESOURCES AND

CORPORATE RESPONSIBILITY,

AVON PRODUCTS, INC.

GERALYN R. BREIGSENIOR VICE PRESIDENT &

PRESIDENT, NORTH AMERICAAVON PRODUCTS, INC.

JERI B. FINARDSENIOR VICE

PRESIDENT, GLOBAL BRAND PRESIDENT

AVON PRODUCTS, INC.

BENNETT R. GALLINASENIOR VICE PRESIDENT,

CHINA, WESTERN EUROPE, THE MIDDLE EAST AND

AFRICA, AVON PRODUCTS, INC.

NANCY GLASERSENIOR VICE

PRESIDENT, GLOBAL COMMUNICATIONS, AVON PRODUCT, INC.

DONAGH HERLIHYSENIOR VICE PRESIDENT,

CHIEF INFORMATION OFFICER,

AVON PRODUCTS, INC.

CHARLES M. HERINGTONEXECUTIVE VICE

PRESIDENT, LATIN AMERICA & CENTRAL AND EASTERN

EUROPE, AVON PRODUCTS, INC.

JOHN HIGSONSENIOR VICE PRESIDENT, GLOBAL DIRECT SELLING & BUSINESS INNOVATION,

AVON PRODUCT, INC.

JOHN F. OWENSENIOR VICE

PRESIDENT, GLOBAL SUPPLY CHAIN

AVON PRODUCTS, INC.

Susan J. Kropf is president and chief

operating officer, Avon Products Inc.

Employee growth: 4.2%Website:

http://www.avoncompany.com

Competitors: Revlon

L'OrealMary Kay

A PERIOD OF GROWTH As the firm grew, so did the product line. In

1920, the company introduced a line of products called Avon that consisted of a toothbrush, cleanser, and vanity set. The Avon name was inspired by the area about the company’s laboratory at Suffern, New York, which Mr. McConnell thought resembled the countryside of William Shakespeare’s home, Stratford-on-Avon, England. The name of the line became so popular that in 1929, the company officially became Avon. By 1929, the company was selling low-cost home care and beauty products, door-to-door and through catalogues in all 48 states.

product lines include lipsticks, foundations, bath and skin lotions, anti-aging cream, perfumes, as well as jewelry and clothing

Targeted growing markets (China and Russia)

Internationally, the company’s product line was marketed primarily at moderate price points. The marketing strategy emphasized department store quality at discount store prices.

Avon was the world’s largest manufacturer and distributor of fashion jewelry, and marketed an extensive line of gifts and collectibles. A separate division, Giorgio Beverly Hills, manufactured and sold prestige fragrances.

These brand name products were sold through major retail department stores, in boutiques, by mail order catalog and by other means.

The Principles That Guide Avon 1. To provide individuals an opportunity to earn in

support of their well-being and happiness; 2. To serve families throughout the world with

products of the highest quality backed by a guarantee of satisfaction;

3. To render a service to customers that is outstanding in its helpfulness and courtesy;

4. To give full recognition to employees and Representatives, on whose contributions Avon depends;

5. To share with others the rewards of growth and success;

6. To meet fully the obligations of corporate citizenship by contributing to the well-being of society and the environment in which its functions; and

7. To maintain and cherish the friendly spirit of Avon.

INTERNATIONAL MARKETING AND EXPANSION

Avon divided the world into four geographical divisions: (1) The United States, (2) Europe, (3) The Pacific, and (4) The Americas. In most cases, the primary operating arrangement in each of these divisions was direct ownership by Avon of the foreign country subsidiary. Joint ventures with foreign firms were used when the culture and the ways of doing business were significantly unfamiliar to Avon management.

By 1991, Avon management felt that it was time to re-evaluate and map out the long-term future of the firm’s beauty businesses on a global level. Senior management knew that the traditional Avon system of door-to-door house calls worked “wonderfully” in developing nations. “We entered new markets, we added new products, and we saw developing nations grow to 27 percent of our sales volume,” noted Chairman Preston.

From a global perspective, three avenues of growth were identified by Avon management: (1) geographic growth, (2) leveraging distribution channels in emerging and developing markets, and (3) marketing in developed industrial areas.

MISSION AND VISION STATEMENTS

“We will build a unique portfolio of beauty and related brands to become the world’s most trusted beauty company and also expand our presence in direct selling, empowering women to achieve economic independence by offering them a superior earning opportunities and deliver superior returns to our shareholder, providing them growth opportunities while maintaining or commitment to be a socially responsible, ethical company that is watched as a model.”

