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March 2003

March 2003. Table of Contents. Executive Summary XX Vitamin Supplement Review XX Weight Management Review XX Tea Review XX Beauty Review XX Appendix XX. Executive Summary. Wellness Line Review 2003.

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March 2003

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  1. March 2003

  2. Table of Contents Executive Summary XX Vitamin Supplement Review XX Weight Management Review XX Tea Review XX Beauty Review XX Appendix XX

  3. Executive Summary

  4. Wellness Line Review 2003 • Wellness 2002 Size of Line finaled at 250 skus. Aggressive inventory clearance of 66 dispos resulted in a 250 SOL, (-15) below an objective of 265 skus. • In 2003, the marketing mix will shift to Beauty and Beauty Plus. The major repositioning of Wellness Beauty will be supported by the launches of Healthy Remedies and Planet Spa. In the Beauty Plus category, continued brand building of SlimWell and VitAdvance will re-vitalize and grow the lines. • Beyond Beauty will continue to remain strong, with more impactful products. Strong vendor relationships (eg. Bally, Conair, HoMedics) will be leveraged to better manage supply and inventory. • Further investigation of Cluster and Wellness Global inventory management. • Wellness 2003 New skus (169 vs. 166) are up slightly (+2%). • The 2003 size of line goal of 265 skus will need to be aggressively achieved through more clearance, improved estimating accuracy, and internal process improvement. • Increase catalog pages dedicated to clearance. • Utilize AIA as a forecasting tool. • Refinement of product life strategy.

  5. Summary Performance of Key Segments 2002-2003 • Fiscal 2002 2003 PP Net $ Net $ Units DP% Net $ Units DP% % Chg. Pt. Chg. • VitAdvance $13,685 2,717 56.2% $20,000 4,074 57.3% 46.1% 1.1pts • SlimWell $12,008 2,062 54.8% $26,000 4,500 56.0% 116.5% 1.2pts • Infusions $2,655 789 53.0% $3,300 800 60.0% 24.3% 7.0pts • Beauty $8,200 2,658 60.4% $16,600 3,168 66.1% 102.4% 5.7pts • Subtotal: $36,548 8,226 56.4% $65,900 12,542 59.1% • % of Total: 38% 54% 58% 74% • Total Wellness $95,148 15,143 56.6% $114,500 18,300 56.6% 20.3% Flat • The Key segments will account for approximately 59% of total Wellness demand sales in 2003. • The launches of Healthy Remedies and Planet Spa will drive growth in Beauty, while unproductive skus and lines are discontinued/dispo’d. • 4 VitAdvance supplements will be introduced in 2003, and 4 will be Dispo’d. • The entire VitAdvance line is on Status due to anticipated Repackaging in 1Q ‘04. • New flavors, forms, and trial Bite Size Bars will drive unit and sales growth in Slimwell. • The Infusions Tea store will broaden its appeal through promotional/seasonal/giftable items. The brand’s in-line skus will be repackaged to add better price/value to the customer. * * *With resourcing

  6. Issues/Next Steps • Regular updates with Product Line Control. • Refine a process for Wellness planning. • Gain greater visibility to vendor managed Inventory. • Marketing process fully implemented to identify product life, and communication to PLC and Merchandising. • Work with Purchasing, Labs, R&D, and Branches to manage “seamless” introduction of reformulated and redesigned products. • Identify cube implications in product selection process. • Need to identify cube implications for clearance activity.

