march 3, 2009 - iis windows serverlibrary.corporate-ir.net/library/90/904/90402/items...avon brazil...
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Avon Brazil Investor Meeting
March 3, 2009
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2
Please see our form 10K of February 20, 2009, filed with the SEC, for our cautionary statement
regarding forward-looking comments made in today’s remarks.
Copies of this presentation are available for download in PDF format from avoncompany.com.
The presentation will be archived for 14 days at that site.
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Avon Brazil Investor Meeting
March 3, 2009
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Citigroup/Deutsche Bank Brazil Investor Meeting
March 3, 2009
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Luis Felipe Miranda
General Manager, Brazil
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Avon Brazil Investor Meeting
March 3, 2009
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AGENDA
• Welcome
• Executive Summary
• Avon Brazil
• Representative Experience
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Avon Brazil: A Continuing Success Story• Over $1.7B in 2008 revenues
• Largest market outside the U.S.
• Over 1.1 million Active Representatives• 3rd largest CFT´s market around the world
• Continuous market share progress
• Continued growth opportunity given market trends• RVP, RVP, RVP
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Avon Brazil Investor Meeting
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Customers in Brazil Receptive to Direct Selling• Brazil's CFT market has experienced strong, double-digit revenue growth
• Direct Selling is a relevant channel for CFT with 40% share
• Brazil is the third-largest HDS market in the world• 2.0 million independent Representatives in Brazil
• More than 1.1M are Avon Representatives!
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Why We Love Brazil
• Growth Market
• Direct Selling Market
• Beauty Market
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March 3, 2009
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One of the Fastest Growing Beauty Market
0
5
10
15
20
Brazil China Russia India
2008-2011 CFT Market Growth Projections+12% +18% +14% +15%
2007 Size of Market (US$B)
Source: Euromonitor
10Source: ABIHPEC – Brazilian CFT Industry Association
UnileverL´OrealBDF NiveaProcter & Gamble Johnson & Johnson Colgate-PalmoliveNiasi
AVONNaturaOthers
O Boticário
2008 Share of Market
Direct Selling 40%
Retail 54%
Franchising 6%
CAGR 02-07 +14%
CAGR 02-07 21%
CAGR 02-07 12%
Direct Selling Has a Sizeable Share of Brazilian CFT Market
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And CFT Direct Selling Outpaces Retail Growth Rates
22%25% 26%
19%17%16%
9%12%
14%12% 11%
21%
'03 vs '02 '04 vs '03 '05 vs '04 '06 vs '05 '07 vs '06 '08 vs '07
HDS Retail
Brazil CFT Direct Selling vs. Retail Growth Rates
Source: ABIHPEC (Oct 08)
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Brazilian Women Spend the Most on Beauty
CFT Spend as % of Disposable Income2007
(Source: Euromonitor)
BRA RUS JAP MEX FRA USA
2.2
1.21.0
0.8 0.8
0.4
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Direct Selling Market in Brazil
• Brazil's CFT market has experienced a strong revenue growth since 2000
• Despite current global economic crisis, growth is forecast to continue
• Direct Selling is a relevant channel for CFT , led by Avon and Natura
• Brazil is the third-largest HDS market in the world.• 2.0 billion units sold in 2008
• 2.0 million independent Representatives in Brazil• Over 1.1M are Avon Representatives
Source: World Federation of Direct Selling Association / ABEVD - Brazilian HDS Association
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Avon Brazil - Structure• Started operations in 1958• Manufacturing plant in São Paulo
• Over 500M units in 2008
• 3 distribution centers • Osasco/SP• Fortaleza• Bahia
• 6,000+ associates, 60% women• Founded Avon Institute in 2003
• Supporting Avon’s Breast Cancer and Domestic Violence campaigns on a local level
Fortaleza
Bahia
São Paulo
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Avon Institute• More than US$ 7M since 2003 for KGBC• Support for 66 projects of early detection since
2003• Donation of 22 mammogram machines and 20
ultrasound machines • Donation of US$ 3M for prevention center against
breast cancer under construction at BarretosHospital (2008 to 2009).
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Avon Institute• US$ 0.8M in 2008, for Speak Out Against
Domestic Violence Campaign• Sales of 250,000 of Empowerment Bracelet• Support for a huge dissemination of protective
law (Maria Da Penha) in partnership with UNIFEM.
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Avon Brazil Operations Overview
GBU
Supply Chain IT Marketing
CBU - Brazil
Mktg Sales Legal Finance HR Comm.
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Avon Brazil – Commercial Structure
• All CFT locally produced• 3-week campaign cycle • 19 campaigns per year, lasting
approximately 17-21 days each• 100% home delivery to
Representatives• Distribution in 27 states, over 5,500
cities
• Local delivery network reaches 35% of Representatives within 24 hours
• Average delivery time of 4.3 days• 35% of total internet order placement
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Fashion 8%
Home 11%
CFT 81%
Avon Brazil – A Beauty Market
Skin Care 23%
Fragrance 32%
Others 6%
Personal Care 12%Make Up 27%
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Beauty Image…
AvonBrazil
Top 14 Avon Markets
Beauty Image Index
Source: Avon Global Consumer Tracking Study 2007
262
195
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One of the Highest in Brazilian MarketBeauty Image Index
Source: Avon Global Consumer Tracking Study 2007
285262
182
94
63 6347
33 30 21
Natura Avon O Boticário Dove L'Oreal Nivea Monange Davene Revlon ColoramaMaybelline
$785
$1.039
$1.352
$1.674
2005 2006 2007 2008
+24%+24%(17% L.C.)(17% L.C.)
