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Avon Products, Inc.

Avon Products, Inc.

1345 Avenue of the Americas
New York, New York 10105-0196
U.S.A.
Telephone: (212) 282-5000
Fax: (212) 282-6049
Web site: http://www.avon.com

Public Company
Incorporated:
1886 as the California Perfume Company
Employees: 43,000
Sales: $5.9 billion (2001)
Stock Exchanges: New York
Ticker Symbol: AVP
NAIC: 32562 Toilet Preparation Manufacturing; 45439 Other Direct Selling Establishments

The oldest beauty company in the United States, Avon Products, Inc. has grown from a modest line of perfumes sold door-to-door to one of the worlds leading brand of cosmetics. It manufactures and sells cosmetics, fragrances, toiletries, accessories, apparel, and various decorative home furnishings. Avon employs a unique direct-selling method, which was greatly responsible for its incredible success in the 1950s and 1960s, when women were easily found in the home for sales purposes. After unsuccessful efforts at diversification into the health-care service industry left the company with massive debts in the late 1980s and early 1990s, Avon began to refocus on its roots: beauty products and direct selling. The companys products are sold through catalogs, mall kiosks, its prestigious day spa in Trump Tower in New York, the Internet, and in J.C. Penney stores. Its products are also sold directly to customers in nearly 143 countries by 3.5 million independent sales representatives, making Avon the number one direct sales company in the world.

Early Years as the California Perfume Company

The beginnings of Avon Products, Inc. can be traced to the mid-1880s, when a door-to-door book salesman named David H. McConnell attempted to bolster declining sales by offering small samples of perfume to housewives who would listen to his sales pitch. It soon became clear, however, that his customers were more interested in the perfume, and McConnell left the book-selling business to create an entire line of perfumes to be sold door-to-door. He brewed the perfume in a pantry-sized space in New York City, naming the product line the Little Dot Perfume Set, which consisted of five scents: white rose, violet, lily of the valley, heliotrope, and hyacinth. His endeavor was named the California Perfume Company in an effort to invoke images of the beauty and excitement of that state.

McConnells intent was to build a business around quickly used products sold directly to the consumer through use of the national network of sales agents he had organized during his years as a bookseller. The nations first Avon Lady was Mrs. P.F.E. Albee of Winchester, New Hampshire, the wife of a U.S. senator. Within the first six months of operation, Albee had assembled a solid base of 100 salespeople and their customers; within 12 years, Albee had recruited and trained nearly 5,000 representatives.

In addition to new scents, other products were quickly added to the California Perfume Companys product line. Popular early items included spot remover, Witch Hazel Cream, machine oil, mending cement, Almond Cream Balm, food flavorings, Tooth Tablet, and carpet cleaner. In 1896, ten years after the company was conceived, McConnell hired Adolf Goetting, a noted perfumer who had been in the business for 25 years. The following year, a new laboratory was built in Suffern, New York, and the first illustrated catalog was produced. By the companys 20th year, its product line had expanded to include more than 100 items, and in 1914 the companys rapid expansion was marked by the opening of an office in Montreal, Canada.

The Early 1900s: Avon Is Born

The first products in the California Perfume Companys line of Avon Productsa toothbrush, cleanser, and vanity setappeared in 1920. The Avon name was inspired by the area around the Suffern lab, which McConnell thought resembled the countryside of William Shakespeares home, Stratford-on-Avon, England. Never wavering from its strategy of door-to-door sales and catalogs filled with low-cost home and beauty products, the company surpassed the $2 million sales mark in 1926, the year of its 40th anniversary.

By the end of the 1920s, the company was doing business in 48 of the United States and in Canada. During this time, thousands of female sales representatives, under Albees supervision, were partaking in one of the first opportunities for American women to experience a degree of economic freedom without upsetting their culturally accepted role as homemakers. The company launched three-week sales campaigns and a specials strategy in 1932. Five years later, in 1937, McConnell died and was replaced by his son, David H. McConnell, Jr., who headed the company for the next seven years. Under his supervision, the companys growth remained steady. In 1939, the California Perfume Company was renamed Avon Products, due to that product lines immense popularity and success.

During World War II, cosmetic production slowed while nearly half of the staff in the Suffern lab devoted themselves to wartime production of such things as insect repellent, pharmaceuticals, and paratrooper kits. In 1944, W. Van Alan Clark replaced McConnell as the companys chairman. The new Avon then instituted several changes during the 1950s, the most notable of which was its entry into overseas markets and the rapid expansion of its sales force.

Postwar Expansion in the 1950s and Beyond

Following the war, many more housewives began seeking extra income and work that did not interfere with family life. In the early 1950s, the Avon sales force almost quadrupled in size. Sales representatives territories were downsized by several hundred homes, a strategy that enabled more representatives to be added and sales to increase sixfold over the following 12 years. Avon advertisements appeared on television for the first time, including the famous slogan, Ding Dong, Avon Calling, which was first televised in 1954. That same year, Avon opened offices in Venezuela and Puerto Rico, marking its first venture into what would become a very lucrative Latin American market. It also penetrated the European market in 1957 with the institution of Avon Cosmetics, Ltd. in the United Kingdom.

Under the leadership of W. Van Alan Clark, Avon also saw changes such as the rapid expansion of foreign sales and Avons listing on the New York Stock Exchange in 1964. Clark was replaced by J.A. Ewald in 1966, who was followed by W. Hicklin a year later. Under Hicklin, the traditional three-week sales cycle was changed to two weeks to improve sales. The three-week campaign was still used overseas, particularly in Asia, a market which was entered by Avon in 1969 through the opening of operations in Japan. Japan remained one of Avons key foreign markets, along with Brazil, Mexico, and the United Kingdom.

The 1970s presented Avon with its greatest challenges in the companys history. Though sales topped $1 billion in 1972, and its profitable costume-jewelry linebegun in 1971had made Avon the worlds biggest jewelry manufacturer in just five years, Avons growth stalled in 1973. The company was hit hard by a recession and the mass entry of women into the workforce. The direct-selling system, Avons innovation and strength, was nearly toppled by social changes that management had not anticipated. The status of the U.S. dollar reduced the companys international profits; recession and inflation crippled its high-sales decanter products line; in 1975, about 25,000 Avon Ladies quit; and Avon products were outpaced by retail cosmetic firms offering jazzier products to women with new attitudes. All of these factors converged and led to troubled timesand Avons eventual restructuring.

In response to these hardships, the most visible change Avon made was to become more sensitive to its market. Sales representatives began to follow women into the workplace, where about 25 percent of Avons sales are made today, and new businesses such as direct-mail womens apparel were tested. Changes were also made to the cosmetics product line and its overall pricing as a result of market studies. Fred Fusee, who had advanced through the manufacturing side of Avon to become its chairman in 1972, was replaced in 1975 by David W. Mitchell, whose years with Avon had been spent in marketing. Mitchell worked to solidify Avons presence in the beauty business via consumer and product research, product development, and promotion. Avons image was overhauled to give it a more contemporary appeal, advertising time was more than tripled, and sales were revamped.

In 1979, Avon made another strategic move to update its product offerings through the purchase of Tiffany & Company, the upmarket jeweler, for $104 million. The Tiffany purchase set the tone for the next decade: diversification through acquisition. This included an ill-fated billion-dollar plunge into the healthcare industry and a later entry into the prestige-fragrance market.

Company Perspectives:

Its a bond forged by everything from shared causes to biology, tracing back through more than a century of beauty and business opportunity. And as we stride past the threshold to the next hundred years, that natural affinity is strengthened by energetic new initiatives, a bolder vision, and a wider, more diverse community of customers. In a dynamic new world, Avon continues to connect, reaching women through a vibrant image and outstanding products, personal relationships, cutting-edge technology, exciting new channels, and unparalleled support for gender and family issues. When we say were the Company for Women we mean it.

