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Brazilian cosmetics company Natura has explored offloading most of its Avon brand’s international business, as the group unwinds a series of high-profile acquisitions to focus on its home region.
The São Paulo-based group, which has already struck deals to sell luxury cosmetics brand Aesop and The Body Shop this year, has considered exit strategies including a divestment of Avon International, according to people familiar with the discussions.
Natura, which does not own Avon in the US, is combining the brand’s operations in Latin America with its own business, leaving a question mark over the future of Avon International, which spans Europe, the Middle East and Africa, and Asia Pacific.
Natura declined to comment.
Famous for its door-to-door sellers of make-up and skincare products, Avon Products was purchased by Natura in an $2bn all-stock deal in 2019, as part of an international expansion plan that transformed it into the world’s fourth-largest pure-play beauty conglomerate. But Natura is now retrenching these global ambitions through a series of divestments following disappointing financial results and a fall in its share price in recent years.
Luxury Australian marque Aesop was sold to L’Oréal for $2.5bn in April and last month Natura agreed to sell The Body Shop to private equity firm Aurelius for a fraction of the price it paid in 2017, after failing to turn round the fortunes of the ailing UK ethical retailer.
Last week, Avon International announced a leadership change that would see chief executive Angela Cretu step down, to be replaced by chief marketing officer Kristof Neirynck at the start of next year.
Because Avon International has differing product lines and varying performance in the more than 70 countries where it is present, a sale of its operations in a single package may prove tricky, according to bankers with knowledge of the business. One option discussed was spinning the unit off into a separate listed entity, according to a person familiar with the matter.
While Avon pioneered a direct-selling model in cosmetics — embodied by its doorstep Avon Lady sellers — it has lost market share to savvier competitors as the rise of social media disrupted the cosmetics business.
Net revenue at Avon International fell to about R$1.46bn ($295mn) in the third quarter, down 2.3 per cent year on year on a constant currency basis with higher pricing offsetting an expected shortfall in Avon sellers.
Although the unit posted an adjusted earnings margin of 8 per cent in its latest quarter, analysts at S&P Global Ratings said in April that “Avon continues to underperform in the third year of the turnaround since its acquisition”.
In place of growth, Natura’s management is now focused on boosting profitability and cash generation as well as reduce debt levels.
A crucial pillar of its turnaround plan is the integration of its eponymous business — known in its homeland for sourcing sustainable ingredients from the Amazon rainforest for its shampoos and creams — with Avon’s Latin American operations.
While Natura’s share price has rallied about 60 per cent this year, the shares are still down sharply from a peak in July 2021.
