Strategic Priorities of Avon
Last month, Avon’s top management gave a presentation at Consumer Analyst Group of New York Conference (CAGNY). With this presentation, we had the opportunity to see more clearly than ever where the new management has decided to head at. In this article, you will find highlights from this presentation.
We know the Avon management has long been openly accepting the difficult situation the company was at. Also, we all remember the new CEO Sheri McCoy has been honestly revealing the mistakes made during the Jung-era (1999-2012). She did not hold back even Jung was still the Chairperson after she had left the CEO position to McCoy.
CEO Sheri McCoy summarizes the current situation at Avon as:
- Underperforming for years
- Eroded financial health
- Disappointed stakeholders
Hence, the company vision has been put at this conference as “Return Avon to its rightful place as an iconic beauty brand with products that consumers love and demand.”
For the market conditions, the expectations are high enough. Between 2011 and 2016, Avon management expects the global beauty products market to grow by 6%. While developing markets are expected to grow by 12%, developed markets’ average rate is expected to be 2% on a yearly basis.
The strategic goals to be achieved by 2016 have been set as:
- Revenue growth, mid-single digit
- Operating margin, low double-digit
- Cost savings, $400 million
And the strategic priorities to reach these are:
- Working on “growth platforms”
- Driving simplification and efficiency
- Improving organizational effectiveness
One of the growth platforms has been identified as “transforming representative experience”. Under this heading, they say they need to better understand who the representatives are and what they need; to make it easier to do Avon business; and last but not least, evolve Avon “sales leadership model”. Currently, 40% of Avon representatives are working with what is called the “traditional model”, 30% with a hybrid model and 30% with “advanced leadership” (ex: Russia) in the world. Traditional model is the one where the field is managed by Avon employees (e.g. regional managers, district managers etc.). Can this situation be interpreted as an indication of how minds were once confused at Avon? I believe so. The plan right now is to quickly move the hybrid markets to the advanced leadership model.
Avon has also grouped its existing markets under five categories:
- Big Guns (US, UK)
- Stars (Russia, Brazil)
- Rising Stars (China and Turkey),
- Helpers (Australia, Italy)
- Underperformers (South Korea, Vietnam)
Company plans to fix and/or reinvent the big guns, drive growth in stars, invest in rising stars, leverage helpers, and restructure or exit from underperformers. As you will remember, Avon has already announced it would exit from South Korea and Vietnam. As a big market, Avon’s plan for the U.S. is to return to profitability, increasing recruitment and retention being two of the highest priorities in this market.
When it comes to 2013, the company says it expects a conservative level of sales growth and focus on sustainability.
Whether the new management will achieve all these and “return Avon to its rightful place as an iconic beauty brand” as stated in the vision statement, that we don’t know for now. We will wait and see. But it is clear that there is an honest acknowledgement of the situation and the management seems to have the courage to tackle all these very serious issues openly.
Click here if you wish to watch the whole presentation given on February 21, 2013.