MISSION STATEMENT

“To be the company that best understands and satisfies the product, service and self-fulfillment needs of women—globally”

VISION STATEMENT:

AVON Products and Brands

PRODUCTS: Product may refer to a

single item or unit produced by labor or effort

Anything that can offer to a market for attention, acquisition

BRANDS:

A brand is a collection of experiences and associations connected with a service, a person or any other entity

A name, sign or symbol used to identify items or services of the sellers and to differentiate them from goods of competitors.

AVON’S PRODUCTS

Avon's product lines include: lipsticks, foundations, creams,

perfumes, as well as jewelry and clothing

Avon’s products fall into three main categories:

Beauty Fashion

Home products

BEAUTY PRODUCTS

Avon company earns 70% revenue from beauty products that are offered in markets and are very famous all over the world includes:

Cosmetics Fragrance Skincare

Cosmetics productsCosmetics products are lip gloss, lip liner,

lip conditioner, lipstick, foundation, face powder, blusher, cleanser, toner, moisturizer, eye liner, eye shadow, mascara, shampoo, conditioner, styling cream, nail polish, cold cream

Avon men & women fragrances

Avon men fragrances are Avon untamed, black leather,black suede,driven black

Avon women fragrances are blue rush,candid,far away, sweet honesty, perceive,bond girl

Avon skin care

Avon skin care products are

facial cleanser Moisturizer Fairness cream Fairness lotion

Fashion products:

Avon company earns 19% revenue from fashion products that includes:

Jewelry Watches Accessories Toys

Home products: AVP earns 11% revenue from home products

that are offered in market includes: Gifts Other home decorative products

AVON’S BRANDS

Brand diversifications are: Avon Color Anew Skin-So-Soft (SSS) Avon Naturals "mark." (Targeted to younger, college-aged women) "M" (an Avon catalogue for men) These brands have helped the

company reach out into markets it has not serviced.

AVON’S BRANDS

Mark proved to be successful in reaching a new generation of recruits, primarily young women ages 18-25, with a monthly “magalog" featuring award-winning products.

SWOT Analysis and Internal & External

Environment

SWOT Analysis

Strength Weakness Opportunities Threats

Strengths

Strength

Design to meet the unique demand and culture of each geographic region

Strong financial position on the international market

Established customers and those in developing market offer the greatest potential for increasing their customer base.

Weakness Compelling market problem is the erosion of

their core customer Poor marketing and advertising strategies

Opportunities Target key market such as Poland, Vietnam,

Cambodia, Czech Republic and Hungary where there is high potential for growth in the near future

Other Domestic Distribution Channels More Distribution Partnerships with companies

like Mattel

Threats Government

implemented exchange control and fixed exchange rate

High interest rate

Marketing Objective

Marketing Objective In an all out attempt to implement its plans for

growth, profit and customer satisfaction and customer retention.

Avon’s marketing plans are:

Marketing Objective There is a necessity for broader access to its

products, especially in the United States. Avon considers opening retail stores or

establish a direct mail catalouge where consumer can place orders directly with the company.

Marketing Objective

Reduce freight and material costs resulting from foreign exchange problem.

Opening more manufacturing plants outside the US in order to take advantage of lower overhead costs and

Exchange rate that are more favorable in other countries.

Marketing Objective

Review sales initative plans and consider a non-traditional way of rewarding sales force

e.g. A mix of salary and commission base and a benefit program is recommended.

Establish new measures to advertise and promote sale.

Target Market & market Demand

STP

Segmentation

New generation of young women between 16-24 years.

Target Market

17 million young women in US with aggregate spending capacity of $ 24 billion on cosmetics.

PositioningCelebrates young women making their Mark in World. Fun, fresh, modern and affordable price

Target Market & market Demand Avon focuses on capturing the market younger women,

college student, men with disposable income in its effort to promote the sale of the sink-so-soft brand extension products

Avon also looks at extending market growth to include countries like

Poland Vietnam Cambodia

Product Avon will reduce product by 30% by reviewing and

eliminate poor performing products and combining near duplicate products.

Lunched new brand extension of the Skin-So-Soft product

Avon new products is directed towards teenage college students and younger women

Pricing

Price

Avon market most of its product at moderate price in relation to the industry.

Discount and price reduction will be offered periodically.

New brand extension product will be priced at approximately the same price as the original brand.

Place

Direct selling channel by US active SRs as well as separate Mark sales force

No credit to Mark sales reps. Encourage to solicit advance from friends, place their order via internet using their personal credit card.

