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Avon Products

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Avon Products
Company typePublic
NYSE: AVP
S&P 400 Component[1]
IndustryPersonal
Founded1886; 138 years ago (1886)
FounderDavid H. McConnell
HeadquartersNew York City, New York, United States
Key people
Douglas R. Conant
(Chairman)
Sherilyn S. McCoy
(CEO)
ProductsCosmetics
Perfume
Clothing
Toys
RevenueDecrease US$ 9.955 billion (2013)[2]
Decrease US$ 427.2 million (2013)[2]
Decrease US$ -51.9 million (2013)[2]
Total assets
  • Decrease US$ 6.4923 billion (2013) [3]
  • Decrease US$ 7.3825 billion (2012) [3]
Total equityDecrease US$ 1.127 billion (2013)[2]
Number of employees
36,700 (Dec 2013)[2]
Websitewww.avoncompany.com

Avon Products, Inc, known as Avon, founded by David H. McConnell in 1886 is a direct selling company in beauty, household, and personal care categories. Avon had annual sales of $10.0 billion worldwide in 2013.[2]

It is the fifth-largest beauty company and, with 6.4 million representatives, is the second largest direct selling enterprise in the world (after Amway).[4] Avon Products is a multi-level marketing company.[5][dead link] The company's CEO is Sherilyn S. McCoy, who was appointed to the position in April 2012.[6] The former CEO, Andrea Jung, became the executive chairman of the board. Recently, Avon has struggled with the global sales falling for five straight years and North American revenues falling 18% in 2014.[7]

In 2016, Avon completed the sale of the remainder of its American business. All of its operations are now outside the United States. As part of a three-year plan, Avon will also move its headquarters to the United Kingdom.[8]

History

David H. McConnell

David H. McConnell was first a struggling door-to-door salesman who used to sell books to New York homes. In September 1886,[9] he decided to sell perfumes rather than books. He started the new business in a small office at 126 Chambers Street, Manhattan, New York. McConnell changed the company name in 1892 when his business partner suggested he call it the "California Perfume Company". His business partner was living in California at the time and suggested the name because of the abundance of flowers in California.[10]

In 1894, Alexander D. Henderson, Vice-President and Treasurer, joined the company and helped to shape its policies and assist in its growth.[11] On June 16, 1909, McConnell and Henderson signed an agreement of Corporation for the California Perfume Company in the state of New Jersey.[12] On January 28, 1916, the California Perfume Company was incorporated in the state of New York. McConnell, Henderson, and William Scheele were listed as company officials.[13]

Early Avon trademark

Original Avon trademark, filed June 3, 1932
The drawing stylized word AVON mark is an expired trademark at the USPTO, and owned by Avon Products, Inc.

The California Perfume Company, Inc. of New York filed their first trademark application for Avon on June 3, 1932 with the USPTO. Part of the description for goods and services provided to the USPTO included "perfumes, toilet waters, powder and rouge compacts, lipsticks", and other toiletry products. First use and commercial use for Avon by the California Perfume Company was on September 1, 1929. Registration was granted on August 30, 1932.

International expansion

Avon sells products in over 100 countries. Brazil is the company's largest market, passing the United States in 2010. Avon entered the Chinese market in 1990.[14] Direct selling was outlawed in China in 1998,[15] which forced Avon to sell only through physical stores called Beauty Boutiques. The ban was lifted in 2001, and the company received a license for direct selling in 2006.[4]

88% of Avon's 2013 revenue (around $10 billion) came from overseas markets.[15]

Mergers and acquisitions

Avon purchased Silpada, a direct seller of silver jewelry, in 2010 for $650 million.[4] In May 2012, perfume company Coty, Inc. offered $24.75 a share for Avon, which was nearly 20 percent above Avon's stock price at the time. While Fox Business Network reported that Avon delayed the process and Coty withdrew its offer,[16] earlier reports said that Avon rejected the bid, stating "At the time, the board concluded, and it still believes, that Coty's indication of interest is opportunistic and not in the best interest of Avon's shareholders."[17][18][19]

In March, 2016, Cerberus Capital Management paid $435 million in cash for preferred stock in Avon Products. This move was the conclusion of a deal initiated in December 2015, when Avon sold 80.1 percent of it North American Business to Cerberus for $170 million. The total value of the deal was $605 million. The investment resulted in Cerberus having an almost 17 percent stake in Avon Products.[20][21]

