Avon bets Hispanics, smaller selection, price hikes can fix U.S. sales

Thu Feb 20, 2014 4:32pm EST
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By Phil Wahba and Lisa Baertlein

NEW YORK/BOCA RATON, Fla (Reuters) - Avon Products Inc (AVP.N: Quote) hopes higher prices, a growing Hispanic market and smaller selection of beauty products will help it reverse years of declines in U.S. sales, top executives said on Thursday.

The company's North American sales have fallen by half since 2007, and last year, the size of its army of Avon Ladies sales representatives, shrank 15 percent.

Yet the world's largest direct-selling cosmetics company, part of U.S. popular culture for its "Ding Dong, Avon Calling" advertisements, insists it can fix the business.

"That's our No. 1 priority," Avon Chief Executive Sheri McCoy told analysts at the Consumer Analyst Group of New York meeting in Boca Raton, Florida, where her team laid out in the most detail yet how Avon plans to return to growth in its home market, despite short-term risk to sales.

Avon's senior vice president for North America, Pablo Munoz, put the growing U.S. Hispanic population at the center of the company's plan, saying Hispanic sales representatives are "incredibly committed" to the Avon brand.

The 10 top highest-grossest districts in the United States out of 850 for Avon are primarily Hispanic, Munoz said at CAGNY. So Avon is planning more marketing aimed specifically at Hispanics and dedicating fewer resources on other districts.

Avon's North American business has been unprofitable for the last three years and Munoz said reducing costs is paramount to Avon reaching its goal of returning to profit in 2015.

A smaller assortment of Avon products will help lower production and printing costs. A more focused assortment will also help sales representatives because they will have fewer products to learn how to demonstrate, Munoz said.   Continued...

The Avon Products headquarters is seen in midtown Manhattan area of New York, June 21, 2013. REUTERS/Brendan McDermid