  7. Wellness Fiscal 1Q ‘03 • 2002 AC 2003 PP 2003 AC % Chg vs. AC % Chg vs. PP • Campaign 2/1 AC • Net $ $1,043,121 $2,000,000 $2,370,487 127.2% 18.5% • DP% 55.5% 55.5% 55.8% 0.3 0.3 • Units 157,652 346,882 341,865 116.8% -1.4% • Campaign 3/2 10D • Net $ $4,054,187 $1,000,000 $1,308,562 -67.7% 30.9% • DP% 56.4% 56.9% 56.4% 0 -0.5 • Units 600,665 186,725 193,686 -67.8% 3.7% • Campaign 4/3 2D • Net $ $4,108,388 $6,475,000 $5,573,379 35.7% -13.9% • DP% 56.7% 58.3% 58.4% 1.7 0.1 • Units 953,323 1,067,198 948,798 -0.5% -11.1% • Campaign 5/4 ES • Net $ $2,858,549 $2,700,000 $4,036,658 41.2% 49.5% • DP% 56.8% 58.8% 57.5% 0.7 -1.3 • Units 544,727 453,528 663,669 21.8% 46.3% • Campaign 6/5 ES • Net $ $3,801,448 $6,300,000 $7,276,713 91.4% 15.5% • DP% 61.9% 58.3% 58.7% -3.2 0.4 • Units 585,358 1,066,957 1,151,216 96.7% 7.9% • Campaign 7/6 MP • Net $ $2,193,783 $3,250,000 $3,437,621 56.7% 5.8% • DP% 61.4% 59.1% 59.1% -2.3 0 • Units 333,994 533,628 583,127 74.6% 9.3% • Campaign 8/7 MP • Net $ $4,933,980 $6,600,000 $8,517,989 72.6% 29.1% • DP% 57.1% 57.3% 56.8% -0.3 -0.5 • Units 758,539 1,175,941 1,536,253 102.5% 30.6% • Fiscal Q1 • Net $ $19,553,081 $24,242,200 $27,266,459 39.4% 12.5% • DP% 58.2% 58.1% 57.9% -0.2 -0.2 • Units 3,405,770 4,104,058 4,476,688 31.4% 9.1%

  8. Vitamin Supplement Review

  9. Mass Market Vitamin • Retail Vitamin Sales vs. Avon • Industry retail dollar sales for vitamin category was down slightly in 2001 (-3.2%), driven primarily by the Letter segment. • Although Avon demand sales are up +15.3%, demand sales were short of the $25MM profit plan by (45.6%). • 2003 Avon multivitamin SKU’s go from 8 in ‘02 to 4 in ‘03, however ‘03 multivitamin sales are projected flat with PY. • Industry growth for total vitamins in 2002 wasmodest at 2.9% vs. PY. Retail Dollar Gross Sales (MM) 2000-2001 by Segment $ $3,360.3 M $3,252.5 M (3.2%) 20.6% 19.1% 2.2% 2.6% 25.5% 26.3% 4.7% 52.0% Avon Dollar Demand Sales (MM) 2001(C13 – C26) -2002 (full year) by Segment $ $20.0 M 47.1% 20.2% $13.6 M 15.3% $11.8 M 29.2% 33.1% 79.8% 70.6% 66.9% * Avon 2001 Sales C13 – 26 only Source: IRI Reviews: FDM w/ Wal-Mart

  10. Vitamin Sales by Class of Trade • Drug accounts for 39% of vitamin sales, however it declined [5%] from 2000. • Wal-Mart alone contributed 28% of category dollars. 2001 Dollar Sales of Total Vitamins by Channel Source: IRI Reviews: FDM w/ Wal-Mart Note: Excludes Avon

  11. Market Trends The vitamin category was down slightly(-3.2%), driven by declines in the 1&2 Letter segment. Average price per unit of all vitamin segments have increased steadily over the past 5 years. Industry new product introductions were down 48.0% in ‘01 vs. PY due to lack of new product innovation. Industry growth has been hampered by efficacy issues, negative study results, safety questions. Competitive Dynamics Wal-Mart accounted for almost 1/3 of total vitamin sales in 2001. Private Label dominates the market, representing 34% of category sales. Centrum, the next closest competitor, follows with 9.0% of the market. 34% of vitamins are sold on some promotion. When promoted, vitamins are discounted an average of 26%. Advertised specials appear to be the primary promotional vehicle for vitamins, followed next by price reductions. Avon offers fewer pills at a premium price point versus top competitors. Nutrition Industry Trends Source: IRI Reviews: FDM w/ Wal-Mart