Business model

An Avon training center in the Bronx

Avon uses both door-to-door sales people ("Avon ladies" primarily, as well as some men) and brochures to advertise its products.[22] The first Avon lady was Persis Foster Eames Albee. Avon operates training centers for potential representatives. Some Avon training centers have a small retail section with skin care products, such as creams, serums, makeup, and washes. Avon uses multi-level marketing to recruit sales representatives, who sell beauty products, jewelry, accessories and clothing.[23]

Avon representatives are considered an independent sales representatives running her or his own business. Some of the brand-names used by the company include Avon, Avon Naturals, Skin-So-Soft and Mark.[citation needed] According to the U.S. government Avon has 5 million to 6 million sales representatives operating in over 100 countries as of 2014. Avon and its subsidiaries have 40,000 to 50,000 employees, 6,000 of which are in the United States.[15]

Avon was an early member of the U.S. Direct Selling Association, which was founded in 1910. The company left the association in 2014, saying that the trade group was not paying enough attention to the industry as a whole.[23]

Celebrity beauty ambassadors

Mark. cosmetics,[24] an Avon fashion and beauty brand, has featured multiple celebrity ambassadors throughout its development in 2003. Notable ambassadors include Lauren Conrad, Ashley Greene, and currently Lucy Hale.[25]

Representative Life

Avon Repfest

Avon hosts an annual Repfest, a 3-day event open to all representatives at a fee. The Repfest serves as an opportunity to inspire representatives from across the country by giving them a chance to network and participate in business-building training seminars.[26] In August 2016, the Repfest was hosted at the MGM Grand Hotel & Casino's convention center in Las Vegas, NV.[27] In August 2017, it will be hosted at the Gaylord Opryland Resort & Convention Center in Nashville, TN.[28]

Avon Foundation

In addition to its corporate pursuits, the Avon corporation is involved in philanthropic causes. The Avon Foundation for Women describes itself as the largest corporate philanthropy dedicated to women's causes globally.[29] The Avon Foundation awards scholarships for Avon representatives and family members. Avon founded the Avon Foundation for Women with its first grant, a $400 scholarship, in 1955.[30]

Additionally, the company's Speak Out Against Domestic Violence program aims to reduce domestic violence.[31] Through 2012, Avon global philanthropy, led by the Avon Foundation, reports having donated more than $910 million in more than 50 countries.[32]

Breast cancer

File:AvonWalkforBreastCancer2013.jpg
The Avon Walk for Breast Cancer

Beginning in the early 1990s, Avon also began donating towards breast cancer research and care, through the Avon Breast Cancer Crusade and the Avon Walk for Breast Cancer, a series of U.S. based charity walks.[33] Before 2003, the Walk was a function of Pallotta Teamworks, with Avon being the beneficiary. Since 2003, the charity reports that more than 180,000 Walk participants have raised $472 million for the cause.[34][35]

Restatements

In Sep 14, 2000, Avon restated its financial statements to reflect the additional write off as of March 31, 1999 of all capitalized costs, associated with the FIRST project as of that date and a reversal of the charge recorded in the third quarter of 2001. In 2001, Avon adopted new provisions and as a result, all prior periods were restated to reflect shipping and handling fees.[36]

Controversy

Chinese corruption charges

Since at least 2008, the conduct of various employees and executives of Avon has been investigated for possible violations of the law, including possible bribery and violations of the Foreign Corrupt Practices Act.[37]

Avon began a probe of its China division after allegations of bribery in June 2008.[38] At least four executives, both in Asia and in the United States, were suspended in 2010,[38] and later fired for their roles in the activities being investigated.[39] According to The New York Times, Avon has spent over $170 million on legal fees and costs related to the investigation: $59 million in 2009 and $95 million in 2010, and $22.5 million for the first quarter of 2011.[40] The Times reported that the final tally may be close to $250 million, after which Avon would report the findings to the United States Department of Justice and the Securities and Exchange Commission (SEC) and try to negotiate the penalties that those entities may impose.[40] On February 24, 2011, Avon filed a report with the Securities and Exchange commission highlighting the investigation as a corporate risk factor that could cause investor loss.[41]

In 2014 Avon settled the bribery charges for a total of $135 million; $68 million in criminal penalties, with the remainder in interest, disgorgement, and fines from a civil case brought by the SEC.[15][42]