The 1980s: Diversification Through Acquisition

In 1983, Hicks Waldron, who had previously helped turn around General Electric, left his post at R.J. Reynolds to become Avons chairman. Shortly before Waldrons appointment, Avon had purchased Mallinckrodt, a chemical and hospital supply company. Waldron followed this purchase with the acquisition of Foster Medical Corporation in 1984. Initially thriving in the home and health-care equipment field, Foster became the fastest-growing division of Avon. Just as the company began to celebrate its success, however, Foster was devastated by Medicare cost-containment efforts. At the same time, Tiffanys profits were steadily decliningin part because customers had become alienated by the introduction of lower-priced merchandiseand the Tiffany subsidiary was sold in 1984.

Avon then tried to focus on health care for the elderly with the 1985 acquisitions of the Retirement Inns of America and The Mediplex Group, both of which were nursing home operations. Unfortunately, only 15 percent of Avons sales came from its health-care holdings that year. This failure, combined with the fact that annual profits overall were about half of what they were in 1979, caused Waldron to rethink his strategy and abandon the diversification plan. Mallinckrodt was sold in early 1986 and Foster in 1988, both at a great loss to Avon, and plans to sell the remaining health-care divisions were announced. The company sold Retirement Inns of America in 1989 and The Mediplex Group in 1990. Avons brief health-care industry foray left it $1.1 billion in debt.

Diversification into prestige fragrances later proved to be a more stable endeavor. First came a joint venture with Liz Claiborne in 1985, followed by the acquisitions of Parfums Stern and Giorgio, Inc. in 1987. Parfums Stern, which produced Oscar de la Renta, Perry Ellis, and other designer perfumes, was a chief competitor of Liz Claiborne, and before long Claiborne dissolved its agreement with Avon. Strapped for cash, Avon then sold Parfums Stern in early 1990. Giorgio remained a top-selling national brand well into the 1990s, however, and under the parentage of Avon introduced several new products in the Giorgio line.

Gaining Financial Stability: Early to Mid-1990s

Waldron retired in 1989, and his successor, James E. Preston, immediately faced several takeover attempts. Avon fought off a bid by Amway Corporation in partnership with Irwin L. Jacobs, a Minneapolis, Minnesota-based raider who then launched a takeover attempt himself. While these efforts receded in the early 1990s, a new suitor appeared in the form of the Chartwell Association, an investment group that included the chief financial officer of Mary Kay Cosmetics. Interestingly, the Avon sales force proved to be the greatest deterrent to these takeover bids; in massive letter-writing campaigns, the sales representatives told aggressors that they will be unwilling to work for them.

In 1990, Avon continued to focus on rejuvenating its domestic sales figures, while selling approximately 40 percent of Avon Japan to the Japanese public for $218 million in revenues. Meanwhile, the company entered further into the business of selling items in the United States through direct-mail means, using full-color catalogs to promote its products. These measures helped the company increase 1990 sales to $3.45 billion, marking an increase of over $150 million from the previous year.

As Avon began to stand on firmer ground financially, it was able to focus once again on expanding its scope worldwide. The early 1990s were spent establishing sales headquarters and networks in other countries, while also continuing to boost sales in the United States. Avon entered the sales market in Poland in 1992 through the recruitment and training of more representatives to work in direct sales capacities there. The company also entered the Russian market in 1993. Annual sales broke the $4 billion mark that year, and the per-share price of Avons stock rose to over $32. The company also began selling its product on the Internet, taking advantage of the increasing popularity of the information superhighway.

In 1994, Avon sold off its Giorgio product line, which was becoming a less important asset as time went on. The company instead focused on promoting products carrying its own name. It further strengthened its standing in the foreign market in 1995 with the addition of a sales office in India, and the acquisition of Justin (Pty) Ltd. in South Africa, the countrys second largest direct-selling cosmetics company. 1995 sales topped off at almost $4.5 billion.

Expansion continued as Avon also began selling sportswear and apparel for women in its direct-mail catalogs after finalizing a joint venture with fashion designer Diane Von Furstenberg to introduce a line of moderately-priced casual wear. Avon tied the addition in with the companys corporate sponsorship of the 1996 Summer Olympics in Atlanta, Georgia, and a multi-million dollar advertising campaign that named sports figures such as Jackie Joyner-Kersee as Just Another Avon Lady. Also in 1996, Avon introduced Lifedesigns, a corporation developed to offer goal-setting and management seminars to women. Early the following year, Avon also purchased Discovery Toys, Inc., a direct-sales marketer of educational toy products for children. Discovery Toys continued operations separate from those of Avon, with the hope that Avons immense global sales network would help the small company attain higher sales and thus contribute to its new parents yearly revenues. The sales from this unit did not reach expected levels, however, and Discovery was sold in 1999.

Rebuilding the Avon Brand: Late 1990s and Beyond

Avon entered the late 1990s trimmed of its unwieldy diversification into the health-care industry. The company continued to hire sales representatives throughout the world to sell products directly to consumers, while also working to expand various other sales outlets. The majority of its efforts during the last years of the decade, however, were spent fine-tuning its brand as it faced fierce competition and slowing American sales. By this time, Avon products had developed a somewhat stodgy image and held little appeal to young women. In 1998, revenue grew by just three percentfar from the companys goal of reaching levels of eight-to-ten percent annual growth by 2000.

Key Dates:

1886:
David H. McConnell establishes the California Perfume Company.
1897:
A new laboratory is built in Suffern, New York, and the companys first illustrated catalog is produced.
1914:
The company opens an office in Montreal, Canada.
1920:
The Avon Products line is launched.
1939:
The company is renamed Avon Products Inc.
1957:
Avon enters the European market and forms subsidiary Avon Cosmetics Ltd. in the United Kingdom.
1964:
The company goes public.
1995:
Justin Pty Ltd. is acquired; sales reach $4.5 billion.
1999:
Andrea Jung becomes the first female CEO of Avon.
2001:
Retail brand beComing is launched in J.C. Penney retail outlets.

As a result, the firm began to devote millions to various advertising campaigns. In an attempt to launch the Avon brand with more of a trendy, upscale appeal, the firm opened a day spa, The Avon Centre, in Trump Tower in New York City. Avons president at the time, Andrea Jung, commented on the companys objective in a 1999 Fortune article, stating that the firm wanted to position Avon as a world-class beauty brand and that it needed to change peoples minds about Avon. Jungwho joined Avon in 1994was named CEO in 1999, becoming the companys first female CEO.

Under her leadership, Avon began its brand turnaround and also focused on bolstering U.S. revenues, which accounted for nearly 30 percent of company sales in 2000. The company started to make sweeping changes to its advertising, manufacturing, packaging, and selling strategies. Adopting the tagline, The Company for Women, Avon set out to increase market share, break into new selling channels, and prove that the faltering Avon Lady and her products could enter the new millennium with a fresh, innovative appeal.

During 2000, Avon increased its advertising budget to $90 millionnearly doubling what it spent in 1999and also invested in revamping its Web site. It signed celebrity tennis stars Serena and Venus Williams to its Lets Talk ad campaign. The firm also spent heavily in research and development, increasing its budget in 2000 by 46 percent over the previous year, and pushed to reduce the time it took to launch new products on the market. During that year, the firm introduced Anew Retroactive, an age reversal cream. Avon Wellness, a line of nutritional, aroma therapy, fitness, and relaxation products, hit the market in 2001. The company also began its foray into store branding by teaming up with J.C. Penney to position its retail brand beComing in a department store setting. Jung also tapped Avons newly elected president Susan Kropf to overhaul the companys manufacturing and distribution operations. Kropf cut the number of Avon suppliers from 300 to 75 and completely automated the ordering processing. Her efforts saved the company $400 million and reduced errors in shipments and customer orders.