  12. Haircare From Within AquaNew (C13) Total Skin (C23) Look & Feel Your Best Outsmart Stress Tension Relief Restful Sleep Energy Advance Outsmart Stress Women’s Complete I Women’s Complete II Bone Health Heart Health Daily Fiber (C7) Soft Calcium Chews (C7) Food for Vitality Kid’s Complete Men’s Complete Cold Season Stomach Comfort* Prostate* Natal Health* Protect Your Family Achieve Your Peak Performance Memory & Focus Joint Formula Menstrual Comfort Mood & Balance* Fight PMS Bonus Samplers Promotional VitAdvance • 2003 Character of Line NEW NEW NEW NEW * 2003 Disposition

  13. Avon Vitamin Sales by Category • “Beauty” vitamins (Haircare, AquaNew, & Total Skin supplements) are projected to grow to 25% of the total vitamin business in 2003. • The single most productive vitamin is Energy Advance, followed by Haircare consistently representing at least 10% of the total vitamin business from 2001 – 2003. • The least productive vitamins are Prostate, Natal, and the Vitamin Sampler which includes the Energy, Menstrual, and Menopause formulas. 2001 Vitamin Demand Sales by Product Family 2002 Vitamin Demand Sales by Product Family 2003 Vitamin Demand Sales by Product Family *Other Sales Contribution: Menopause Support 3.5% Mood & Balance 3.3% Immune Advance 3.1% Menstrual Comfort 3.0% Stomach Comfort 1.7% Prostate 1.3% *Other Sales Contribution: Menstrual Comfort 3.0% Sleep Support 3.0% Tension Relief 2.3% Cold Season 2.1% Stomach Comfort 2.0% Immune Advance 2.0% Mood & Balance 1.6% Prostate 1.0% Natal 0.7% Vitamin Sampler 0.4% *Other Sales Contribution: Sleep Support 2.3% Tension Relief 2.3% Immune Advance 1.9% Cold Season 1.7% Menstrual 1.6% Mood & Balance 1.2% Natal 1.2% Prostate 0.9% Stomach 0.8% Vitamin Sampler 0.3%

  14. VitAdvance • VitAdvance line placed on Status in 2003 due to anticipated Repackaging in 1Q ’04. • 2001 2002 2003 2003 vs. 2002 • VitAdvance • Net ($MM) $12,390 $13,685 $20,000 46.1% • DP% 61.7% 56.2% 57.3% 1.1pts • Units(000) 2,225 2,718 4,074 49.9% • # SKUs 17 27 27 0 • %Contribution 18.9% 14.4% 17.5% 3.1pts • Active Status/Disc. Additions Reform/Redesign Dispo’d SKUs C26 ‘03 • VitAdvance (Begin ‘03) (End ‘03) • Multi’s 8 8 • Supplements 16 4 4 16 • Samplers 3 3 • Total 27 4 0 4 27 Calcium Chews Natal Daily Fiber Prostate Aqua New Stomach Total Skin Mood & Balance

  15. VitAdvance 2002 Sales Sorted • Units Net Sales DP % • Haircare from within Vitamin 365,741 $1,899,096 52.3% • Energy Advance 262,318 $1,390,822 65.2% • Women's Complete II 265,729 $1,253,482 56.2% • Bone Health 222,767 $1,139,576 53.3% • Heart Health Formula 187,126 $956,002 53.5% • Joint Formula 168,433 $874,472 55.3% • Men's Complete High-potency Multi-vitamins/Minerals 154,391 $753,736 51.7% • Women's Complete I 154,343 $753,394 55.8% • Menopause Support 127,087 $697,037 57.4% • Kid's Complete Chewable Multi-vitamins/Minerals 125,355 $563,074 53.9% • Memory and Focus 105,427 $554,822 67.2% • Menstrual Comfort System 77,973 $429,041 55.6% • Sleep Support Restful Sleep 79,278 $423,460 56.8% • Bonus Complete II 63,103 $342,341 55.6% • Tension Relief Stress 59,909 $326,282 61.1% • Cold Season 56,337 $303,420 55.7% • Stomach Comfort 56,880 $291,298 62.2% • Immune Advance 54,557 $281,940 55.7% • Mood and Balance 42,450 $233,062 60.9% • Bonus Mens Complete 38,581 $208,196 49.9% • Bonus Complete One 33,870 $182,380 52.8% • Prostate Formula 27,124 $142,261 53.7% • Bonus Kids Vitamins 24,057 $115,175 48.3% • Healthy Babies at Birth Formula 17,294 $101,883 65.4% • Vitamin Sampler - Energy, Menstrual, Menopause 56,828 $62,349 44.6%

