March 3, 2009 - IIS Windows Serverlibrary.corporate-ir.net/library/90/904/90402/items...Avon Brazil Investor Meeting March 3, 2009 1 2 Please see our form 10K of February 20, 2009,

Avon Brazil Investor Meeting

March 3, 2009

1

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.


March 3, 2009

3

Citigroup/Deutsche Bank Brazil Investor Meeting

March 3, 2009

4

Luis Felipe Miranda

General Manager, Brazil


March 3, 2009

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AGENDA

• Welcome

• Executive Summary

• Avon Brazil

• Representative Experience

6

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


March 3, 2009

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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


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


March 3, 2009

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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


March 3, 2009

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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


March 3, 2009

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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.


March 3, 2009

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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


March 3, 2009

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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


March 3, 2009

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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.)

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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.)


March 3, 2009

232005 2006 2007 20082005 2006 2007 2008

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)


March 3, 2009

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FRAGRANCE: Gain share through excellent brochure execution and new products focusing on masstige

• Lacroix• Ungaro

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COLOR: Defend leadership through new products and innovation.

• Lipstick pro to go• Lipstick AC lip plump• Renew make up product line.


March 3, 2009

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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


March 3, 2009

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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%)


March 3, 2009

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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


March 3, 2009

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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


March 3, 2009

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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


March 3, 2009

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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


March 3, 2009

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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.


March 3, 2009

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Outrun consumer spending contraction and protect market share

NewCustomers

Active Representatives

GROW

+

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Clear Focus on Smart Value MessageFirst time Q1 09 – last spread of the brochure

Offer Smart Value


March 3, 2009

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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


March 3, 2009

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Regular Program Prizes Special Program Prizes

More Active Representatives

Appointment Incentives

46

Recruitment AdvertisingMore


As well as Email Marketing


March 3, 2009

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• Articles in 22 important media vehicles• Advertorial in Veja magazine• Total estimated audience:

13MM people

Public RelationsMore


48

Outrun consumer spending contraction and protect market share

NewCustomers


GROW

+


March 3, 2009

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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

50

Management Q&A


March 3, 2009

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AGENDA

• Welcome

• Executive Summary

• Avon Brazil

• Representative Experience

52

The Representative Experience


March 3, 2009

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Representative Q&A

54

Documents

March 3, 2009 - IIS Windows Serverlibrary.corporate-ir.net/library/90/904/90402/items...Avon Brazil Investor Meeting March 3, 2009 1 2 Please see our form 10K of February 20, 2009,