BW Confidential this week published an editorial on the purchase of Avon by Natura, from the point of view of international industry observers in a b2b – online and printed publication based in Paris – analyzing the critical points, but also the favorable aspect of the business. In Brazil, newspapers and magazines considered the economic aspects of the new aquisition out of shape and the incongruity with the animal tests to which Avon submits itself in China, while foreign analysts and journalists raise yet the issue of the survival of the direct selling model, the so called ‘social sales’.
The beauty market saw a major deal last week with Brazilian company Natura’s acquisition of Avon. The purchase pushes Natura well up the scale in the global industry rankings by creating the fourth-largest pure-play beauty company with sales of $10bn.
The deal also boosts Natura’s international profile, as 70% of the combined company’s business will come from outside Brazil. And in Brazil, the acquisition is set to solidify Natura’s position in a market where it is said to have been losing share in recent years.
However, there are many question marks over how Natura will make the Avon deal work. It’s no secret that Avon’s business has been suffering for years, which has seen the company initiate a restructuring and cost-cutting plan. Avon has been up against falling sales, a declining number of sales representatives and a dated business model, which it has been trying to turn into a digitally focused social-selling model. Indeed, this has led some industry watchers to call Natura’s decision to purchase Avon an attempt to save a dying business model. They also question Natura’s bid for a 133-year old struggling company that has admitted it has missed important trends, at a time when competitors are snapping up nimble, on-pulse brands. At the same time, Natura is in the process of re-inventing its business for the digital age, which has led to questions over whether adding such a largescale acquisition on top of this could complicate matters. The deal also comes just two years after Natura acquired another struggling company in the form of The Body Shop.
On the upside, Natura is buying a business it understands (a key criticism of Coty’s bid for Avon in 2012 was that it has no experience in the direct-selling business). And if Natura can successfully make the shift into to a true social-selling model, it could be on the road to capture growth, given the much-talked-about potential of this channel, especially in markets such as China.