“Last year we had pleasant and unpleasant surprises every month. But uncertainty made it difficult to apply Avon’s strategies.” Diratian says 2011 was a good, but not very good year for the company he runs.
“We came pretty close to our budget and we kept our client base. Eight out of ten women bought at least one Avon product last year.” He says in the future as well, Avon’s strategy is to keep its client base.
Last year consumption continued on the downward path that started in 2009. In the first 11 months of 2011 consumption fell 4%. This trend was also felt in Avon’s business, with clients either buying less or cheaper.
“We experienced a sales decline for non-cosmetics – accessories, handbags, jewelry, which account for 13% of our turnover. Cosmetics sales – Avon’s core business – were similar to 2010 both in terms of the number of products sold and in terms of their value.
The head of Avon does not offer figures on last year’s turnover. Avon Romania, the largest direct sales cosmetics company, posted a turnover of EUR114 million in 2010 and a profit of around EUR18 million.
Consumption characterized by migration
As for last year, Diratian admits that the sales trend was different from one category of products to the next. The common feature for almost all product categories, except fragrances – was migration from premium products to mass ones and from mass to value products (the cheapest ones). Mass products continue to account for the bulk of sales, around 60%, followed closely by value products (27%) and premium products (12%).
Plans for 2012: optimistic, pessimistic, realistic
When it comes to 2012 he cites uncertainty and does not provide figures.
“It is very difficult to say what this year will be like. The latest projections from Euromonitor (market research company), which date back to May, talked about growth. But many have since changed on the market.”
As for the Avon business, Diratian wants a turnover that matches the 2011 level.
“We have a main plan which entails a turnover stagnation both in volume and in value. But we also have plans B and C, which can be quickly put into motion if there are growth opportunities or if, on the contrary, a worsening of the situation can be noticed.”
They buy less, but more often
For 2012 Diratian intends to boost the number of representatives from the around 140,000 current ones, a steady number in the last two years. Again, the head of Avon is reluctant to offer numbers. Each representative orders 15-20 products on average, worth EUR40-50. A product costs on average 2EUR or 3EUR. But Diratian did not say how often a representative places orders with Avon.
“The value of the order has diminished. (…) People buy less and more often because they are more cautious in their monthly spending.”
How has the cosmetics market fared?
Diratian says the cosmetics market fell last year, but does not offer information on its value.
“In the first half of 2011 there was a dramatic decline of 8-10%, and then the decline slowed down to 2-5%.”
He says in the fourth quarter, which is a peak for the industry, the decline was lower than in the rest of the year, which is a good sign.
As far as the value of the market is concerned, estimates range between EUR600 and EUR850 million, with EUR2.5-3.5 per month spent by each Romanian.
Romanians’ cosmetics budget is much lower than that of other EU citizens, sometimes even less than half that of a Western European.
“Direct sales of cosmetics account for 30-35% of the overall market,” Diratian says.
The main players on the market are Avon, Oriflame and Amway.
(English version by Daniela Stoican)