Animal testing

Avon vowed in 1989 that as a company located in the United States, they would no longer participate in animal testing.[43] As an ambassador of non-animal testing methods, Avon is working globally to introduce safer methods of testing cosmetics that do not require animals. These methods include in vitro testing, computer simulations, and testing cosmetics on human volunteers.[43]

Although Avon does not practice animal testing of its cosmetics that are sold in the United States, certain specialty products do require extensive testing in other countries. In China, specialty products that require degrees of animal testing include but are not limited to: sunscreen products, whitening/pigmentation products, and hair dye/perm/ or growth products.[43] Due to laws mandated by different countries, Avon is forced to test those specific cosmetics on animals in those jurisdictions. Laws in various countries require companies to pay for animal testing through a commercial business in order to sell certain products in that country.[44] Because Avon is not globally animal-testing free, People for the Ethical Treatment of Animals (PETA) has not included Avon on their cruelty-free list.[45][46]

Labour harassment in Turkey

In 2016, Avon's branch in Turkey (Gebze industrial zone near Istanbul) has been alleged of discrimination against women and union workers.[47]

Avon France

On 14 October 2013, Avon announced the closure of its branch in Paris, France at the end of that month. Its French representatives accused it of keeping the workers in the dark for months and not acting in line with the company's publicly stated values of being a socially responsible company that upholds values of trust, respect and integrity and a culture of "open and candid communication".[48] As of January 2014, Avon France has begun receivership.[49]

