Avon Products Inc.’s ongoing quest for “sustainable, profitable growth” has led it to shake up its Latin American management and eliminate the post of chief marketing officer.
Fernando Acosta, senior vice president and president of Latin America, will retain responsibility for North Latin America and the Andean Cluster while adding responsibility for global brand marketing following the elimination of the role of chief marketing officer held by Patricia Perez-Ayala, who will leave the company Jan. 2. Perez-Ayala also serves as Avon’s global brand and category president.
The remainder of Latin America has been organized as the South Market Group, including Argentina, Chile, Uruguay and Avon’s largest market, Brazil, and assigned to David Legher, senior vice president and president of Avon Brazil. Legher will report to Sheri McCoy, Avon’s chief executive officer, and join the company’s executive committee. Acosta remains a member of the executive committee and continues to report to McCoy.
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The changes, ostensibly part of Avon’s $400 million cost-saving program, come just weeks after the beauty firm reported that its Latin American business dropped 12 percent in the third quarter ended Sept. 30 to $1.07 billion, just under 50 percent of its revenues.
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Reacting to the results, Standard & Poor’s Ratings Services on Nov. 3 lowered Avon’s corporate credit rating a single notch to “BB-plus,” the highest speculative rating, from “BBB-minus,” the lowest investment grade, based on the slow progress of the beauty firm’s recovery.
“Some of the company’s issues are deeper than we anticipated, particularly in the U.S., where active representatives and sales declines have been material, and in Brazil, where the company is facing softening macroeconomic conditions and a heightened competitive environment,” wrote S&P credit analyst Jacqueline Hui. “While the company still has good geographic diversity, many of its key markets are experiencing sales weakness and we believe it will take time to reengage its active representatives and rebuild sales growth.”
McCoy commented, “Latin America is our largest region, representing more than half our annual revenue. Driving growth in our Latin American markets is a top priority for Avon, and adjusting the business management responsibilities between two seasoned Avon executives will allow for better management focus and sustained growth.”
Avon said in a regulatory filing with the Securities and Exchange Commission that it had entered into a transition agreement with Perez-Ayala providing for her to receive salary for an additional year beyond her departure and other separation benefits.
John Higson will also perform a dual role for Avon as part of the organization. He will continue as senior vice president of Europe, Middle East and Africa, will add responsibility as head of global field operation, providing “assessment and advisory support to the sales team in Avon’s top 12 markets, aiming to accelerate the onboarding for sales heads new to their role and improve the Avon pipeline to ensure more ‘ready now’ successors for key field management assignments.” He maintains his seat on the executive committee and continues to report to McCoy.
As part of its cost-cutting program, the company said it had taken actions to improve the efficiency of its supply chain, including contract terminations and global head count reductions, which weren’t quantified.
The actions, expected to be completed by June 30, will result in total pretax charges of about $45 million, between $30 million and $35 million to be recorded in the current fourth quarter and the remainder by the time of their completion.
Coty Inc. made a failed bid to acquire Avon in 2012 prior to Coty’s initial public offering. Michele Scannavini, ceo of Coty at the time of the bid, resigned from the post for personal reasons in September and was succeeded on an interim based by Bart Becht, the company’s chairman.