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CEO Letter

Dear fellow shareholders,

It has been my distinct privilege to serve as the CEO of Avon and a member of the Board of Directors for just over a year now.

From day one, my mandate was clear: To define the strategy to modernize Avon, unlock its inherent value and set a course to regain its competitive market position, returning the Company to growth. The first six months were spent diving deeply into the Company, visiting all key markets, listening and learning, absorbing everything about Avon from each stakeholder’s perspective: our Representatives; our customers; our partners; our employees; and our shareholders. I met with many of you and learned a great deal about where we stood and about how far we needed to go.

Jan Zijderveld

Chief Executive Officer, Avon Products, Inc.

Dear fellow shareholders,

It has been my distinct privilege to serve as the CEO of Avon and a member of the Board of Directors for just over a year now.

From day one, my mandate was clear: To define the strategy to modernize Avon, unlock its inherent value and set a course to regain its competitive market position, returning the Company to growth. The first six months were spent diving deeply into the Company, visiting all key markets, listening and learning, absorbing everything about Avon from each stakeholder’s perspective: our Representatives; our customers; our partners; our employees; and our shareholders. I met with many of you and learned a great deal about where we stood and about how far we needed to go.

With these insights and lessons, we were able to move quickly to identify and address some immediate fixes while formulating the basis of our longer-term vision. Avon’s next chapter—Open Up Avon—was unveiled in September 2018. At the core of this strategy is the belief Avon must accelerate its pace of change. We have already begun taking the necessary actions to modernize and simplify the Company, build a culture of accountability and focus our business. Our goal is to unlock Avon’s significant potential, building on its powerful brand and purpose to empower millions of entrepreneurial women around the world.

Among other initiatives, we are doing the following:

Renewing our focus on our powerful global social selling network

One of our early actions was to sharpen our focus on our Representatives – “re-booting” and modernizing our powerful global selling network to improve Her earnings and end-to-end experience. We started by making critical improvements in our service model and increasing investments in recruiting, training and communication. We are introducing segmented programs to target our different types of Representatives designed to enhance Her effectiveness. In the fourth quarter, we trained roughly 1.2 million Representatives, nearly tripling our goal. We are rapidly bringing to market innovative, “on-trend” products, bundles and regimes that meet the dynamic needs of women, supported by modern training and sales tools that motivate Her to become a trusted Beauty Advisor. We are already seeing some signs that these initiatives are taking hold, with Representative additions increasing 12% in the fourth quarter of 2018 over the third quarter. In 2019, we will expand our recruiting and training capabilities across all markets.

Simplifying operations

Avon must have simpler, leaner and more agile operations and an infrastructure and cost structure that is competitive in today’s market. To that end, we are moving swiftly to simplify our processes and operating structure and reducing product line complexity, inventory levels, and costs. During 2018, we announced the sale of our China manufacturing plant, we exited our Rye, NY facility and we reduced head count by 8% vs 2017. We successfully exceeded our previous savings plan by removing over $350 million of cost. Further, in September we announced additional plans to reduce costs by $400 million over the next three years to help fuel future growth initiatives. By year end we had already saved $40 million against this new plan.

Modernizing and digitizing the brand experience

Delivering on our transformation strategy will ensure that Avon’s widely-recognized and trusted brand becomes stronger and more relevant. At the heart of our strategy, we intend to empower our Representatives by providing a modern digital experience as well as tools and training to help them build and grow their business online. We understand that in today’s world it is critical to go beyond the paper brochure and make the Avon brand, products and experience available to every Representative and customer whenever, wherever and however she chooses to access it. Internally, we are developing the technological infrastructure to enhance Her experience and manage Her business. Externally, we are revolutionizing Avon’s service model and have begun to unleash powerful digital and mobile capabilities, enabling our Representative to extend Her reach and build Her business across multiple channels. We made significant progress in 2018, with 100% of our markets having online ordering capabilities; launching eBrochure in 60 markets, increasing the Representative’s flexibility, and releasing My Avon Store in 23 markets with 18% of our Representatives selling online to anyone, anywhere.

Transforming the culture and injecting best-in-class talent

Ensuring that Avon has the right team that is accountable for executing our transformation is crucial to our future. Over the past year, we have built a strong executive team and recruited talented, experienced leaders across key functions and in our major markets. Overall 73% of our top 33 executives were newly appointed in 2018, including seasoned leaders in critical areas such as: supply chain, digital, service, training, and marketing. Additionally, the appointment of skilled General Managers to lead key markets has injected fresh talent exactly where it’s needed. While significantly bolstering our bench, we have also made good progress instilling a performance culture throughout Avon that is supported by the introduction of a comprehensive new governance cadence, tighter controls and metrics and clear performance targets for all managers.

My first year has been busy and productive, starting with our initial progress fixing the basics and “re-booting” our powerful direct selling network. We have built a strong, capable management team determined and dedicated to delivering our strategy to transform and “Open Up” Avon. We will do this by simplifying, focusing and modernizing our business, culture and cost structure while empowering the success of our global Representatives and consumers.

Our focus in 2019 is on execution. As we enter the year, we are glad to see early signs of positive momentum and improving metrics. We are in the early stages of our transformation and recognize that change at this scale and this depth will take time. We are working with urgency, making tough decisions with speed and holding people accountable for their results. Stepping back, I am confident in the strength of Avon’s brand, our purpose and in our people—and in the opportunities we can capture by delivering our strategy.

I am proud of the progress we are making as we write Avon’s new chapter where we strive to return the Company to growth, reclaim its competitive market position, and unlock value for all Avon Stakeholders. Also this year we launch our stand4Her initiative to improve the lives of 100 million women each year by advancing their earning potential, freedom of expression and ability to live a safe and healthy life. I am committed to using the power of our brand and our global reach to do this.

On behalf of the Board and our management team, we appreciate the efforts of our Representatives and employees and thank you, our shareholders, for your continued support.

Best,

Jan Zijderveld

Chief Executive Officer

CEO Signature
Details 03/11/2019