See also

References

  1. ^ "Celgene, Kinder Morgan and Actavis Set to Join the S&P 100; Several Constituent Changes Announced for S&P 500, S&P MidCap 400 and S&P SmallCap 600". Mar 13, 2015.
  2. ^ a b c d e f AVON PRODUCTS, INC. Form 10-K, Securities and Exchange Commission, February 26, 2014
  3. ^ a b "AVON PRODUCTS INC 2013 Annual Report Form (10-K)" (XBRL). United States Securities and Exchange Commission. February 26, 2014.
  4. ^ a b c Kowitt, Beth (April 30, 2012). "Avon: The Rise and Fall of a Beauty Icon". Fortune. 165 (6): 106–114. Archived from the original on February 22, 2014. Retrieved April 29, 2012. {{cite journal}}: Unknown parameter |deadurl= ignored (|url-status= suggested) (help)
  5. ^ Lubove, Seth (2008-05-28). "Aegon in Missouri Provokes Regulators Finding Sales Deceptions". Bloomberg. Retrieved 2011-01-05.
  6. ^ Lublin, Joann S.; Glazer, Emily (April 10, 2012). "Avon Names J&J's McCoy as CEO". The Wall Street Journal. p. B1. Retrieved April 9, 2012.
  7. ^ Wahba, Phil (14 April 2015). "Avon's in a ding-dong battle to stay in business". Fortune. Retrieved 15 April 2015.
  8. ^ http://www.bbc.co.uk/news/business-35808678
  9. ^ "USATODAY.com - Avon updates its look, strategy". USA Today. 2006-09-10. Retrieved 2016-03-29.
  10. ^ Quote from an interview with David McConnell, Sr., April 15, 1936. Avon Achieves, IE7, 1936.
  11. ^ "The Story of the C P C, A Brief Sketch of the Upbuilding of a Great Business". California Perfume Company. Retrieved 2012-12-17.
  12. ^ "Agreement of Incorporation for California Perfume Company". Hagley Museum and Library. Retrieved 2012-12-17.
  13. ^ Weekly Drug markets, New Incorporations, Volume 2, Page 26. Google eBooks. Retrieved 2012-12-17.
  14. ^ "TIMELINE-Key dates in Avon's history". Reuters. 2012. Retrieved 2017-09-20. {{cite news}}: Cite has empty unknown parameter: |dead-url= (help)
  15. ^ a b c d "Avon Products settles bribery charges for $135M". Crain's New York Business. Associated Press. 18 December 2014. Retrieved 21 December 2014.
  16. ^ McIntyre, Douglas A. "10 Brands That Will Disappear in 2013". Fox Business.
  17. ^ Smith, Aaron (2012-04-02). "Avon rejects $10 billion offer from Coty - Apr. 2, 2012". Money.cnn.com. Retrieved 2012-09-03.
  18. ^ Dominic Rushe in New York (2012-04-02). "Avon rejects $10bn takeover bid from celebrity-fragrance company Coty | World news | guardian.co.uk". London: Guardian. Retrieved 2012-09-03.
  19. ^ Tiffany Hsu (April 2, 2012). "Avon rejects Rimmel owner Coty's $10-billion bid - Los Angeles Times". Articles.latimes.com. Retrieved 2013-04-16.
  20. ^ Ausick, Paul (8 March 2016). "Avon Concludes Deal With Cerberus". 24/7 Wall Street. Retrieved 13 March 2016.
  21. ^ Becker, Nathan; Mattioli, Dana (17 December 2015). "Cerberus Strikes Deal to Buy into Avon". Wall Street Journal. Retrieved 13 March 2016.
  22. ^ Klepacki, Laura (2005). Avon: Building the World's Premier Company for Women. John Wiley and Sons. ISBN 0-471-71026-1. Retrieved April 4, 2013.
  23. ^ a b Ehrenfreund, Max (16 September 2014). "Avon splits with trade group, citing risk of pyramid schemes". The Washington Post. Retrieved 21 December 2014.
  24. ^ "About: Mark".
  25. ^ "Lucy Hale Named Beauty Ambassador of Mark. Cosmetics".
  26. ^ "Avon Repfest Official Website". Avon.com. 2017-02-14.
  27. ^ "Avon RepFest 2016". Multiview. 2017-02-14.
  28. ^ "Avon RepFest 2017". Facebook. 2017-02-14.
  29. ^ Avon Foundation website, "About the Foundation" Archived June 3, 2013, at the Wayback Machine, June 2013
  30. ^ "Avon Foundation for Women". www.avoncompany.com. Retrieved 2017-08-02.
  31. ^ Klepacki, Laura (2005). Avon: Building The World's Premier Company For Women. John Wiley and Sons. p. 218. ISBN 0-471-73923-5. Retrieved 2008-06-13.
  32. ^ Avon Foundation website, "Our Causes" Archived June 2, 2013, at the Wayback Machine, June 2013
  33. ^ Avon Walk website, "Cities and Dates", June 2013
  34. ^ Avon Walk website, "How Your Donations Help", June 2013
  35. ^ Avon Foundation website, "Breast Cancer Events" Archived June 3, 2013, at the Wayback Machine, June 2013
  36. ^ "Avon Reports Record Fourth Quarter and Full-Year Results, In Line With Expectations".[permanent dead link]
  37. ^ Wohl, Jessica (13 April 2010). "Reuters report". Reuters. Retrieved 2012-09-03.
  38. ^ a b https://www.reuters.com/article/2010/04/13/avon-china-idUSN1318680420100413 Reuters
  39. ^ https://www.bloomberg.com/news/2011-05-04/avon-says-it-fired-four-executives-in-china-over-bribes.html Bloomberg News
  40. ^ a b https://dealbook.nytimes.com/2011/05/06/the-high-price-of-internal-investigations/ N.Y. Times
  41. ^ "Avon 10-K report". Sec.gov. Retrieved 2012-09-03.
  42. ^ Berfield, Susan (1 May 2014). "Avon's Ugly China Bribery Probe Ends With a $135 Million Settlement". Bloomberg Business Week. Retrieved 21 December 2014.
  43. ^ a b c "Avon Products, Inc. & Consumer Safety: Commitment to Science...Respect for Animal Welfare". www.avoncompany.com. Retrieved 2017-03-16.
  44. ^ "Urge Avon to Stop Paying for Cruel Tests on Animals in China". PETA. Retrieved 2017-03-16.
  45. ^ "Avon, Mary Kay, Estée Lauder (and Subsidiary MAC Cosmetics), and Revlon Are Paying for Tests on Animals". PETA. Retrieved 2017-03-16.
  46. ^ "Search for Cruelty-Free Companies, Products, and More". PETA. 2010-06-09. Retrieved 2017-03-16.
  47. ^ https://www.labourstartcampaigns.net/show_campaign.cgi?c=3096
  48. ^ "Avon to close its French operations". BBC News. 14 October 2013. Retrieved 14 October 2013.
  49. ^ Weil, Jennifer (28 January 2014). "Avon France Said Seeking Receivership". WWD. Retrieved 29 January 2014.
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