Promotion On-line sales training program to Avon sales

representatives. Distribution of 16 million “magalogs” in both

English & Spanish every 6-8 weeks to prospective Mark customer

Hired ad agency to launch through TV & print ad with slogan “Meet Mark”

Door-to-Door sales method, Avon the world's number one direct seller.

Financial Statements And Ratios Analysis

Income Statement

Income Statement

Income Data 2008 2007 2006

Total revenue $10,690.1 $9,938.7 $8,763.9

Operating profit 1,339.3 872.7 761.4

Net income 875.3 530.7 477.6

Diluted earning per share

$ 2.04 $ 1.21 $ 1.06

Cash dividend per share

$ 0.80 $ 0.74 $ 0.70

Balance sheet

Balance sheet

Total assets $ 6,074.0 $5,716.2 $5,238.2

Debt maturing within 1 year

1,031.4 929.5 615.6

Long term debt 1,456.2 1,167.9 1,170.7

Total debt 2,487.6 2,097.4 1,786.3

Shareholder’s equity

674.9 711.6 790.4

2008 2007 2006

Cash Flow:

Income Data 2008 2007 2006

Net cash provided byoperating activities

$ 748.1 $ 589.8 $ 796.1

Net cash used by investingActivities

(403.4) (287.2) (207.9)

Net cash used by financingactivities

(141.5) (597.1) (490.4)

Effect of exchange ratechanges on cash andequivalents

(61.9) 59.0 42.4

COMPETITOR ANALYSIS

COMPETITOR ANALYSIS

AVP REV INDUSTRY

Market Cap: 6.85B 131.01M 32.20M

Employees: 42,000 5,600 1640

Rev. Growth -8.70% -10.50% 8.90%

Revenue 10.69B 1.35B 121.46M

Gross Margin 64.80% 63.55% 56.62%

AVP REV INDUSTRY

EBIT 1.59B 172.70M 11.45M

Operating Margins 13.10% 10.89% 8.23%

Net Income 875.30M 13.10M N/A

EPS 2.038 1.128 0.15

PE 7.88 2.26 9.24

COMPETITOR ANALYSIS

Ratio Analysis Profitability Ratio

Liquidity Ratio

Activity Ratio

Debt Ratio

Profitability

Profitability

Gross Profit Margin 64.8%

Operating Margin 13.10%

Profit Margin 11.6%

ProfitabilityROE from Total Operations

129.7%

Return on Assets 14.4%

Return on Invested Capital 38.1%

Liquidity Ratio

Current Ratio 1.2 :1

Quick Ratio 0.6 :1

Interest Coverage 13.3

Activity Ratio

Inventory turnover 3.7 times

Account receivable turnover 14.0 times

Total asset turnover 1.8 times

Return on Assets 14.4%

Days sales in Inventory 98 Days

Debt Ratio

Long-Term Debt to Total Capital

0.71

Total Debt/ Equity

80:20

Debt Ratio 40%

Book Value per Share $1.58

Price/Earnings 7.88

Changing Marketing Strategy

Changing Marketing Strategy

Change #1: Refocus product lines to core businesses Price Cuts “Leadership” bonuses for salespeople based

on sales of people they recruit Change #2:

Avon SelectCatalogue with toll-free number, designed for median age 38, held income > $45,000, extensive advertising, *less commissions and incentives, and executive layoffs

Changing Marketing Strategy

Change #3:In Canada, introduced magazine

“Confidante”, and new interactive kiosks

Change #4:Switched to distribution through retail

stores, *original strength was to avoid retail stores

Cut product line by 30%Created global brands and

standardized

TWO Type of Strategies

Domestic Marketing Strategy

International Marketing Strategy

Marketing Strategy

Domestic Marketing Strategy

Recommendations:Consistency in Marketing StrategyBetter PositioningDistinctive Product LineBetter Sales Force IncentivesBetter Coordination of Distribution

Channels to Minimize Conflict

International Marketing Strategy

Recommendations: Stick with selling to Retailers in China less

risky Expect to sell smaller volumes to many

customers due to Economics of this country Different Products to Appeal to this Market Develop more Partnerships with companies like

Mattel

Takeaways (Conclusion)

Find a strategy and stick with itImportant to position a company (re: a

target market) and have a focused strategy that flows from positioning

Always keep in mind the broader environment when formulating Marketing Strategy (anticipate changes)

Capitalize on opportunities in developing marketsMay be a better fit with a company’s

strengths Keep in mind Sales force Availability Economic, Political, and Cultural factors

ANY QUESTION?