Avon Products Inc. Is Finally Adapting To The 21st Century
Published: Aug 02, 2018
By: Thomas Guth

Avon Products Inc. Is Finally Adapting To The 21st Century



The transition from door-to-door sales to online is finally happening under the new CEO.

Some key personnel have been hired.

Significant upside potential, if the new strategy is sustainable.


The company was founded in 1886 by David H. McConnell who sold books door-to-door and gave out perfume to entice women to buy his books. He changed his business strategy when it became clear to him that the perfumes were more sought-after than the books. The name was shortly thereafter changed to Avon products Inc. (AVP), as it is known today.

The strategy of using direct marketing has been a key driver of sales from the beginning and has never changed. The company uses representatives (before better known as “Avon girls”) to put the product in front of the potential customers.

Previous management never really prioritized the transition to online/e-commerce. The “missing the boat” of the transition from offline to online is strongly reflected in the stock price. The stock price has steadily been declining after the top in 2004.

As of February this year, the company named Jan Zijderveld as new CEO after a long search. Will he be able to turn the company around?

Hiring spree

The company, under strong encouragement of shareholders, not only hired a new CEO, but also hired some other management personnel who will become key players in the company's transition.

CEO – Jan Zijderveld

Mr. Zijderveld, previously served 30 years with Unilever N.V./PLC, where he rose to a member of the Executive Committee and President of Unilever’s $14 billion European business in 2011. In this role, he oversaw operations in 34 countries and 25,000 employees, effectively returning the business to growth and improved profitability during significantly challenging market conditions.

Prior to that, he served as Executive Vice President in South East Asia and Australasia and Non-Executive Chairman of Unilever’s listed Indonesian business from 2008-2011.

In earlier roles, he served as CEO of Unilever, Middle East and North Africa ((MENA)) from 2007-2008 and Chairman of Arabia and Iran within Unilever MENA from 2004-2007, after serving in a number of leadership positions across Europe, Australia and New Zealand in General Management, marketing, sales and distribution.

As stated above, Mr. Zijderveld has extensive experience in the consumer goods sector. His knowledge of marketing and especially online marketing will be very helpful for the transition of the company.

Digitisation is at the heart of our strategy as we build a new, modern and relevant Avon that is both high-touch and high-tech. We are working intensely to build the right tools to support our 6 million strong network of beauty entrepreneurs to help them provide a personal service to their customers that is underpinned by strong digital capability - Jan Zijderveld (NYSE:CEO)

Vice president Global Brand Marketing, Skincare and personal care - Anna Chokina

Anna joins Avon from L'Oreal Paris, where as General Manager, Russia, she led the business to consecutive years of growth. Anna also oversaw successful brand strategy development and played a central role in making L'Oreal Paris the number one digital beauty brand in Russia. In addition, she brings a strong Consumer Goods background to this new role, having worked at Procter & Gamble and PepsiCo in the Feminine Care and Snacks categories, respectively.

Vice president APAC region – Bill Rahn

Bill Rahn will look after the entire APAC region in terms of both strategy as development. Previously he was managing director, also for the APAC region, for Herbalife international. His fit into the company looks promising, as the similarities in marketing strategy are extensive between his previous employer and Avon. His vision of the company is clearly in line with the overall strategy, as he wants to emphasize on the push for digitalisation.

Chief digital and information technology officer – Benedetto Conversano

Benedetto Conversano is a former Procter & Gamble Co. executive. At Procter & Gamble, Conversano built customer relationship management and sales force automation systems. He will be responsible for developing a new digital strategy for Avon while building and standardizing technology solutions and delivery across the global organization. Avon is creating a digital board comprised of digital, commercial and other business leaders, and Conversano will lead it.

Business strategy

Digitalization and online (direct) marketing is the most prominent strategy point for the upcoming years and the hiring spree shows the commitment.

The company has already shown action by launching a fully digitalized, mobile-enhanced, e-interactive brochure that allows Avon Representatives to connect quickly and effectively with their customersThe launch was successful with more than 500,000 visitors in the first 48 hours and strong, positive feedback from across the network.

Numerous other points of action have also already been taken. Such as:

  • A marketing campaign with drag queens in Brazil.
  • Operating more like successful fast-fashion brands (such as Zara, Mango, etc.). The make-up items are being brought to market in as little as four months, down from two years.
  • Adding products that appeal more to millennials such as “lip tattoos”.
  • Launching a line of Korean cosmetics to ride the K-beauty products hype.
  • Setting up a training program to coach half a million representatives monthly.

“What’s been missing is a belief that this is a business for the future,” new CEO Jan Zijderveld told Bloomberg. “We want people to think, ‘Wow, that’s Avon?’”


The share price has been declining since the financial crisis of 2008 and the all-time high was made in 2004. A natural consequence of a declining business, as revenue declined year on year and no clear radical turnaround strategy from the former CEO was in place. Avon cannot, despite of those facts, be marked as a distressed company. It has a current ratio of 1.23 and the cash per share is currently 1.75 dollars per share (current share price is 1.58 dollars).

This comes down to a total of $772.5 million of cash with long-term debt at $1.9 billion.

Obligations AVONSource: 10-K report 2017

As you can see from the table above, there are no significant debt obligations in the near future.


Before I would be comfortable myself to invest in the stock, I would like to see some (small) confirmation of the effect fullness of the strategy of the new CEO. With the long lasting decline of the stock price in mind, I do not want to fall for one of the biggest Wall Street clichés of “catching a falling knife”. A confirmation in the broadest sense of the word (10-Q, earnings guidance, media coverage, etc.) should first make me feel comfortable before taking ownership of a piece of the company.

I have not bothered with making a proper forward-looking financial analysis (DCF, LBO, etc.) of Avon, as it is virtually impossible to make this for a company that is in the middle of a turnaround. I only looked at signs of distress and I did not find any. The short-term obligations are easily covered and the long-term debt should not be a problem in the upcoming 5 years.

For now, I have no reason to buy the stock as for above mentioned reasons. It is, however, an interesting company with an extremely interesting situation. I will therefore keep a close eye on the company and the future developments, as it can become a compelling investment opportunity in the (near) future.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.