While Jungnamed chairman in 2001pressed for further growth for 2002 and beyond, she faced several challenges. While company stock had increased by 70 percent since her election to CEO in 1999, it began to fall after the September 11th terrorists attacks on the U.S. Consumer spending slowed, and foreign markets such as Argentina faltered due to economic crises. During 2001, the company posted revenues of $5.9 billion, a small 4.9 percent increase over the previous year. Jung, while optimistic, prepared for the challenging future. The next couple of years are going to be no walk in the park, she commented in an October 2001 Fortune article. This turnaround is far from complete. Im probably thinking that we need to be even bolder and faster.

Principal Subsidiaries

Cosmeticos Avon S.A.C.I. (Argentina); Avon Cosmetics Australia Proprietary Limited (Australia); Avon Products Pty. Limited (Australia); Avon Cosmetics Vertriebsgesellschaft m.b.h. (Austria); Arlington Limited (Bermuda); Stratford Insurance Co., Ltd. (Bermuda); Avon Holdings, Ltd. (Bermuda); Productos Avon Bolivia Ltda. (Bolivia); Avon Cosmeticos, Ltda. (Brazil); Avon Industrial Ltda. (Brazil); Avon Canada, Inc. (Canada); Avon Fashions, Inc. (Canada); Avon Mode Inc. (Canada); Cosmeticos Avon S.A. (Chile); Avon Products (Guangzhau) Ltd. (China) (73.85%); Avon Products (China) Co. Ltd. (73.85%); Avon Cosmetics, Spolecnosti S. Rucenlm Omezenym (Czech Republic); Avon Capital Corp.; Avon International Operations, Inc.; Avon-Lomalinda, Inc.; Productos Avon S.A. (Dominican Republic); Productos Avon Ecuador S.A. (Ecuador); Productos Avon, S.A. (El Salvador); Avon S.A. (France); Avon Cosmetics GmbH (Germany); Productos Avon de Guatemala, S.A. (Guatemala); Productos Avon, S.A. (Honduras); Avon Cosmetics (FEBO) Limited (Hong Kong); Avon Cosmetics Hungary KFT (Hungary); Avon Service Center, Inc.; Avon Beauty Productos India Private Limited (India); P.T. Avon Indonesia (Indonesia; 92%); Albee Dublin Finance Company (Ireland); Avon Limited (Ireland); Avon Cosmetics S.p.A. (Italy); Avon Products Company Limited (Japan; 66%); Live & Life Company Limited (Japan; 68%); Avon Cosmetics SIA (Latvia); UAB Avon Cosmetics (Lithuania); Avon Cosmetics (Malaysia) Sendirian Berhad (Malaysia; 70%); Avon Cosmetics, SA. de C.V. (Mexico); Avonova, S.A. de C.V. (Mexico) (49%); M.I. Holdings Inc.; Avon Americas, Ltd.; Avon Overseas Capital Corp.; Avon Cosmetics Limited (New Zealand); Productos Avon de Nicaragua, S.A. (Nicaragua); Avon Cosmetics A/S (Norway); Productos Avon S.A. (Peru); Productos Avon S.A. (Panama); Avon Cosmetics, Inc. (Philippines); Avon Products Mfg., Inc. (Philippines); Beautifont Products, Inc. (Phillipines); Avon Cosmetics Polska Sp. z o.o (Poland); Avon Cosmeticos, Lda. (Portugal); Avon Cosmetics Spal s r.o (Slovak Republic); Avon Beauty Products Company (Russia); Justine/Avon (Pty) Ltd. (South Africa); Avon Cosmetics, S.A. (Spain; 75%); Avon Cosmetics (Taiwan) Ltd. (Taiwan); Avon Products Limited (Taiwan); Avon Cosmetics (Thailand) Ltd. (Thailand); California Manufacturing Co. Ltd. (Thailand); Eczacibasi Avon Kosmetik Urunleri Sanayi ve Ticaret A.S. (Turkey) (50%); Avon Cosmetics (Ukraine); Avon Cosmetics Limited (United Kingdom); Avon European Holdings Ltd. (U.K.); Cosmeticos Avon De Uruguay S.A.; Avon Cosmetics de Venezuela, C.A.

Principal Competitors

LOreal SA; Mary Kay Inc.; Revlon Inc.

Further Reading

Brooker, Katrina, It Took a Lady to Save Avon, Fortune, October 15, 2001, p. 202.

Cardona, Mercedes M., Becoming a Store Brand, Advertising Age, September 10, 2001, p. 70.

Earnings Fall at Avon, United Press International, February 6, 2002.

The Greatest Beauty Story Ever Told, New York: Avon Products, 1986.

Hayes, Linda, The Changes in Avons Makeup Arent Just Cosmetic, Fortune, August 13, 1979.

Kleinfield, Sonny, Staying at the Top, New York: New American Library Books, 1986.

Klepacki, Laura, and Pete Born, Avons Star Return, WWD, December 15, 2000, p. 10.

McLean, Bethany, Not Your Mothers Avon: A Middle American Icon Gets Sort of Cool, Fortune, May 24, 1999, p. 44.

Remaking the Avon Lady, Money, February 1, 2000, p. 46.

Carol I. Keeley
updates: Laura E. Whiteley and Christina M. Stansell

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Avon Products, Inc.

Avon Products, Inc.

9 West 57th Street
New York, New York 100192683
U.S.A.
(212) 282-7000
Web site: http://www.avon.com

Public Company
Incorporated:
1886 as the California Perfume Company
Employees: 33,700
Sales: $4.81 billion (1996)
Stock Exchanges: New York
SICs: 5963 Direct Selling Establishments; 2844 Toilet Preparations; 5122 Drugs, Proprietaries, and Sundries; 3961 Costume Jewelry; 3999 Manufacturing Industries Not Elsewhere Classified

The oldest beauty company in the United States, Avon Products, Inc. has grown from a modest line of perfumes sold door-to-door to one of the worlds leading brand of cosmetics. It manufactures and sells cosmetics, fragrances, toiletries, and accessories, and has recently begun offering sportswear for women. Avon employs a unique direct-selling method, which was greatly responsible for its incredible success in the 1950s and 1960s, when women were easily found in the home for sales purposes. After unsuccessful efforts at diversification into the health-care service industry left the company with massive debts in the 1970s, Avon began to refocus on its roots: beauty products and direct selling. Today, Avons products are sold through catalogs as well as directly to customers by its sales representatives. Avon products are sold in more than 130 countries by two million representatives, making Avon the number one direct sales company in the world.

Early Years as the California Perfume Company

The beginnings of Avon Products, Inc. can be traced to the mid-1880s, when a door-to-door book salesman named David H. McConnell attempted to bolster declining sales by offering small samples of perfume to housewives who would listen to his sales pitch. It soon became clear, however, that his customers were more interested in the perfume, and McConnell left the bookselling business to create an entire line of perfumes to be sold door-to-door. He brewed the perfume in a pantry-sized space in New York City, naming the product line the Little Dot Perfume Set, which consisted of five scents: white rose, violet, lily of the valley, heliotrope, and hyacinth. His endeavor was named the California Perfume Company, in an effort to invoke images of the beauty and excitement of that state.

McConnells intent was to build a business around quickly-used products sold directly to the consumer, through use of the national network of sales agents he had organized during his years as a bookseller. The nations first Avon Lady was Mrs. P. F. E. Albee of Winchester, New Hampshire, the wife of a U. S. senator. Within the first six months of operation, Albee had assembled a solid base of 100 salespeople and their customers; within 12 years, Albee had recruited and trained nearly 5,000 representatives.

In addition to new scents, other products were quickly added to the California Perfume Companys product line. Popular early items included spot remover, Witch Hazel Cream, machine oil, mending cement, Almond Cream Balm, food flavorings, Tooth Tablet, and carpet cleaner. In 1896, ten years after the company was conceived, McConnell hired Adolf Goetting, a noted perfumer who had been in the business for 25 years. The following year, a new laboratory was built in Suffern, New York, and the first illustrated catalog was produced. By the companys 20th year, its product line had expanded to include more than 100 items, and in 1914 the companys rapid expansion was marked by the opening of an office in Montreal, Canada.

