Natura and Avon unify sales and ‘name’ of resellers – 05/23/2023 – Market

The Natura&Co group begins the most important stage of integration with Avon, which was acquired in 2020 and has been going through a long process of adapting its business.

The new phase will bring together the sales force, that is, people who resell Natura or Avon will have a single registration and will be able to register product orders in the same application, also receiving the order in a single shipment. Distribution centers have already been integrated.

In direct sales jargon, brand resellers, who are called representatives in the case of Avon and consultants at Natura, now have the same name: beauty consultants.

According to João Paulo Ferreira, CEO of Natura&Co Latin America, today, the overlapping of Avon representatives and Natura consultants (who sell both brands at the same time) is around 30% in the region. The goal is to surpass 70% in a few months. The process starts in Brazil in the second semester.

The first phase included some integration of support activities, communication and changes in the product portfolio, but further adjustments are expected.

The new stage takes place at the time when the group sells the Australian Aesop to the French L’Oréal, which helps in the capital structure, but the impact of economic conditions on consumption suggests caution. “What I foresee for the market is a much more moderate consumption than we saw last year”, says Ferreira.

The group is also preparing to expand its payment solutions business, Natura&Co Pay, which should gain a new name and expand to Argentina and other countries in the region.

After of the sale of Aesop, what is the next step? Now, the priority is what we call wave two, which is the total integration of Avon with Natura in Latin America.

In practice, what has already been done in the integration up to now? There were investments in strengthening the Avon brand, resuming communication. For example, the BBB two years ago. There was an optimization of Avon’s portfolio and the introduction of commercial rules for Avon representatives that were more similar to those of Natura. There was some level of integration in support activities across the offices.

In the last three years, we’ve done wave one, which was Avon’s optimization per se. This was done in all Latin American countries. Some advanced a little more, others a little less. In the phase that is now coming, the most iconic element is the integration of the sales forces, the networks of consultants and representatives, in which all of them will be able to sell both the Natura and Avon brands.

This wave two has already started in Peru. In the middle of the year, it’s in Colombia. And in the second half, in Brazil, which is the biggest market. In 2024 it will take place in Chile, Mexico and Argentina.

What is the share of people who sell both brands? Today, on average, in Latin America, there is an overlap of consultants [Natura] and representatives [Avon] of about 30%. And also the homes that are penetrated by the two brands. All the households that over the past year have bought one brand and the other account for about a 30% overlap as well. The goal is to exceed 70%. From the time of integration, we expect this high number of overlap within a few months.

Are the difficulties generated by the pandemic and the war in Ukraine, which were not on the radar at the time of Avon’s acquisition by Natura, resolved with the sale of Aesop? Aesop solves the capital structure. A side effect of this period of the pandemic, the acquisition, the war, was the imbalance between the company’s debt and its ability to generate cash.

This is resolved with the sale of Aesop. But some of the businesses can still be much more profitable and healthy. Avon and The Body Shop have opportunities for growth, profitability and overall health. That’s what we’re focusing on. Therefore, Aesop does not solve this. It just gives peace of mind to eliminate the debt, and that we make the necessary changes both at Avon and at The Body Shop. This change in Latin America is the key to Avon’s change.

Is there a portfolio change at this stage? There is a new optimization of the Avon and Natura portfolios so that the offers are more complementary. Avon has a focus on make-up and face care, while Natura has on perfumery, body care and gifts.

Portfolios are being adjusted to favor and amplify these strengths and reduce overlap. Additionally, Avon has a line of home products that is not our priority and has been downsized. It will continue to exist, but is being optimized.

And the brake on consumption? How do you see this for the next months? Our beauty and personal care product market is highly dependent on household disposable income. And this income has not increased in general in Latin America, and in Brazil in particular. By the way, the level of household debt has never been so high. This has been progressively reflected in consumption. First, consumption of capital goods, then durable goods, and now consumption of everyday goods.

So, what I foresee for the market is a much more moderate consumption than we saw last year. Unless some government measure changes this reality. But I think, in the short term, we won’t see much change. Recognizing that there is the theme of the framework, the policy changes in fuel prices, the credit measures associated with payroll, that is, the government is trying to create mechanisms that favor consumption, however, I work with the most cautious scenario.

And the interest? What is the impact? Our business is less dependent on interest and more on income. But the fact is that, families being heavily indebted, this can compromise consumption. In the case of our consultants and representatives, they take credit from us to do better business. We are not feeling effects, for example, related to default. Our indices are healthy. Additionally, we are expanding our payment solutions business, Natura&Co Pay, which helps consultants’ commercial dynamics.

What is the size of Natura Pay today? Around 50% of the consultants do not have a bank account, therefore, they are unable to offer good sales conditions to their clients. Sometimes they don’t accept a card. They have difficulty understanding how to manage their finances, understand basic concepts. They take credit, they give credit, they make credit, they default. This has always been an obstacle to the commercial activity of our network of representatives and consultants. So, about a year and a half ago, we created a new business within the company that, for now, only has an internal name, but will have a fancy name soon.

It is a payment solutions business for our consultants and representatives that was first launched at Natura in Brazil and today has 600,000 active accounts. We have just expanded to Avon and, last year, R$26 billion worth of financial transactions circulated within this business. We are in the process of expanding to Argentina and then to other Latin American countries.

How is the situation in Argentina? It has been a very good market for us. We have a leading position with a market share even greater than that of Brazil. Our brands are very popular with Argentine consumers. That said, Argentina’s currency restrictions have posed difficulties.

Last year, we had difficulty importing goods there. There was a lack of products, which this year is already a little better. There are price increase restriction mechanics and financial flow, dividend flow. We look forward to this election year in Argentina, which will bring changes in economic and bilateral trade issues.

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X-RAY | JOÃO PAULO FERREIRA

He holds a degree in electrical engineering from USP (University of São Paulo) and an MBA from the University of Michigan (USA). He worked at Unilever for 20 years and joined the Natura group in 2009