  16. Avon VitAdvance 2001 Pricing / Pillvs. Competition • Total vitamins on a per pill basis, Avon is priced more than double the competitive average, even when on discount. • Avon’s Heart, Bone, and Energy supplements are priced competitively as compared to One a Day, but still are slightly higher than Centrum. Total Vitamins Multi Vitamins Promoted Average Non-Promoted Promoted Average Non-Promoted Price / Pill Price / Pill Price / Pill Price / Pill Price / Pill Price / Pill Avon $0.15 $0.17 $0.18 $0.15 $0.15 $0.15 Private Label $0.04 $0.05 $0.05 $0.04 $0.05 $0.05 Centrum $0.08 $0.09 $0.10 $0.07 $0.09 $0.09 One a Day $0.09 $0.10 $0.10 $0.08 $0.09 $0.09 Nature Made $0.06 $0.07 $0.08 $0.08 $0.10 $0.11 Mineral Supplements Key Forms Non-Promoted Price Promoted Average Non-Promoted Price / Pill Price / Pill Price / Pill Heart Bone Energy Avon $0.17 $0.19 $0.20 $0.20 $0.17 0.17 Private Label $0.07 $0.09 $0.09 Centrum n/a 0.18 0.08 0.18 One a Day n/a 0.33 0.17 0.33 Nature Made $0.09 $0.10 $0.11 Osteo Bi Flex $0.08 $0.09 $0.09 N/A N/A N/A Source: IRI Reviews: FDM w/ Wal-Mart & NYC Competitive Shopping

  17. Five Basic Programs to Address Women’s Health Concerns • One Philosophy…Five Programs Feeling Young Helps mature adults rejuvenate, enhance endurance, and improve outlook Feeling Powerful Helps active adults and workout enthusiasts improve their energy, endurance, stamina, and performance Vitality Program Energy & Fitness Program Daily Health Program Taking Care A complete nutritional program formulated for growing young bodies Feeling Beautiful Optimum support for beautiful skin, hair, and nails Feeling Great! Helps men & women achieve optimum nutrition and enjoy life to its fullest Beauty Program Kids Program

  18. Re-launch VitAdvance A Fresh New Perspective More compelling & consumer friendly Add diversity to the line • Products for specific lifestyles • Easy, clear choices • Doctor recommended formulas • Easy on-the-go solutions • Not just pills • Interesting regimens Less commodity driven • Exclusive value-added bundles • Proprietary combo products • Regimen approach Leverage our beauty heritage • Fight the signs of aging • Look and feel your best • Style is everything!

  19. VitAdvance • Growth Strategies Branding Brand Building Brand Bonding • New Look Brochure • Line Re-stage • Segmentation • Avon Enrich • Radiance • Pfizer for Living • Wellness.com Expanding Representative Participation Nutrition Capabilities Consumer Reach • Avon Enrich • Field Nutrition Experts • WNE Compliance • Sampling • E-mail Blast • Testimonials • Events • Avon Nutrition Labs • Avon R&D • Virtual Experts (Industry Partners) • Professional Sales Force • Marketing Partnerships