The Early 1900s: Avon is Born

The first products in the California Perfume Companys line of Avon Productsa toothbrush, cleanser, and vanity setappeared in 1920. The Avon name was inspired by the area around the Suffern lab, which McConnell thought resembled the countryside of William Shakespeares home, Stratford-on-Avon, England. Never wavering from its strategy of door-to-door sales and catalogs filled with low-cost home and beauty products, the company surpassed the $2 million sales mark in 1926, the year of its 40th anniversary.

By the end of the 1920s, the company was doing business in 48 of the United States and in Canada. During this time, thousands of female sales representatives, under Albees supervision, were partaking in one of the first opportunities for American women to experience a degree of economic freedom without upsetting their culturally-accepted role as homemakers. The company launched three-week sales campaigns and a specials strategy in 1932. Five years later, in 1937, McConnell died and was replaced by his son, David H. McConnell Jr., who headed the company for the next seven years. Under his super-vision, the companys growth remained steady. In 1939, the California Perfume Company was renamed Avon Products, due to that product lines immense popularity and success.

During World War II, cosmetic production slowed while nearly half of the staff in the Suffern lab devoted themselves to wartime production of such things as insect repellent, pharmaceuticals, and paratrooper kits. In 1944, W. Van Alan Clark replaced McConnell as the companys chairman. The new Avon then instituted several changes during the 1950s, the most notable of which was its entry into overseas markets and the rapid expansion of its sales force.

Post-War Expansion in the 1950s and Beyond

Following the war, many more housewives began seeking extra income and work that did not interfere with family life. In the early 1950s, the Avon sales force almost quadrupled in size. Sales representatives territories were downsized by several hundred homes, a strategy which enabled more representatives to be added and sales to increase sixfold over the following 12 years. Avon advertisements appeared on television for the first time, including the famous slogan, Ding Dong, Avon Calling, which was first televised in 1954. That same year, Avon opened offices in Venezuela and Puerto Rico, marking its first venture into what would become a very lucrative Latin American market. It also penetrated the European market in 1957 with the institution of Avon Cosmetics, Ltd. in the United Kingdom.

Under the leadership of W. Van Alan Clark, Avon also saw changes such as the rapid expansion of foreign sales and Avons listing on the New York Stock Exchange in 1964. Clark was replaced by J. A. Ewald in 1966, who was followed by W. Hicklin a year later. Under Hicklin, the traditional three-week sales cycle was changed to two weeks to improve sales. The three-week campaign was still used overseas, particularly in Asia, a market which was entered by Avon in 1969 through the opening of operations in Japan. Japan has remained one of Avons key foreign markets, along with Brazil, Mexico, and the United Kingdom.

The 1970s presented Avon with its greatest challenges in the companys history. Though sales topped $1 billion in 1972, and its profitable costume-jewelry linebegun in 1971had made Avon the worlds biggest jewelry manufacturer in just five years, Avons growth stalled in 1973. The company was hit hard by a recession and the mass entry of women into the workforce. The direct-selling system, Avons innovation and strength, was nearly toppled by social changes that management had not anticipated. The status of the U.S. dollar reduced the companys international profits; recession and inflation crippled its high-sales decanter products line; in 1975, about 25,000 Avon Ladies quit; and Avon products were outpaced by retail cosmetic firms offering jazzier products to women with new attitudes. All of these factors converged and led to troubled timesand Avons eventual restructuring.

In response to these hardships, the most visible change Avon made was to become more sensitive to its market. Sales representatives began to follow women into the workplace, where about 25 percent of Avons sales are made today, and new businesses such as direct-mail womens apparel were tested. Changes were also made to the cosmetics product line and its overall pricing, as a result of market studies. Fred Fusee, who had advanced through the manufacturing side of Avon to be-come its chairman in 1972, was replaced in 1975 by David W. Mitchell, whose years with Avon had been spent in marketing. Mitchell worked to solidify Avons presence in the beauty business via consumer and product research, product development, and promotion. Avons image was overhauled to give it a more contemporary appeal, advertising time was more than tripled, and sales were revamped.

In 1979, Avon made another strategic move to update its product offerings through the purchase of Tiffany & Company, the upmarket jeweler, for $104 million. The Tiffany purchase set the tone for the next decade: diversification through acquisition. This included an ill-fated billion-dollar plunge into the health-care industry, and a later entry into the prestige-fragrance market.

Company Perspectives:

A major reason for our success in the U.S. has been the revamping of our product lines and a renewed focus on our beauty heritage. Discerning consumers are turning to Avon for cutting-edge innovation, quality and value, as well as the convenience we provide through our unique direct selling system.

The 1980s: Diversification Through Acquisition

In 1983, Hicks Waldron, who had previously helped turn around General Electric, left his post at R. J. Reynolds to become Avons chairman. Shortly before Waldrons appointment, Avon had purchased Mallinckrodt, a chemical and hospital supply company. Waldron followed this purchase with the acquisition of Foster Medical Corporation in 1984. Initially thriving in the home and health-care equipment field, Foster became the fastest-growing division of Avon. Just as the company began to celebrate its success, however, Foster was devastated by Medicare cost-containment efforts. At the same time, Tiffanys profits were steadily decliningin part because customers had become alienated by the introduction of lower-priced merchandiseand the Tiffany subsidiary was sold in 1984.

Avon then tried to focus on health care for the elderly with the 1985 acquisitions of the Retirement Inns of America and The Mediplex Group, both of which were nursing home operations. Unfortunately, only 15 percent of Avons sales came from its health care holdings that year. This failure, combined with the fact that annual profits overall were about half of what they were in 1979, caused Waldron to rethink his strategy and abandon the diversification plan. Mallinckrodt was sold in early 1986 and Foster in 1988, both at a great loss to Avon, and plans to sell the remaining health-care divisions were announced. The company sold Retirement Inns of America in 1989 and The Mediplex Group in 1990. Avons brief health-care industry foray left it $1.1 billion in debt.

Diversification into prestige fragrances later proved to be a more stable endeavor. First came a joint venture with Liz Claiborne in 1985, followed by the acquisitions of Parfums Stern and Giorgio, Inc. in 1987. Parfums Stern, which produced Oscar de la Renta, Perry Ellis, and other designer perfumes, was a chief competitor of Liz Claiborne, and before long, Claiborne dissolved its agreement with Avon. Strapped for cash, Avon then sold Parfums Stern in early 1990. Giorgio remained a top-selling national brand well into the 1990s, however, and under the parentage of Avon introduced several new products in the Giorgio line.

The 1990s and Beyond

Waldron retired in 1989, and his successor, James E. Preston, immediately faced several takeover attempts. Avon fought off a bid by Amway Corporation in partnership with Irwin L. Jacobs, a Minneapolis, Minnesota-based raider who then launched a takeover attempt himself. While these efforts receded in the early-1990s, a new suitor appeared in the form of the Chartwell Association, an investment group which included the chief financial officer of Mary Kay Cosmetics. Interestingly, the Avon sales force proved to be the greatest deterrent to these takeover bids; in massive letter-writing campaigns, the sales representatives told aggressors that they will be unwilling to work for them.

In 1990, Avon continued to focus on rejuvenating its domestic sales figures, while selling approximately 40 percent of Avon Japan to the Japanese public for $218 million in revenues. Meanwhile, the company entered further into the business of selling items in the United States through direct-mail means, using full-color catalogs to promote its products. These measures helped the company increase 1990 sales to $3.45 billion, marking an increase of over $150 million from the previous year.

As Avon began to stand on firmer ground financially, it was able to focus once again on expanding its scope worldwide. The early 1990s were spent establishing sales headquarters and net-works in other countries, while also continuing to boost sales in the United States. Avon entered the sales market in Poland in 1992 through the recruitment and training of more representatives to work in direct sales capacities there. The company also entered the Russian market in 1993. Annual sales broke the $4 billion mark that year, and the per-share price of Avons stock rose to over $32. The company also began selling its product on the internet, taking advantage of the increasing popularity of the information superhighway.