22
902 9491.018
1.117
2005 2006 2007 2008
History of Solid Revenue and Representative Growth
Total Revenue US$ (MM) Active Representatives (000´s)
CAGR 7%CAGR 29%(17% L.C.)
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Well Balanced Order and Average Order Growth
Orders (MM) Avg. Order (US$)
+8%+8%
CAGR 7%CAGR 20%(L.C. 9%)
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Marketing Strategies
SKIN CARE: Defend and gain share through new technologies and innovation
• Anti-aging (Anew) • Body Lotion (Naturals)• Facial Care (Liiv)
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Marketing Strategies
FRAGRANCE: Gain share through excellent brochure execution and new products focusing on masstige
• Lacroix• Ungaro
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Marketing Strategies
COLOR: Defend leadership through new products and innovation.
• Lipstick pro to go• Lipstick AC lip plump• Renew make up product line.
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Marketing Strategies
PERSONAL CARE: Gain share entering fast growing segments
• Aerosol • Feminine hygiene
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Marketing Drivers
HAIR CARE: Increase penetration among Reps and consumers.
• Advance Techniques• Naturals
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2005 2006 2007 2008
Consumer Investments (US$M)
CAGR = 55%(L.C. 40%)
Brochure
Sampling Public Relations
Advertising
2005 2006 2007 2008
CAGR = 21%(L.C. 10%)
2005 2006 2007 2008
CAGR = 46%(L.C. = 31%)
2005 2006 2007 2008
CAGR = 25%(L.C. 11%)
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RVP Investments (US$M)
2005 2006 2007 2008
2005 2006 2007 2008
CAGR = 51%(L.C. = 37%)
Sales Leadership
Incentives
CAGR = 20%(L.C. = 10%)
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Campaign Highlights - 2008
1st Quarter1st Quarter 2nd Quarter2nd Quarter 3rd Quarter3rd Quarter 4th Quarter4th Quarter
LIIV (Personal Care) & Wish of Happiness
(Fragrance) Renew Elixir (Skin Care) & Batom Extra
Volume (Color)
Renew Ultimate and Renew Clinical &
Blue Rush (Fragrance)
Pro-to-Go (Color) and Bond Girl (Frangance)
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Continue to Invest to Support Representative
Embrace Representative Value Proposition (RVP)
RepresentativeEarnings Representative
Effort
Representative
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High Investment Level in RVPKey Actions• Respond to an aggressive competitive
environment• Increase advertising and innovation (Recruitment
advertising included)• Aggressive launch program• Increase RVP pricing support (Higher NPU items)• Field Training
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High investment level in RVP
Sustain Growth
• Step up technology investments• Tools for Sales Force• Call center, web enablement, smart phone, BI
information, Virtual brochure, Internet order placement
• Invest in infrastructure• Expand capacity
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RVP Investments: Avon Expressa
• To increase sales coverage• Penetration through a new channel (Fixed)• To achieve new prospects: An Entrepreneur Profile
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Osasco
RVP Support: New Distribution Center
FROM TOCabreuva
365,973
3,600
55,000
2.7MM
13,000
861,113
8,200
120,000
6.5MM
34,000
sq ft built area
cartons/hour
orders/day
units/day
pallet positions
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• Build capabilities to support RVP enhancement
• Two delivery dates per campaign to Reps in cities with more than 500k inhabitant
• Delivery in 48 hours for major cities
• Customer sorted orders for Top Reps
• 20% reduction in order turnaround time
• Meaningful productivity improvement
RVP Support: New Distribution Center
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These Are Unprecedented Times
Consumer Contraction
Global Recession Credit Squeeze
Job LayoffsCurrency Volatility
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We Have an Updated Playbook forThese Times
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We don’t have an economic crisis.We have opportunities.
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Outrun consumer spending contraction and protect market share
NewCustomers
Active Representatives
GROW
+
42
Clear Focus on Smart Value MessageFirst time Q1 09 – last spread of the brochure
Offer Smart Value
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• 1.5 million extra brochures to top sellers Representatives.
• Representatives More brochures = more “stores” open
More CustomersExtra Brochures Strategy
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• Pro-To-Go: 01/04 (5 weeks)• Plumping Lipstick: 01/04 (5 weeks)• Liiv: 01/18 (5 weeks)• Renew Clinical: 01/19 (5 weeks)• Christian Lacroix Absynthe 03/09 (5 weeks)
More CustomersTV Product Advertising
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Regular Program Prizes Special Program Prizes
More Active Representatives
Appointment Incentives
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Recruitment AdvertisingMore
Active Representatives
As well as Email Marketing
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• Articles in 22 important media vehicles• Advertorial in Veja magazine• Total estimated audience:
13MM people
Public RelationsMore
Active Representatives
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Outrun consumer spending contraction and protect market share
NewCustomers
Active Representatives
GROW
+
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$0
$500
$1.000
$1.500
$2.000
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
US
$ M
1999 Brazil Financial CrisisAvon Brazil stays the course
We Know How To Do This
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Management Q&A
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AGENDA
• Welcome
• Executive Summary
• Avon Brazil
• Representative Experience
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The Representative Experience
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Representative Q&A
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