  20. 2003 New Forms of Delivery Liquid Chews Powder Avon Enrich (Customer Continuity Program) Build upon success of “Beauty” supplements AquaNew Skin Formula 2004 Re-design of VitAdvance line for 1Q ‘04 Avon Nutrition Lab to replace Roche partnership Avon will lead the process, but will leverage the functional expertise and capabilities of proven industry leaders. VitAdvance Tactical Implications

  21. Weight Management Review

  22. Bars/Shakes/Supplements Overview • Avon 2003 Weight Management demand sales projected up 118.5% due to the following: • Introduction of new Snack Bar flavors. • Introduction of new Gourmet Meal Replacement Bars. • Introduction of Bite Size Bars & Shake Packettes for consumer convenience and trials. • Entry into Weight Management Tablet category. • New creative approach effective C13 ’03. Industry Retail Dollar Gross Sales (MM) 2000-2001 by Segment $ $2,788.7 M 43.6% $2,033.3 M 18.1% 16.9% 11.0% Avon Demand Sales (MM) 2002-2003 (projection) by Segment $ $26.0 M 212.0% 64.8% $11.9 M 62.5% * Note: Granola & Cereal Bars include brands such as Quaker, General Mills, Kellogg and Nature Valley Source: IRI Reviews: FDMX (Excl. Wal-Mart)

  23. Bars/Shakes/Supplements By Class of Trade • All Snack Bar channels posted significant growth over 2000 sales, with Food as the dominant channel (71%). • All Liquid/Powder channels posted growth over 2000 sales, with Food accounting for the majority of liquid and powder dollars 46%. • 30% of Liquid / Powder category dollars were sold through Wal-Mart in 2001. • All Weight Control Pill channels posted significant growth over 2000 sales, with Wal-Mart accounting for the largest portion of category sales 37%. Snack Bar/Granola Bar 2001 Dollar Sales by Channel Weight Management Powders 2001 Dollar Sales by Channel Weight Management Pills 2001 Dollar Sales by Channel Source: IRI Reviews: FDM w/ Wal-Mart Note: Excludes Avon

  24. Market Trends The Liquid/Powder category (with Wal-Mart) is up substantially in 2001 +18.1%, at $1.4 billion in sales. The Snack Bar/Granola Bar category (with Wal-Mart) posted significant gains in 2001, +16%, reaching $1.6 billion in sales. Meal Replacement/Sports Bars have outperformed granola/cereal bars in terms of growth (+17%), and now represent $600M. The Tablets category (with Wal-Mart) almost doubled in 2001 +43.6%, reaching $526 million in sales. Competitive Dynamics Wal-Mart accounted for almost 1/3 of total liquid/powder sales in 2001. Ultra Slim Fast dominates the liquid weight control segment, representing 64% of sales. Slim Fast and Private Label are the leading brands within the meal replacement/sports bar segment, together representing 25% of sales. Wal-Mart accounted for the largest proportion +37% of candy/tablet sales in 2001. Metabolife 356 is the leading brand within Tablets, representing 42% of sales. Key Learnings – Weight Control

  25. SlimWell • 2003 Character of Line Oatmeal Raisin* Chocolate Crunch Brownie* Chocolate Frosted Peanut* Honey Peanut Crunch** Meal Replacement Bars Iced Tropical Crisp (C13) Iced Cranberry Crisp (C13) Chocolate Toffee Crisp (C13) Gourmet MealReplacement Bars Cappuccino French Vanilla Dutch Chocolate Meal Replacement Shakes S’mores (C21) Chocolate Mint (C21) Rich Caramel Snack Bars NEW NEW NEW NEW NEW Dietary Supplements Advanced WeightLoss System (C13) Trial/Convenience Sizes Shake Packettes (C13): Cappuccino French Vanilla Dutch Chocolate Bite Sizes (C13/16): Oatmeal Raisin* Chocolate Crunch Brownie* Chocolate Frosted Peanut Iced Tropical Crisp (C13) Iced Cranberry Crisp (C13) Honey Peanut Crunch Chocolate Toffee Crisp Tea Botanical Tea (C11) NEW NEW NEW NEW ** C21 Reformulation ** 2003 Disposition

