2008 Avon Russia Investor Meeting

Transcription

1 2008 Avon Russia Investor Meeting October 1, Agenda Welcome Overview of Avon Russia The Representative Experience Q&A 2 John P. Higson Senior Vice President, Central and Eastern Europe 3 1

2 Central and Eastern Europe 22 markets 343M population $1.6B 2007 total revenue The region s Beauty leader Finland Estonia Russia European ( part) Latvia Lithuania (to Russia ) Belarus Poland Ukraine Czech Czech Rep. Slovakia Moldova Moldova Hungary Hungary Slovenia Romania Croatia Bosnia Serbia Bulgaria Bulgaria Montenegro Macedonia Albania Kazakhstan Kyrgyzstan Source:Euromonitor CEE Historical Development Finland Russia Estonia Latvia Lithuania Belarus Poland Czech Ukraine Slovakia Hungary Moldova Slovenia Bosnia Romania Croatia Serbia Montenegro Bulgaria Macedonia Albania Kazakhstan Kyrgyzstan 5 CEE Historical Development Finland Russia Estonia Latvia Lithuania Poland Belarus Czech Ukraine Slovakia Hungary Moldova Slovenia Bosnia Romania Croatia Serbia Montenegro Bulgaria Macedonia Albania Kazakhstan Kyrgyzstan 6 2

3 CEE Historical Development Finland Russia Estonia Latvia Lithuania Belarus Poland Czech Ukraine Slovakia Hungary Moldova Slovenia Bosnia Romania Croatia Serbia Montenegro Bulgaria Macedonia Albania Kazakhstan Kyrgyzstan 7 CEE Historical Development Finland Russia Estonia Latvia Lithuania Belarus Poland Czech Ukraine Slovakia Hungary Moldova Slovenia Bosnia Romania Croatia Serbia Montenegro Bulgaria Macedonia Albania Kazakhstan Kyrgyzstan 8 Recent Strategies Move to 3-week selling campaign cycle Re-launch Avon Color under Hello Tomorrow Step up merchandising quality Launch and rollout Sales Leadership Re-invigorate Skin Care Raising commissions in certain markets 9 3

4 Delivered Results in 1H 2008 Revenue +23% (10% L.C.) Active Representatives +23% Units +9% 10 CEE - Scale and Profitability Total Revenue and Operating Profit ($MM) 2,000 1,500 1,000 1,066 1,226 1,320 1, Total Revenue Operating Profit 11 Supporting Avon Russia Through Campaign Planning Leverage of Marketing Representative Value Proposition Human Resources 12 4

5 Russia Russia continues to offer great opportunity Avon is investing to win in Russia with Representatives and consumers 13 Avon Russia Overview Hristo Manov General Manager

6 Russian Market Population of 142M Female population 15-64: 52.6M 2007 Per Capita GDP: US$ 9,060 6,600 km Northwest Central Volga Ural South Siberia Far East 8,000 km 11 time zones Source: EIU data as of 18 March 2008; Federal State Statistics Service 16 Avon Russia Background Commenced direct selling mid 1995 Significant growth Russian economic crisis mid 1998 Growth resumed Revenue reached $500M Investment driven growth 2008 and beyond 17 Market Quickly Reached $500M in 2005 Total Revenue (LC $M) CAGR 11% $500M CAGR 60%

7 From Entry to a Top 3 Market Player Market Share Value 11.0% 9.4% 8.9% 6.7% 6.2% P&G L'Oréal Avon Henkel Oriflame Source: Euromonitor 19 We Are Truly a Beauty Company in Russia Contribution to Revenue CFT Jewelry, Accessories and Other 20 And Well Diversified Across Categories CFT Category Mix Fragrance Personal Care Hair Care and Other Skin Care Color 21 7

8 Russia Russia continues to offer great opportunity Avon is investing to win in Russia with Representatives and consumers 22 Russia Continues to Offer Great Opportunity Russian economy offers growth, with risks One of the fastest growing CFT markets Women spend on Beauty The direct selling channel is healthy The Avon brand appeals to Russian women The Avon earnings opportunity appeals to Russian women 23 Russian Market Offers Scale and Strength Tenth largest economy worldwide growing at 7% per year since 1999 Wealthiest BRIC market, with an emerging middle class of consumers Healthy economic policy, backed up by Stabilization Fund which reached 11% of annual GDP 24 8

9 But with Risk Increasing government involvement, high levels of bureaucracy Hot labor market with high salary increases and difficulties in recruiting and retaining people High dependency on oil as export revenues account for 20% of GDP 25 One of Fastest Growing Beauty Markets 2007 CFT Market Size, C$B Brazil China Russia India CFT Market Growth Projections +12% +18% +14% +15% Source: Euromonitor 26 One of Fastest Growing Beauty Markets Russian CFT market - C$B CAGR 14% P 2009P 2010P 2011P Source: Euromonitor 27 9