In 1994, Avon sold off its Giorgio product line, which was becoming a less important asset as time went on. The company instead focused on promoting products carrying its own name. It further strengthened its standing in the foreign market in 1995 with the addition of a sales office in India, and the acquisition of Justin (Pty) Ltd. in South Africa, the countrys second largest direct-selling cosmetics company. 1995 sales topped off at almost $4.5 billion.

Expansion continued as Avon also began selling sportswear and apparel for women in its direct-mail catalogs, after finalizing a joint venture with fashion designer Diane Von Furstenberg to introduce a line of moderately-priced casual wear. Avon tied the addition in with the companys corporate sponsorship of the 1996 Summer Olympics in Atlanta, Georgia, and a multi-million dollar advertising campaign that named sports figures such as Jackie Joyner-Kersee as Just Another Avon Lady. Also in 1996, Avon introduced Lifedesigns, a corporation developed to offer goal-setting and management seminars to women. Early the following year, Avon also purchased Discovery Toys, Inc., a direct-sales marketer of educational toy products for children. Discovery Toys continued operations separate from those of Avon, with the hope that Avons immense global sales network would help the small company attain higher sales and thus contribute to its new parents yearly revenues.

Entering the end of the century trimmed of its unwieldy diversification into the health-care industry, Avon made great strides in expanding business in its areas of strength. The company has continued to hire sales representatives throughout the world to sell products directly to consumers, while also working to expand its direct-mail business. With sales figures increasing each year, and a more concrete conceptualization of its spectrum of business, Avon remained a world leader with the potential to achieve future growth.

Principal Subsidiaries

Cosmeticos Avon S.A.C.I. (Argentina); Avon Cosmetics Australia Proprietary Limited (Australia); Avon Products Pty. Limited (Australia); Avon Cosmetics Vertriebsgesellschaft m.b.h. (Austria); Arlington Limited (Bermuda); Stratford Insurance Co., Ltd. (Bermuda); Productos Avon Bolivia Ltda. (Bolivia); Avon Cosmeticos, Ltda. (Brazil); Avon Canada, Inc. (Canada); Avon Direct Inc. (Canada); Cosmeticos Avon S.A. (Chile); Compagnia de Ventra Directa Seller Chile S.A. (Chile); Avon Products (Guangzhau) Ltd. (China) (60%); CS Avon Cosmetics, Spol. sr. o (Czech Republic); Avon Capital Corp.; Avon Diversified Services, Inc.; Avon International Operations, Inc.; Avon-Lomalinda, Inc.; Avon-Mirabella, Inc.; Marbella Dominicana; Manila Manufacturing Co.; Productos Avon S.A. (Dominican Republic); Productos Avon Ecuador S.A. (Ecuador); Productos Avon, S.A. (El Salvador); Avon S.A. (France); Avon Cosmetics GmbH (Germany); Productos Avon de Guatemala, S.A. (Guatamala); Productos Avon, S.A. (Honduras); Avon Cosmetics (FEBO) Limited (Hong Kong); Avon Cosmetics Hungary KFT (Hungary); Avon Service Center, Inc.; P.T. Avon Indonesia (Indonesia) (85%); Albee Dublin Finance Company (Ireland); Avon Limited (Ireland); Avon Cosmetics S.p.A. (Italy); Avon Products Company Limited (Japan, 66%); Live & Life Company Limited (Japan); Avon Cosmetics (Malaysia) Sendirian Berhad (Malaysia); Avon Cosmetics, S.A. de C.V. (Mexico); Avonova, S.A. de C.V. (Mexico) (49%); M.I. Holdings Inc.; Avon International Finance N.V. (Netherlands Antilles); Avon Americas, Ltd.; Avon Overseas Capital Corp.; Avon Cosmetics Limited (New Zealand); Productos Avon S.A. (Peru); Productos Avon S.A. (Panama); Productos De Bellesa, S.A. (Peru); Avon Cosmetics, Inc. (Philippines); Avon Products Mfg., Inc. (Philippines); Beautifont Products, Inc. (Phillipines); Avon Cosmetics Polska Sp. z o.o (Poland); Avon Cosmeticos, Lda. (Portugal); Avon Cosmetics Spal s r.o (Slovak Republic); Avon Beauty Products Company (Russia); Justin (Pty) Ltd. (South Africa); Avon Cosmetics, S.A. (Spain) (75%); Avon Cosmetics (Taiwan) Ltd. (Taiwan); Avon Products Limited (Taiwan); Avon Cosmetics (Thailand) Ltd. (Thailand); California Manufacturing Co. Ltd. (Thailand); Eczacibasi Avon Kosmetik Urunleri Sanayi ve Ticaret A.S. (Turkey) (50%); Avon Cosmetics Limited (U.K.); Avon European Holdings Ltd. (U.K.); Avon Cosmetics de Venezuela, C.A.; Discovery Toys, Inc.

Further Reading

The Greatest Beauty Story Ever Told, New York: Avon Products, 1986.

Hayes, Linda, The Changes in Avons Makeup Arent Just Cosmetic, Fortune, August 13, 1979.

Kleinfield, Sonny, Staying at the Top, New York: New American Library Books, 1986.

Carol I. Keeley

updated by Laura E. Whiteley

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Avon Products, Inc.

Avon Products, Inc.

1345 Avenue of the Americas
New York, NY 10105
(212) 282-5000
www.avoncompany.com

When Avon started operations in 1886 under the name California Perfume Company (CPC), the idea of setting women up in their own businesses was a revolutionary one. Women did not yet have the right to vote and only about 15 percent of them worked outside the home. In less than a century, however, Avon grew into a multibillion-dollar enterprise, and an army of "Avon ladies" selling beauty products door-to-door became a powerful force in the business world.

Salesman Starts Company

David H. McConnell (1858-1937), a twenty-eight-year-old New York salesman, started the California Perfume Company because he felt that women were a vastly under-tapped resource, both as customers and workers. The company's first headquarters was in a 500-square-foot office in New York City where manufacturing, shipping, and administration were handled. McConnell not only developed his own perfume formulas, he was the company's bookkeeper, cashier, secretary, and shipping clerk.

McConnell believed the best way to sell his perfumes was with a door-to-door sales force. In particular, he thought the most successful sales representatives would be women who could walk around their neighborhoods selling cosmetics to friends and family. So, in 1886, he hired Mrs. P. F. Albee, a minister's daughter, to be a CPC sales representative in Winchester, New Hampshire. Mrs. Albee was the world's first Avon lady. Her official title, however, was general traveling agent. Albee not only became a saleswoman, she immediately began recruiting a sales force of housewives. The company's first product was Little Dot Perfume, but the product line quickly expanded to other perfumes, makeup, and bath products.

For the first few years, Avon ladies were limited to rural areas and small towns where they could take advantage of the large social networks they were connected to. McConnell also believed customers were more likely to trust a female neighbor they knew. Most door-to-door sellers at the time were men who typically used glib, high-pressure sales tactics. The Avon ladies' approach was friendlier and more low-key.

McConnell quickly shipped products to his sales representatives, who promptly delivered them to their customers. CPC quickly gained a reputation for a strong sales force, quality products, and dependability. As the company grew, sales representatives were recruited by traveling agents, usually unmarried women who could be on the road for long periods of time. By 1900, the company had forty-eight traveling agents and more than 5,500 door-to-door sales representatives.

Avon at a Glance

  • Employees: 39,000
  • Sales Representatives: 3.5 million
  • CEO: Andrea Jung
  • Subsidiaries: Discovery Toys; Avon Products, Ltd. (China); Avon Products Company Ltd. (Japan); Avon Products Manufacturing Inc. (Philippines); Avon Products Pty. Ltd. (Australia); Cosmeticos Avon SACI (Argentina)
  • Major Competitors: L'Oreal; Mary Kay; Revlon; Estée Lauder
  • Notable Product Lines: Anew; Avon Skin Care; Avon Color; Avon Wellness; Advance Techniques; Skin So Soft; BeComing

McConnell rarely visited his sales force in person. Instead, he kept in frequent touch by mail, usually offering encouragement. He was foremost a businessman, however, and a scolding was given when performance lagged. He also kept in touch through a monthly company newsletter. In one early newsletter he wrote, "Enter upon your work joyously, without fear, and push for the result desired."

