Avon posted 451.8 million lei (EUR103 million) revenue in 2013, an increase of nearly 4% on 2012. Its business returned to growth after two years of decline but has yet to reach the peak of 2010, RON479 million. Moreover, profit margin fell from almost 16% in 2010 to less than 10% last year.
Razvan Diratian, 37, general manager of Avon Romania & Moldova says that sales were up in the first eight months of 2014, as a result of the investments made in promoting new products. Avon has previously said it invests several tens of millions of dollars in promotion a year, which includes both the marketing and advertising budget and the incentive program for its representatives.
“Sales performance was in line with our expectations in the first eight months of the year, we saw low single-digit (less than 5% i.e.) growth. We expect a positive trend in the coming months, as well, in line with the market trend and estimate sales will increase compared with last year,” Diratian said.
The fourth quarter will probably be the most important of 2014, as the cosmetics industry is highly seasonal favoring the fall/winter season, he added.
Avon Romania’s general manager, who joined the company 15 years ago while still in college, says that the most surprising thing about the first eight months of the year was the sales of men’s products, which posted one of the highest growths. He did not say exactly how much of the sales such products contributed.
The segment had accounted for very little of the cosmetics market for years and only recently started to grow. Last year’s data show that a Romanian man spends $3 dollars on care products a year or 20 times less than a Romanian woman spends on cosmetics and care products annually, according to ZF estimates based on market data.
Research company Euromonitor data show Romanian men are Europe’s laggards when it comes to buying men’s grooming products, with only Bulgarians spending less. Poles, Czechs, Hungarians spend up to four times more than Romanians, so the markets in their respective countries are much more developed.
“Perfumes, makeup products and gift sets posted good results. The novelty is that high sales came from the men’s line,” Diratian added.
Whereas mass-market products generate the bulk of sales, luxury products share in the total sales has gone up in the last few years, especially after the company chose local celebrities for its campaigns.
“Customers are educated in Romania and they look for the right price/product ratio and do not make impulse purchases. The average order has increased in value compared with 2013 but that growth comes from the rise in the number of products purchased.”
Avon has about 130,000 representatives throughout the country, a number that has remained relatively constant in the last three or four years of crisis and consumer spending decline.
Razvan Diratian said a while ago that the maximum number of Avon representatives once reached 140,000.
The number of Avon representatives has been on the rise in the Central and Eastern European region, which includes countries like Romania, Poland and Czech Republic, in the past year, Diratian added.
Avon’s share of the total cosmetics and care products market (which includes more than direct sales) stands at 12%. The company’s rivals L’Oreal and Beiersdorf, as well as Romanian-owned Farmec Cluj.
(English version by Loredana Fratila-Cristescu)