EVIAN, France — A new world order is coming, predicted Andrea Jung, chairman and chief executive officer of Avon Products. And the beauty model that will dominate is the one that successfully reinvents itself first.
This story first appeared in the July 19, 2002 issue of WWD. Subscribe Today.
“I think we are in the moment of reinvention of the department store, the reinvention of the specialty store formats, of direct selling, of mass,” said Jung, during her keynote address at the WWD CEO Beauty Summit. “He or she who reinvents the channel fastest can win.”
Jung lists herself among a new generation of business leaders “who see a dizzying pace of change across a global and political environment.” She said the beauty industry should be thankful for its relative stability as it witnesses the “unprecedented demise of entire industries that have been built over decades like telecommunications, accounting, steel and travel.”
While stressing her belief that beauty is not in dire straits, Jung said, still, “it is at an inflection point. We are embracing change at a much faster pace.” Declared Jung, “The expected unexpected in the game has changed forever. No industry, including ours, is immune.” To keep pace in a swift-moving world, brands need to willingly reinvent themselves.”
Jung proposed that to keep the business viable, beauty companies should embrace a rapid pace of growth — annual double-digit increases. “If we do not unleash a faster rate of growth in this industry, I think the industry is in peril.” She challenged the opinion of a London-based analyst who commented earlier in the conference that sales predictability is what investors yearned for from beauty companies. “I think predictability for the industry with 2 to 3 percent growth is not only not good enough, but I think it will lead to crisis down the road,” responded Jung. “I personally am not a believer in low- to mid-single-digit gains over the long term. I think you go one way or the other.”
Along with the transformation of channels and the transformation of brands, there will be a transformation of business leaders, said Jung. These new leaders will be defined, “by a new level of energy.” They will also exhibit more emotional intelligence.
To push change, “you have to have courage, you have to have guts. You have to be bold, thoughtful and calculated so that the financial markets remain calm,” said Jung. “Rule makers have to have the mind-set of rule breakers in terms of mentality of innovation and entrepreneurship. Rule breakers have to have some of the rule-maker mentality about process, structure and discipline in order to grow past a certain point.”
Pointing to the impact Tiger Woods has had on golf, Jung said, “He is the example of totally redefining the game. And I think it is our turn and our moment to completely redefine the beauty game.”
To grow the business, Jung said there are new demographics and new geographies that are untapped. For one thing, Avon is launching a teen business next year. And, she noted, by 2004, Avon anticipates its sales in Central and Eastern Europe — particularly Poland and Russia — and China will represent a $1 billion business. Russia alone is a $120 million market today, up from nothing in 1998.
To reinvigorate the Avon brand, psychological hurdles had to be overcome, recalled Jung, who joined the company in 1993. “I think and believe that the barrier to growth is more psychological than economic in nature.” At Avon, “No one believed we could grow. Our own people didn’t believe we could grow.
“We took huge, bold resistance and turned it around and made it a winning proposition. Our belief was that high touch can be extremely modern.” Avon has sustained 10 straight quarters of financial growth.
Even Wal-Mart, the world’s leading retailer, only rates itself five on a scale of 10 and continuously looks to reinvent itself, according to Jung, who recently visited the company’s headquarters.
“I think I am the only mass cosmetics manufacturer to go down to Bentonville and not sell,” she quipped. Rather, Jung participated at a forum to help Wal-Mart find ways to improve its performance. “They are committed to reinventing the mass channel.”