Timeline

1886:
David H. McConnell starts the California Perfume Company in New York.
1914:
First overseas office opens in Montreal, Canada.
1928:
First products offered under the Avon brand name.
1937:
McConnell dies and his son, David H. McConnell jr., becomes company president.
1939:
The company changes its name to Avon Products, Inc.
1946:
Avon stock offered for public sale.
1954:
Company launches its "Ding, Dong, Avon Calling" advertising campaign; annual sales are at $55 million.
1970:
Annual U.S. sales reach $750 million; Avon begins selling in Japan and Argentina.
1979:
Global sales hit $3 billion; company stops using environment-damaging CFCs in its aerosol products.
1986:
Avon celebrates its one-hundredth anniversary; invests in magazines and healthcare products.
1989:
Company stops several takeover attempts.
1990:
Avon begins selling in China; ends product testing on animals.
1997:
Annual sales reach $5 billion worldwide; sales force at 2.6 million; Avon launches Web site.
1998:
Avon sets up small sales kiosks in U.S. shopping malls.
1999:
Andrea Jung becomes the company's first female CEO.
2001:
Annual worldwide sales reach $6 billion; global sales force at 3.5 million, including 550,000 in the United States.
2002:
Avon lays off nearly four thousand workers.

Company Expands

California Perfume issued its first product catalog in 1896, which contained descriptions of items but no photographs. In 1897, McConnell had a three-story, 3,000-square-foot laboratory constructed in Suffern, New York, to develop new cosmetic products for the company. In 1906, its first print ads appeared in Good Housekeeping and its first color catalog was issued. Disaster struck that year when CPC's San Francisco office was destroyed in the great earthquake that decimated the city. A new office soon opened, as did new branch offices in Luzerne, Pennsylvania, and Davenport, Iowa. By the end of the year, the company had ten thousand sales representatives and managers, and offered 117 different products.

In 1914, CPC opened a sales office in Montreal, Canada, followed the next year by a manufacturing plant. By 1920, annual sales revenue had topped $1 million. Fueled by the economic boom of the 1920s, annual sales reached $2 million in 1928, powered by twenty-five thousand sales agents in the United States and Canada. The company moved into a new headquarters, a just-built skyscraper in Manhattan. It also introduced its first products under the Avon brand name: a toothbrush, talcum powder, and a vanity set.

McConnell died in 1937 and his son, David Jr., became president of CPC. The company moved its headquarters to a larger building in Rockefeller Center in New York. The company also instituted a money-back guarantee on its products. Despite the economic hardships following the Great Depression (1929-34) when millions of Americans lost their jobs, CPC managed to flourish, doubling its sales revenue to $4 million by 1938.

The Man Behind the Women

Avon founder David McConnell was born on July 18, 1858, near Oswego, New York. His father was a dairy farmer but McConnell had other ambitions. He went to work as a door-to-door book salesman with Union Publishing Company. To entice female customers to buy his books, he gave them a small vial of rose-scented perfume. When he discovered that many women were buying books just to get the perfume, McConnell decided to launch his own perfume company.

Ding Dong, Avon Calling

In 1939, David McConnell Jr. changed the company's name to Avon Products, Inc., in honor of his father's love for playwright and poet William Shakespeare (1564-1616), who was born in Stratford-upon-Avon, England. In 1941, the United States entered World War II (1939-45), and half of Avon's New York manufacturing plant was quickly converted to military use. Avon continued to grow and in 1944 had annual sales of $14 million. That same year, J. A. Ewald took over as president following the death of David McConnell Jr. In 1946, Avon began offering its stock for sale to the public.

Avon continued its growth through the 1950s, opening branch offices in Atlanta, Georgia, and Newark, New Jersey. Its annual sales jumped to $55 million by 1954, and the company now offered more than five hundred products. Avon's success was in part due to its highly successful television advertising campaign, which featured the now-famous "Ding Dong, Avon Calling," slogan.

Avon Goes Global

The 1950s also saw the company's overseas presence expand, with offices opening in Puerto Rico, Venezuela, and Cuba. During the 1960s, Avon opened offices in Mexico, West Germany, Brazil, Great Britain, and Australia. The company's U.S. revenues reached $250 million in 1963 with an additional $33 million coming from overseas sales. By 1970, sales in the United States reached $750 million and the product line had increased to eight hundred items. Internationally, Avon ladies began to sell products in Argentina, Japan, Ireland, France, Italy, and Spain.

Until early in the twentieth century, most sales representatives made their calls on foot, horseback, or horse-drawn carriage. But, just as the California Perfume Company was getting off the ground, the first automobiles were being invented and times began to change for traveling salesmen (and women). In 1911, Effie Miller of Oregon won a new Brush Runabout automobile for being the CPC's number one sales agent.

Sales reach $3 billion by 1979, spurred by expansion into Hong Kong, Thailand, the Ivory Coast, the Philippines, New Zealand, El Salvador, Malaysia, and Chile. The number of sales representatives topped one million worldwide. The company also went on a buying binge, purchasing upscale jeweler Tiffany & Company. It also acquired a chemical manufacturing firm and a health products company.

Decades of growth came to a halt in the 1980s as annual sales declined or remained flat. Avon's purchase of Tiffany's proved to be a bad investment and the company was sold in 1983. Yet Avon continued to diversify, investing in magazines, retirement properties, and catalogs for children and men's wear. By the end of the decade, it had dismantled its health care company at a loss of $520 million and had total debts of $1.2 billion. The late 1980s also saw a series of takeover attempts by companies such as Amway and rival Mary Kay. The takeover attempts failed, but they caused Avon management to begin a company makeover. The biggest strategy was to concentrate on Avon's core line of beauty products. In 1989, a new chief executive officer (CEO), James Preston, was hired to get the company back on track.

Avon rebounded in the 1990s, posting annual sales of $5 billion in 1997, most coming from the company's worldwide sales force of 2.6 million women and men. It also launched its Web site that year, allowing customers to buy products on-line. The move, however, made many of the company's half-million U.S. sales representatives angry. Avon would be able to reach millions of customers directly, allowing sales to take place without salespeople. Sales representatives felt that their established customers would abandon them for the Web. Tensions escalated the following year when Avon set up kiosks, or small stores, in shopping malls around the country.

Avon: For a Good Cause

The 1970s saw the beginning of Avon's jump into charitable work. It sponsors a tennis championship for youth organizations and two marathons for women's groups. It also opened a women's cultural center in Japan. In the environmental arena, Avon stopped using chlorofluorocarbons (CFCs) in its aerosol products. CFCs damage the ozone layer, which surrounds the earth and protects it from the ultraviolet rays of the sun. In 1990, Avon became the first major U.S. cosmetic manufacturer to stop testing its products on animals. In 1993, the company launched its fund-raising Breast Cancer Awareness Crusade. It followed with the Avon Worldwide Fund For Women's Health, which has raised about $10 million a year since 1992.

Women Named to Top Posts

In 1993 and 1994, Preston elevated three women to top management positions. Christina Gold, head of Canadian operations, became president of Avon-North America. Susan Kropf moved from operations and research to become head of emerging markets, where much of the company's sales growth was coming from. And in what many financial analysts saw as his most brilliant move, he hired Andrea Jung from Neiman Marcus, an upscale department store. Jung, then thirty-eight, was placed in charge of redesigning Avon's product line and creating global cosmetic brands. Up until then, Avon had separate product lines in each of the countries it served.

