Avon invests in brazilian operation out of the crisis

São Paulo-after losing 85% of its market value in five years, the Avon is running a global restructuring plan to try to recover.
The first steps have already been taken: the company separated the North American operations in a new company, sold in December for Cerberus, known for investing in companies in crisis.
Now the focus is on dryer costs and direct investments to emerging countries. With that, the Brazil, Avon''s number one market from 2010, will gain more relevance.
"We are focused in the right areas and Brazil is one of them," said the President of Avon, Sheri McCoy, in an exclusive interview with the newspaper O Estado de s.Paulo last week, during a visit to the Country.
Removed the results in North America, Brazil accounted for between 20% and 25% of the revenue of the Avon between 2013 and 2015.
In the process of restructuring, the company transferred the headquarters of the United States to the United Kingdom in search of lower tax costs and, in order to allocate the global divisions of the company closer to the main markets, Brazil has been moved to the base of the world''s leading four areas-personal care, makeup Color Trend line, feminine and masculine fragrances.
The order is to bet on marketing and creating new tools that help the dealerships to close deals in social networks.
Cutting costs is also vital. Until 2018, the company plans to reduce $ 350 million in annual costs and eliminate 2.5 1000 jobs in the world. Sheri did not inform the total layoffs in Brazil, but said that is a "minor portion", focused on the administrative areas.
Challenge
The numbers of Avon give idea of the size of the challenge of the company. From 2012, the company discloses net losses, which totaled $ 1.8 billion until the first quarter of this year, according to Economática.
The net margin is negative. The recipe is on the decline, in part because of the devaluation of emerging currencies against the dollar. But even in real, the company sold 7% less in the first quarter.
Fragile, Avon became the target of activist investors, who buy minority interests and after pressing the company to make changes to improve the result.
In December, the Barington Capital Fund, owner of about 3% of Avon, did send a letter to the Chairman of the Board of the company in which he suggested a restructuring and the exchange of the company''s leadership.
About of 15 days later, Avon announced the operation with the Cerberus. The Fund made a contribution of $ 605 million in the company in return for 80% of the North American Division and a slice of 16% in Avon.
"They didn''t get a good financial return. The value of the operation reflects the challenges facing the company, "said UBS Bank analyst in the area of consumer goods, Stephen Powers.
In 2012, the multinational cosmetics Coty even made an offer of $ 10 billion for Avon, which today is worth less than 20% of the former proposal (about $ 1.68 billion).
The UBS analyst pointed out, however, that the sale of the North American Division was a correct decision, since consumed much effort and investment management. For him, the brand does not have great potential for growth in the United States.
In March, Avon entered into an agreement with the Barington and accepted that the activist Fund indicated an independent Director to the company. The President of the Barington, James Mitorotonda, said that despite being "disappointed" with the value of negotiating with Cerberus, see the entry from the bottom on the deal as positive.
"We''ve seen significant changes in the short term after the investment, including a significant cost reduction plan and relocation of company headquarters," he said.
He stressed, however, that it expects the company to announce new initiatives to cost cuts and revenue gains.
The turn?
Sheri acknowledges that the company made a mistake, but that now she''s on the right path. "Yes, we had challenging moments and I think the Division of North America was part of the problem. We were not so focused in some regions and the need to invest in them, "he said.
In Brazil, while the American company suffered, competitors advanced.
In 2010, the Avon was the third company in the Brazilian market of beauty and personal care, with 8.8% of market share, behind Natura and Unilever, according to Euromonitor.
In 2015, fell to seventh, with slice of 5.7%, surpassed by the Apothecary and L Oréal.
Euromonitor Analyst William Machado explained that the Avon lost space by the changes of market and by increased competition.
"With the advance of retail in the cities, the average penetration before exclusively reached by direct sales consultants was a competitive advantage that has lost its strength," he said.
Sheri stressed that the changes have already begun and that the company returned to gain space in the country in March – about 1 percentage point, according to data from Nielsen. "We believe that Avon is at a turning point."
Four analysts polled by the newspaper O Estado de s. Paulo consider hit the company''s decision to invest in Brazil, even in times of crisis, noting that there are long-term opportunities in the segment.
Some, like Powers, of UBS, even found the plans of Avon shy here. "When you look at how the competition has grown in Brazil and how Avon is behind me, I''m not convinced that will be enough."
Social networks
While its biggest rival in Brazil, Natura, initiates the expansion in retail, Avon will focus on direct sales, strategy used since its Foundation, there are 130 years old. In its restructuring plan, Avon wants to turn the "door to door" in a digital sale.
"I know I talk in direct sales seem old-fashioned. But I really think it depends on how you think about it, "said the President of Avon, Sheri McCoy.
"It''s always been a social commerce and there is a great opportunity to use technology to create a door to door."
Avon will invest in technologies to help the consultants to sell. The company is building an arsenal of specific marketing for they share on Facebook, Instagram or Whatsapp.
In the next quarter, Avon will launch in Brazil a new system for consultants, which will facilitate the integration of the content of Avon with the cell phone of them.
In Turkey, the consultants already have an application, called "magic mirror", which simulates how is makeup in the picture of the client. This app will come to Brazil and will help the consultants to sell, said Sheri.
Avon also will appeal to science. "We have 200 scientists in the area of product development and 600 patents, but we never use it in marketing," said Vice President of marketing for Avon, Marise Barroso.
Blind consumer testing results and details about innovation will enter the catalog and television campaigns.
Shops
Asked if the company could follow the path of nature and open stores, Sheri refuted the idea. "I looked at the shops and it seemed to me that it''s more a place for brand experience than to bring sales volume," he said.
She insists that recommendation of friends is the primary factor in choosing a beauty product and that direct selling gives that "personal touch" sales. "It would not be possible if our 6 million consultants were in a department store."
For the consultant Maximilian Bavaresco, founding partner of Sonne Branding, Avon''s right to bet on the advancement of direct sales in social networks.
"It''s a new front. But only the direct sales does not meet all the consumers. The multichannel market, "he said. He recalled that competitors such as the Apothecary, Natura and L Oréal sell in different channels.