The Brazilian cosmetics maker Natura is buying Avon Products in an all-stock deal valued at $3.7 billion, in a move that would create the world’s fourth-largest beauty group.
WHO: Avon was founded in California in 1886. It leverages an army of independent contractors to sell product. The company went public in 1946 and now generates over $5 billion in annual revenue but has been struggling in recent years. Avon moved its headquarters to London after the 2015 agreement, saying the shift would help it focus on international markets. But it’s lost momentum: In its most recent earnings statement, Avon said its sellers base dropped 9% year over year, mainly driven by declines in Brazil and Russia. Earlier this year the company announced a workforce reduction of 10% to trim costs. Currently the company operates in 57 countries. Avon sold its operations in the US to private equity firm Cerberus Capital Management LP in a 2015 deal. Last month, LG Household & Health Care agreed to buy Cerberus’s majority interest as well as Avon’s minority stake in the US business.
Natura, founded in 1969, has become one of Avon’s fiercest competitors with 1 million direct sellers in Brazil alone. The São Paulo-based company is quickly expanding into the rest of Latin America, and it’s rolling out digital accounts and card payment machines to its consultants to make the sales process more digital. Natura is also introducing direct sales to the Body Shop, combining it with their website, stores, and other points of sale to give consumers a broader range of options.
WHY: Natura’s turnaround plans for Avon include speeding up the company’s existing initiatives on e-commerce and development of new products. It also plans on strengthening the brand and emphasizing the narrative around Avon’s historic focus on women’s empowerment.
IN THEIR OWN WORDS: “Today is a historic day,” Natura founder Guilherme Leal said on a call with journalists. “These two companies have been sailing in parallel for a long time and now they’re on the same boat.”
“Natura is taking a decisive step to build a global group, multibrand and multichannel,” said Roberto Marques, CEO of the Brazilian company. “Together we will improve our growing digital capacity, our social network of representatives.”
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