To help win back the trust of its U.S. sales force, Avon revamped its Web site, linking it to the Web sites of individual sales representatives. An internal study also showed that most of the sales at Avon mall kiosks came from first-time customers. This meant that existing customers were continuing to purchase Avon products from their sales representatives. The emphasis on change gained momentum in 1999 when Jung became CEO, the first woman ever to lead the company.

Jung's goal was to revamp Avon's product line, packaging, marketing, and even its image. She started by revitalizing Avon products. Jung eliminated a third of the product line and repackaged the rest. She also doubled spending on research and development, focusing on breakthroughs in skin care and color cosmetics technology. To back up the changes, Avon launched a $90 million advertising campaign in twenty-three countries.

Jung was quick to embrace Internet technology while recognizing its limitations. In a 2000 interview with Chief Executive, she commented that the Internet would make doing business easier, but she also acknowledged that "person-to-person selling in cosmetics is very important. Women like to use products that other women say work. The Internet will be a big opportunity, but you can't smell a fragrance there yet."

Twenty-first Century Makeover

Into the twenty-first century, Avon has undergone a makeover that is more than cosmetic. Its products are designed for a younger, hipper, and more diverse customer base. Looking forward, Avon plans to tap into the vast teen market by launching a separate teen division and enlisting teenage girls as sales representatives.

Avon also continues to expand its product line. In addition to makeup and beauty products, the company now offers nutritional supplements, exercise equipment, and "stress management" products. Avon is also, however, a business and remains dollar conscious. In early 2002, the company laid off nearly four thousand workers in the United States, Mexico, and Puerto Rico in a move to increase its profits.

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Avon Products, Inc.

Avon Products, Inc.

founded: 1886



Contact Information:

headquarters: 1345 avenue of the americas
new york, ny 10105-0196 phone: (212)282-5000 fax: (212)282-6049 url: http://www.avon.com

OVERVIEW

Avon Products, Inc. is the world's largest direct seller of cosmetics and a leader in the direct sale of fashion jewelry and collectible gift items. With 2.6 million sales representatives (445,000 in the United States) and almost 35,000 employees in 134 countries, Avon's annual revenue is more than $5 billion dollars. The company constantly expanded its international market by offering sales in new countries and acquiring companies like Avon Lifedesigns, a women's workshop firm, and Discovery Toys, a direct sales toy manufacturer. Avon maintains customer loyalty by creating and offering recognizable brands, including Anew, Skin-So-Soft, Avon Color, Far Away, Natori, Rare Gold, and Millennia. Though the company was expanding its sales avenues, more than 95 percent of Avon's sales were still generated by "Avon Ladies."



COMPANY FINANCES

Avon Products, Inc. earned 1997 sales of $5.08 billion, up from $4.8 billion in 1996. This marked the eighth consecutive year that Avon revenues increased. Of that $5.08 billion, 34 percent ($1.73 billion) was earned in the United States, 16 percent was earned in Europe ($811 million), 15 percent was earned in the Pacific region ($782 million), and remaining revenues ($1.75 billion) were earned in other countries across the world. As of mid-1998, revenues for fiscal year 1998 were already $5.17 billion, increasing for the ninth year in a row. Net income for the same period also rose, from $317.9 million in 1996 to $338.8 million in 1997. As of mid-1998, Avon's net income for the year was $266.5 million.

Earnings per share (EPS) were also on a steadily increasing trend. In 1996 Avon earned $2.38 per share, and in 1997 that increased to $2.54. As of mid-1998, the company's earnings were $1.99 per share, well on their way to another increase for the company's shareholders. Avon's stock price was almost $78.00 per share in mid-1998. Its 52-week high was $79.00, and its 52-week low was $31.50 per share.




ANALYSTS' OPINIONS

Avon's financial record during the 1990s speaks well for itself—the company has good cash flow, consistent sales growth, and its operations are well diversified geographically. Its compound annual average return to stockholders was 29.6 percent (the S&P 500 average was 16.3 percent). Analysts at Zack's Investment Research seemed confident advising investors to buy into the company—half rated the company a "strong buy," while the other half rated it a "moderate buy."




HISTORY

Founded in 1896 as the California Perfume Company, Avon spent its first 10 years building its reputation as a company dedicated to women. By 1900 the company had over 6,000 representatives with sales of more than $200,000. Early in its history, Avon realized the advantage of expanding its sales beyond the United States, and in 1914 the company entered the Canadian market. In 1928 "Avon" was introduced as a brand name for a limited number of products. Proving successful, the name was changed to Avon Products in 1939, and the company went public a mere seven years later in 1946. A 26-year growth spurt began in 1948 when Avon entered more than 10 new countries, introduced 450 products, and its annual sales figure grew to more than $1 billion. By 1978 Avon had more than 1 million representatives; that same year Avon began its sponsorship of women's sporting events.

Avon celebrated its one-hundredth birthday in 1986, as well as the beginning of 10 years of technological advancement in product development. Products developed during that time included those with active ingredients such as retinol, alpha hydroxy acids, and collagen boosters. Avon's first global fragrance, Far Away, was almost immediately a world best seller on the fragrance market. In 1996, Avon served as the exclusive cosmetics sponsor for the Olympics and embarked on a marketing campaign using well known athletes as "Just another Avon Lady." Avon also began offering goal setting seminars and services for women, a program called Avon LifeDesigns. In 1998, Avon launched a new women's magazine, Athena, in conjunction with publisher Hachette Filipacchi.




STRATEGY

Avon has three main strategies for growth. The first is a commitment to geographical expansion. During the 1990s, Avon focused on introducing its products to countries with developing economies. Avon focused on emerging economies since there was a big demand for western products, an underdeveloped retail infrastructure, and a vast pool of entrepreneurial women seeking opportunities as sales representatives. The company entered 18 such markets since 1990—including Brazil, Argentina, the Phillippines, and Malaysia—and was in the midst of making provisions to enter China, Central Europe, and Russia. By 1995, nearly half of Avon's pretax income was generated in developing markets.

The second key strategy employed by Avon Products, Inc. is the leveraging of direct selling channels. In addition to cosmetics and toiletries, which generates over 60 percent of its revenue, Avon uses direct selling as a means to sell clothing, fashion jewelry, home furnishings, home entertainment products, vitamins, licensed products bearing the Olympic logo, and a special edition Barbie. By introducing new products to an already loyal customer base, Avon ensures more sales.

Finally, Avon strives to make its direct selling channels more contemporary. They update service options by using toll-free telephone numbers, fax access, regular mail, and a site on the World Wide Web. Avon also makes marketing alliances with companies such as Reader's Digest to reach a wider customer base. In 1995, they began testing the use of a catalog allowing customers to order directly from the company rather than through a representative; by 1996, catalogs were used routinely as a sales tool.

In 1998 Avon decided to channel more of its money into advertising and promotional efforts. The company had plans to shift $400 million of its annual costs to these efforts in hopes to make the Avon name more recognizeable—hopefully in the league of brand names such as "Coca-Cola" or "Bacardi." The plan also entailed dropping 30 percent of its existing brands in the process.

Other promotional and marketing strategies were carried out through assistance to Avon sales representatives. Avon did this by providing agents with brochures, product samples, and demonstration products. Other tactics included trial sizes, gift packages, and combination offers. Other aids and promotional pieces were specifically designed for women who did not sell door-to-door, such as flyers and other promotional pieces that could be posted rather than distributed.




INFLUENCES

In the mid-1970s Avon experienced problems due to recessionary conditions and the number of women rejoining the work force—fewer women were home to answer the door. Also, many of its products were priced too high for women with small incomes. In response, Avon began expanding its markets, including targeting younger women and introducing a line called Color-works, which was specially targeted toward teenagers.

After the recession, Avon pursued a strategy of diversification in order to extend its product offerings. In an effort to enhance its image, Avon acquired Tiffany Jewelry in 1979. Later, the company launched a new clothing line, which was developed with designer Diane Von Furstenberg. Other acquisitions included health care companies such as Foster Medical and the Mediplex Group. Tiffany Jewelry and the health care companies were later sold. However, this diversification left the company with a large amount of debt and in a vulnerable financial position. Three takeover attempts were made, including attempts by competitors Amway and Mary Kay. The takeover bids were held at bay in part by massive letter-writing campaigns undertaken by Avon's sales representatives.

