Avon Products Inc. is cutting $400 million in costs are part of a new turnaround plan.
The business plans to streamline operations in manufacturing, sourcing, distribution, administration and the back office in order to save $400 million by 2021, chief executive officer Jan Zijderveld told Wall Street during the company’s Investor Day on Friday. “We can take more costs out of this business and make it a leaner, better, faster business,” Zijderveld said.
The business also plan to invest about $300 million in things like digital initiatives, training for representatives and entering new categories.
“I would argue we’ve missed every single big trend out there,” Zijderveld said, noting the business has been “slow to the party” but has plans to launch K-beauty, expand J-beauty, launch men’s personal care and do more in naturals.
It’s all part of Zijderveld’s plan to create a more “open” culture, which includes opening up the company to more representatives, consumers and opportunities, he told WWD. It also includes the launch of an e-rep program, which will allow the company’s salesforce to open online shops in addition to peddle beauty products via physical brochure.
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“If you think about our business today, it’s a very physical business,” Zijderveld said. “You’ve got a lady that uses the brochure, that goes physically to her consumers, takes the orders, gets the product and then delivers.…That’s great for a group of consumers, but it’s not appropriate for many more modern consumers.”
Digital programs give Avon the opportunity to reach even more customers, Zijderveld said. He gave the example of South Africa, a country where Avon is considered trendy, where between 200,000 and 300,000 Avon reps are reaching about three million people of a population that’s approaching 60 million.
“How do we equip our representatives to reach not two to three million people, but to reach 10 million people, 15 million people, 20 million people?” Zijderveld said. “That is a massive strategic leap for the business, to say, ‘we’re not going to restrict the business to only this physical brochure, we’re going to give the tools and the training for her to significantly step-change her ability to sell to more consumers in the marketplace.”
“Even today almost half of our recruits are below 30,” Zijderveld continued. “We’ve got lots of young people coming in…[physically delivering] is not great for many of the young people, so we’re going to give them the tools and the technology to be able to run their business through e-commerce and digitally.”
The company — which spends about one-third of its advertising budget digitally — is also working to reach end consumers on new platforms, Zijderveld said.
“In the area where more young people and beauty-conscious people are looking, our brand is starting to show up in a much more active way,” he said. That, in conjunction with launching more trendy products, faster, should help “reframe the brand in a much more modern way” in the minds of consumers, he said. For one recent lip launch in the U.K., the company got the product to market in 20 weeks, Zijderveld noted.
The business will also start training reps — who Zijderveld refers to as “the boss” — again.
“We are here to help in her success. If she wants to do physical brochures, we’re going to make that as easy and seamless as possible, if she wants to run a digital business and then there’s also underpinned by a real commitment to investing in training and developing her again,” he said.
Over the last few years, Avon essentially stopped doing that. But now, the company has set up a global sales academy and committed to training at least 500,000 reps in the second half of 2018 — so far, Avon is far ahead of that goal, according to Zijderveld.
Zijderveld is also working to inject a new culture into the business with new hires, including a new general manager of India and procurement officer, he said.
“We’re really on the operating table. How fast the recovery is is always the question, and as with a patient on the operating table, this takes time,” Zijderveld said, declining to provide a turnaround timeline.
“We’re in the reset moment. It’s about resetting the company, and then stabilizing…then we talk about how do we go into acceleration and then we go into momentum,” Zijderveld said.
Zijderveld’s presentation at Avon’s investor day comes during the same week as sale rumors have swirled in the marketplace. Asked directly if a sale was part of the turnaround plan, or if the business was focusing instead on digitization initiatives, Zijderveld said, “I don’t know. I’ve also read the rumors. In the end, I’m here to turn around this company. [Friday] is all about rejuvenating this great iconic business and this iconic brand. And that’s what we’re focused on, to make this brand great again.”