10 Russian Women Becoming Higher Beauty Spenders CFT Usage Per Capita - C$ P US 128 Brazil 141 Brazil 93 US 137 Poland 75 Russia 107 Russia 61 Poland 87 Ukraine 37 Ukraine 70 China 9 China 16 Source: Euromonitor 28 Direct Selling Holds its Own vs. Retail in CFT CFT Sales Split by Channels - Value % 100% 80% Other non-retail Other retail* 60% 40% 14% 16% 18% 18% 19% 19% Direct selling Outdoor markets Department stores 20% Super and hypermarkets 0% *Other retail: groceries, chemist and pharmacy stores, specialized health and beauty retailers, kiosks Source: Euromonitor 29 Russian Women are Receptive to Direct Selling Women Ages % 25% Women in or considering direct selling career Women purchasing through direct selling within last 12 months Source: Euromonitor 2007, Russia Consumer strategy report

11 The Brand Appeals to Russian Women with the Highest Beauty Image Beauty Image Index Avon L'Oreal Oriflame Max Factor Nivea Source: Russia Consumer strategy report = market average 31 The Highest Brand Awareness Amongst Direct Sellers Total awareness 92% 90% 57% 28% 45% 64% 55% 17% 10% 37% 40% 38% 36% 11% 20% Purchased within the last 12 months Aware however not contacted yet Contacted however did not purchase 7% 8% 7% 7% 5% Avon Oriflame Faberlic Mary Kay Amway Source: Russia Consumer strategy report And Other Beauty Players Brand Awareness - Color Category 82.3% 75.8% 64.4% 63.7% 60.9% Avon Oriflame Max Factor L'Oreal Bourjois Source: M'Index, Gallup, 1H

12 And Appeals to Women Across the Country Sales Split by Regions 1H 2008 Moscow 10% 14% 1M+ Cities 76% Other Areas 34 Avon Is Investing to Win in Russia with Representatives and Consumers Product innovation Advertising investment Differentiated brochure RVP investment Successful Product Launches 36 12

13 Continued Innovation in Backed Innovation with Large Advertising Increases Advertising Spend as % of Total Revenue in 2007 Doubled Since 2004 ~2X Driving Higher Share of Voice 4.3% 4.8% 3.1% Rank in the CFT category #11 #5 Source: Gallup 39 13

14 Christian Lacroix TVC 40 SuperShock Mascara TVC 41 U by Ungaro TVC 42 14

15 Addressing the Russian Woman with Differentiated Brochure C14 15 th Anniversary C17 New Year 43 Addressing the Russian Woman with Differentiated Brochure C14 15 th Anniversary C17 New Year 44 And Increasing Number of Local Messages in the Brochure Number of Local Pages in Brochure (#) % 30 Source: Company data Q4' 2007 Q4'

16 46 Continued RVP Investment Representative Earnings Tip the Scale for RVP Representative Effort Constant flow of innovation 3-week campaign cycle Sales Leadership roll-out New commission structure Representative Key Actions Differentiated brochure Internet based ordering for faster turnaround Electronic payment options 47 Sales Leadership Avon s multi-level earnings program Provides career opportunity for Representatives Accelerates sales growth National roll-out in September

17 New Commission Structure From Old Commission Structure 15% + 50 RUR delivery charge <1200 RUR To New Commission Structure 15% + 50 RUR delivery charge <1200 RUR 15% RUR 20% RUR 20% RUR 25% RUR 25% RUR 30% RUR 49 Improved Internet Based Ordering Internet Orders (%) 21% 25% 28% 1H % 13% 2007 C01 C03 C05 C07 C09 C11 C13 C15 Order turnaround time improved to 4 days from 7 days More selling days for Representatives 50 Launched Lower Cost Payment Options in September 2008 New payment options: ATM Cash terminals Service provider offers one of highest level of coverage and accessibility Saves Representative fee on money orders 51 17

18 Russia Russia continues to offer great opportunity Avon is investing to win in Russia with Representatives and consumers 52 Questions for Management 53 The Representative Experience 54 18

19 Recruitment TVC Recruitment TV Movies The Representative Experience As Told By... Zoya Patlan 8 years Avon Representative 57 19

20 The Representative Experience As Told By... Ekaterina Filimonova 5 years Avon Representative 58 The Representative Experience As Told By... Marina Potashova 10 years Avon Representative 59 The Representative Experience As Told By... Ludmila Fominyukh 5 years Avon Representative 60 20

21 Questions for Representatives 61 21