FAST FACTS: About Avon Products, Inc.


Ownership: Avon Products, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: AVP

Officers: James E. Preston, Chmn., 64, $1,424,147; Robert J. Corti, Sr. VP & CFO, 48; Charles R. Perrin, CEO, 52; Andrea Jung, Pres. & COO, 39, $520,506

Employees: 34,995

Principal Subsidiary Companies: Avon Products' principal subsidiaries are Avon Lifedesigns and Discovery Toys.

Chief Competitors: As a direct seller of merchandise, Avon counts among its competitors: Mary Kay Cosmetics; Amway; Fuller Brush; and Tupperware. As a manufacturer and marketer of cosmetics, toiletries, and fragrances, additional competitors include: BeautiControl Cosmetics; The Body Shop; Cosmair; Estee Lauder; Procter & Gamble; Revlon; and Unilever.


Other ventures focused more on expanding Avon's own product offerings and have proved more successful. The company's new line of women's clothing was introduced in the United States in 1994—it earned more than $500 million by 1997. Its joint venture to market Barbie dolls with Mattel proved Avon's best-selling gift product in the history of the company.

PRODUCTS

Avon's most well known products include Anew, Avon Skin Care, Moisture Therapy, and Skin-So-Soft. The Skin-So-Soft line also offered the insect-repellent products Skin-So-Soft Bug Guard and Moisturing Sun-care Plus; the repellents were made without the use of DEET, a chemical used in the repellent products sold by most other manufacturers. Cosmetic and fragrance brands offered at Avon included Avon Color, Beyond Color, Color Bundle, Color Last Plus, Far Away, Incredible Lengths, Millennia, Moisture 15, Natori, Perfect Wear, Rare Gold, and True Color.




CORPORATE CITIZENSHIP

Along with its drive to employ women in an industry pitched to women, Avon exhibits a commitment to women's issues and needs. In 1993 the Avon Breast Cancer Awareness Crusade was first introduced. Working in conjunction with the YWCA, National Alliance of Breast Cancer Organizations, the Centers for Disease Control, and the National Cancer Institute, the Crusade now raises money, runs education programs, and offers early detection screening services to women around the world. Avon Products also started the Worldwide Fund for Women's Health, whose goal is to promote women's health worldwide by developing programs that address the leading women's health issues in each area.

Avon extended its citizenship to include the Avon Products Foundation. According to Avon, "the foundation is dedicated to supporting endeavors that understand and respond to the unique needs of women and their families, and enable women to reach their full potential." The Foundation also identified education as a vital concern to women and children across the world. The Foundation met its goals by giving more than $800,000 in grants annually to programs in health, education, community services, and arts and culture. Recipients of Foundation awards included the United Negro College Fund, the Organization of Chinese Americans, the American Indian College Fund, the National Hispanic Scholarship Fund, the Business and Professional Women's Foundation, and Hostos Community College (Bronx, New York).

CHRONOLOGY: Key Dates for Avon Products, Inc.


1886:

Founded as the California Perfume Company

1900:

Has 6000 sales representatives

1914:

Begins selling products in Canada

1916:

Incorporates in New York

1928:

Avon is introduced as a brandname

1939:

Changes company name to Avon Products

1946:

Avon goes public

1948:

Introduces 450 new products; sales figures reach $1 billion

1954:

Begins selling in Puerto Rico and Venezuela

1959:

Begins selling products in Mexico, Brazil, Germany, and the U.K.

1969:

Introduces Avon products in Japan

1978:

Begins sponsoring women's sporting events

1979:

Acquires Tiffany Jewelry

1986:

Introduces Far Away fragrance

1993:

Avon Breast Cancer Awareness Crusade is introduced

1996:

Begins seminars for women called Avon LifeDesigns

1998:

Introduces the women's magazine Athena


GLOBAL PRESENCE

Avon's presence is truly global—its products are available in 134 countries on 6 continents. The company maintains operations in 44 markets. Since its entrance into the Canadian market in 1914, Avon Products have been dedicated to expanding into international markets. The appeal of American products was a major factor in its success, as was its offer of self-employment for women. In many countries, opportunities like those presented to women by Avon were scarce. Although Avon waited another 40 years before expanding beyond North America, it began entering international markets aggressively in 1954, adding Puerto Rico and Venezuela. By 1959 Mexico, Brazil, Germany, and the United Kingdom enjoyed the ability to purchase Avon products. Asia's market was opened to Avon by its entrance into Japan in 1969. During the late 1990s, Avon products were available in 135 countries. Avon was directly present in 44 of those countries, while they sold through specially appointed representatives and local distributors in 90 others. South Africa was added to the growing list in 1996, marking Avon's first presence on the African continent. Avon was also considering ventures that would launch them into Bulgaria, Romania, the Ukraine, and Vietnam.

Avon has 19 laboratories and manufacturing facilities located around the world. Of the company's 34,995 employees, 26,942 were located outside the United States.

BARBIE TEAMS UP WITH AVON

What could be better than the life of Barbie? Not only is the Barbie doll one of the top-selling toys around the world, but Avon has recently developed a line of cosmetics especially for her!

Teaming up with Mattel, Avon became the sole supplier of special-edition Avon Barbie dolls. With sales of 40 million dolls in 1996, Avon's Barbie dolls were the biggest product launch in the company's history.

Based on the success of the Avon Barbie dolls, Avon created a line of doll cosmetics in 1997. Realizing that the future of the company was with young girls who were enjoying the special-edition Avon Barbie dolls, Avon created a cosmetics line that the girls could use on their Barbies as well as on their own bodies. Ranging from lip balm to cologne spray, the Barbie cosmetics line is a huge marketing ploy by Avon. Knowing that the young girls who are using the Barbie cosmetics will identify makeup with the Avon label, Avon hopes that the cosmetics line will boost future sales.

Targeting girls from the ages of 6 to 9, Avon has pointed out that "Girls are our customers of tomorrow." Since Barbie dolls have always been a popular toy with young girls, it made sense to Avon to develop a cosmetics line exclusively for Barbie. Being a plastic doll named Barbie certainly has its perks!


EMPLOYMENT

As reported by Betty Morris in Fortune, "Avon has no glass ceiling." The company has been on the Women's Wire list of the top 100 companies for women since the early 1990s. Four of the company's eight top executives were women and, of Avon managers worldwide, more than 40 percent were women. An example of Avon's sense of corporate responsibility was its interest in maintaining a woman- and family-friendly work environment. According to Women's Wire, "Avon offers its employees a wide range of family-friendly services, including child care referrals, adoption aid, and flexible work schedules." Avon's corporate citizenship begins with its own employees.




SOURCES OF INFORMATION

Bibliography

"avon products, inc." hoover's online, 2 july 1998. available at http://www.hoovers.com.

avon products, inc. 1996 annual report. new york: avon products, inc., 1997.

avon products, inc. 1997 form 10-k. u.s. securities and exchange commission, 1998.

avon products inc. home page, june 1998. available at http://www.avon.com.

morris, betty. "if women ran the world it would look a lot like avon." fortune, 21 july 1997.

"top 100 companies for women." women's wire home page, 1996. available at http://www.women.com/work/best/a.html#avon.


For an annual report:

on the internet at: http://www.avon.com/about/financial/company/annual.htmlor telephone: (888)avp-fact or write: avon shareholder relations, avon products, inc., 1345 avenue of the americas, new york, ny 10105-0196


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. avon's primary sics are:

2844 perfumes, cosmetics, and other toilet preparations

3911 jewelry, precious metal

3961 costume jewelry and costume novelties, except preciousmetal

5137 women's, children's, and infants' clothing and accessories

5963 direct selling establishments

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