Avon Products Inc
Avon commenced operations in 1886 and was incorporated in the State of New York
on January 27, 1916. Avon is a global manufacturer and marketer of beauty and
related products. Avon’s products fall into three product categories: Beauty,
which consists of cosmetics, fragrances and toiletries (“CFT”); Beauty Plus, which
consists of fashion jewelry, watches, apparel and accessories; and Beyond Beauty,
which consists of home products, gift and decorative products and candles. In
2003, Avon launched in the U.S. a new global cosmetics brand, focusing on the
market for young women. The brand is named “mark.” and the product line is targeted
to young women in the 16 to 24 age group, with an objective of enhancing Avon’s
share of the worldwide youth market. The “mark.” brand is sold both through the
Company’s core group of Representatives and a separate “mark.” sales force. The
Company intends to introduce “mark.” into additional markets over the next several
years.
Avon’s business primarily is comprised of one industry segment, direct selling,
which is conducted worldwide. The Company’s reportable segments are based on
geographic operations in four regions: North America, Latin America,
Distribution
Avon presently has sales operations in 60 countries or territories, including
the United States, and distributes its products in 72 more. Sales are made to
the ultimate customer principally through a combination of direct selling and
marketing by approximately 4.4 million active independent Avon Representatives,
approximately 500,000 of whom are in the United States. Representatives are
independent contractors or independent dealers, who are not agents or employees
of Avon. Representatives purchase products at a discount from the brochure price
directly from Avon and sell them to their customers. The Representatives are
the customers of Avon and Avon generally has no arrangement with any end user
of its product beyond the Representative. Representatives are invoiced for their
order and are responsible for payment to Avon upon delivery of product to the
Representative, regardless of whether or not the Representative sells the products
to an end user.
Competitive Conditions
The cosmetic, fragrance and toiletries (CFT), gift and decorative, apparel
and fashion jewelry industries are highly competitive. Avon’s principal competitors
in the CFT industry are large and well-known cosmetics and fragrances companies
that manufacture and sell broad product lines through various types of retail
establishments. There are many other companies that compete in particular CFT
products or product lines sold through retail establishments.