The acquisition of Avon by Natura & Co was one of the most significant developments in the history of the beauty industry of recent years. As it has been reported, the Brazilian cosmetic group is set to buy Avon in a deal of about £1.6bn, with combined figures of 3,000 stores and presence in 100 countries, creating the world’s fourth-largest pure play beauty company. On announcing the acquisition Avon saw their share price increase by 10 per cent, which was an important early indicator of success. In this piece, we will go beyond the numbers and consider the opportunities and challenges to be overcome.
This won’t be the first time a company from a BRIC country undertakes a major international acquisition, especially considering the ascendancy of China and India, but in terms of Brazilian companies, buying a brand from a developed country with the magnitude of Avon is both remarkable and surprising. Natura had already bought Aesop and The Body Shop, showing its breadth and significance. However, the acquisition of Avon, a 130-year history brand, brings the group to another level. Despite the positive response from the deal disclosure, both companies have cultural differences that will determine the next steps of the conglomerate.
On one side, Natura have a strong positioning and have been excelling in buying companies to add value to the group. They are known for their commitment to cruelty-free products, their innovation, their eco-friendly refill packaging and for exploring ethical alternatives to the exploitation of the Amazon forest. Natura has a long history of challenging the outdated and unequal beauty standards, initiating the conversation about diversity, self-acceptance and female empowerment many years prior to Unilever. There is no doubt that Natura are highly effective communicators with a rich and well-received brand identity.
On the other side, Avon have a broader reach, global brand recognition, the second-largest direct-selling enterprise in the world with door-to-door operations in markets such as China and the U.S. and an aggressive commercial strategy. Avon pioneered a sales model by inviting their brand fans to become saleswomen themselves. Advantages aside, Avon have been removed from PETA’s cruelty-free list and don’t have an observable commitment to a higher social purpose. They are at the tipping point of change and need to modernise door-to-door operations in the post-digital era by finding innovative ways in which to support their direct selling model with the wide range of digital channels available.
It’s all about brand culture
Brand cultural strength is essential in acquisition processes, and culture and brand equity usually prevail in relation to size. They share a similar brand positioning with the other companies of the group (The Body Shop and Aesop), but Avon is the odd one out. The Body Shop’s core value proposition of “naturally inspired cosmetic products for those who care,” is carried out at every level of operations from branding to supply chain management. Aesop ethos is based on pleasure and purpose to deliver simplicity, integrity and authenticity. They formulate high-quality products and celebrate science with plant-based ingredients, pristine design and meticulous attention to detail. Natura & Co have been using the hashtag ‘For a fairer world’ (#porummundomaisjusto) and it will be interesting to see how this approach unfolds and affects the other companies of the group, especially Avon. Keeping their ethos based on sustainability and commitment to ethical business development will be one of the challenges to address in the near future. Does Avon have the credibility to talk about beauty in a way that is more aligned with today’s world and with the other three brands in the group?
Innovation and sustainability were always Natura core values. In the beginning of the ’80s when ecological issues were completely out of consumer awareness, Natura was already working with packaging refills. The system always worked in Brazil as the refills were cheaper than the original bottle. After the first purchase, consumers would buy only the refill of their preferred products. Here again, the brand showed its courage and avant-garde spirit, implementing a process that most brands and supermarkets are still struggling to initiate.
China is one of the markets that require animal testing and Avon had to succumb to these demands in order to have access to it. Although the main focus will be in Latin America, Natura will explore opportunities in China as Avon have retail operations and a consultancy operation in the country and China is expected to become the largest cosmetic market in the world, according to Euromonitor. Assuming the Chinese market is important to the group and that China will not change its laws and requirements any time soon, it’s difficult to imagine how Natura will overcome the contradiction.
Opportunities and challenges ahead
When it comes to opportunities, Natura’s already impressive logistical operations will be bolstered by Avon’s existing door-to-door operations, especially in markets such as China and the Philippines. Additionally, direct-selling as an agent of social transformation for women is an engaging strategy, especially as society clamours for the empowerment of women. According to recent publications, door-to-door consultants will be able to work with both brands and they have a unique opportunity to engage with rising feminist consciousness in emerging markets. This could be seen as the major common ground for both brands to be strategically explored.
In terms of challenges, although we can’t detail the precise reasoning behind the acquisition, we can recognise the tension between the commercial decision and its impact on brand strategy, brand architecture, culture and operations. In order to achieve success, it is imperative that both brands identify how they are relevant, distinctive and credible to consumers and how their respective strengths meet these needs. Having an offer with a meaningful difference as a brand and a group is paramount for successful navigation in the challenging times of transformation that these brands will endure.
Article by Marina Lorenzato and Fábio Testa from Creative Leap