Razvan Diratian, commercial director of Avon, says if the cosmetics market will decline in 2012 under political and economic pressure, he has a plan B so that the business of his company isn’t affected.
“It’s hard to say by how much this year’s turnover will increase. (…) However, we can see that under the current economic and political circumstances, mixed signals have emerged on the market, so we are prepared for a plan B,” he says, without providing further details except that it involves fine-tuning.
Diratian hopes however that the economic measures to be implemented by the government in the coming period should not affect Romanians’ purchasing power.
Consumption was significantly affected by the economic crisis, with the cumulated decline from 2009 to 2011 amounting to almost 20%. However, in 2011 consumption slowed down its decline to 3%. But Avon’s turnover fell by over 8%, to slightly less than EUR105 million, the company’s lowest since 2007.
“Last year our business followed the expected trend. The consumption decline was reflected in our business and the cosmetics market fell too, according to our data” says Diratian, without providing details on the value of the market.
In 2011 the head of Avon did not talk about the decline of the business, citing uncertainty at all times.
The manager of Avon says under the current economic circumstances he felt stronger market competition, including from hyper and supermarket chains that continued to expand, opening tens of stores.
He says only in the fourth quarter of 2011 was there a slight improvement in consumption, so he expects better results in the last few months of 2012.
Diratian says he expects to see a consumption growth in the second half of the year, but doesn’t give figures, citing economic and political pressures, as well as exchange rate fluctuations, as factors able to change market trends.
“In the first six months we felt a stabilization of the market. But performance was different across different categories of products. Fragrances and personal care products saw rises, non-cosmetics fell.”
Non-cosmetic products contribute around 15% of Avon’s overall turnover.
Given the positive signals of a market stabilization in the first six months of 2012, Avon decided to boost its marketing and advertising budget by 15% this year.
More than half of the 1,000 products in Avon’s catalogue are discounted and these are the best-selling products.
Diratian says Romanians buy as many products as before, but their average value has declined. “It’s all to do with Romanians’ purchasing power.”
Diratian doesn’t give details on the number of customers the company has, but says the number of Avon representatives varies between 120,000 and 140,000. This count includes active representatives, who placed at least one order in the past two months. Avon’s main rivals on the market of direct sales cosmetics are Oriflame and Amway.
(English version by Daniela Stoican)