  26. SlimWell • 2002 2003 2003 vs. 2002 • SlimWell “Extruded” Meal Replacement bars placed on Status due to Reformulation in 4Q ’03. • New forms (e.g.. Granola) will be added to create diversity within the SlimWell bar line. • New Bite Size Bars will add unit energy and generate Customer trial. • Enter the tablet category with the introduction of Advanced Weight Loss System in C13 ‘03, and further extend the SlimWell brand into a more comprehensive “Weight Loss” system. • SlimWell • Net ($MM) $12,003 $26,000 116.6% • DP% 54.8% 56.0% 1.2pts • Units(000) 2,062 4,500 118.2% • # SKUs 6 21 15 • %Contribution 12.6% 22.7% 10.1pts • Active Status/Disc. Additions Reform/Redesign Dispo’d SKUs C26 ‘03 • SlimWell (Begin ‘03) (End ‘03) • Bars 4 3 3 4 6 • Shakes 2 1 3 • Snack 1 2 3 • Bite Size 3 4 6 7 6 • Supplements/Teas 2 2 • Giftsets 1 1 • Total 6 4 13 9 11 21 Gourmet Bars (3) Extruded (4) Cappuccino Shake Bite Size (7) Snack Bars (2) Bite Size Advanced Weight Loss System Botanical Tea

  27. Avon Weight Management Pricing vs. Competition* • NuSkin Pharmanex hold a super-premium price point, nearly one and a half times the average. • Slim Fast brands severely undercut competitors on a per serving basis in both shakes and meal bars. • SlimWell bars and shakes are mid priced on a per serving basis. SlimWell Balanced Slim Fast Meal NuSkin / Atkins Meal Bars on the Go Bars Herbalife Pharmanex Advantage CDSS $12.99 $5.79 $16.95 $33.50 $29.99 Cost per Serving $1.30 $0.97 $1.21 $3.35 $2.00 Cost per Day $1.30 $1.93 $2.42 $6.70 $4.00 Servings 10 6 14 10 15 Weight per Bar (g) 50 56 40 65 60 • SlimWell Balanced Slim Fast Ultra Slim Fast Ultra Slim Fast NuSkin / Meal Shake Slim Fast Shakes Shakes Cans Herbalife Pharmanex CDSS $12.99 $4.99 $6.89 $6.99 $23.95 $23.95 Cost per Serving $0.81 $0.38 $0.53 $1.17 $1.09 $2.40 Cost per Day $0.81 $0.77 $1.06 $2.33 $2.18 $4.79 Servings 16 13 13 6 22 10 ** 2001 Competitive Pricing

  28. Weight Management Competitive Size of Line Breakfast / Powders MealBars Lunch Bars Snack Bars Nuts Aloe Drink Soup SlimWell 3 7 0 3 0 0 0 SlimFast 4 SlimFast/9 Ultra 7 2 5 0 0 0 Herbalife 7 total 4 (5 weightloss & 2 high protein) (high protein) 0 0 1 1 2 Unicity 4 total 2 (2 to be discontinued upon stockout) (high protein) 0 0 0 0 0

  29. SlimWell • Growth Strategies Branding Brand Building Brand Bonding • New Look Brochure • Key Line Extensions • Flavors • Ingredients • New Product Forms • Supplements • Chewies • Reform/ Redesign • Promotional • Avon Enrich • Radiance • Wellness.com Expanding Representative Participation Nutrition Capabilities Consumer Reach • Events • (The SlimWell Challenge) • Bite Size Sampling • SlimWell Boot Camp • SlimWell Success Kit • New TPM Network • Avon Nutrition Labs • Marketing Partnerships • Prevention • Promote–IT Fitness Centers • Snack Bar Fund Raiser

  30. SlimWell Tactical Implications • Introduce Gourmet Bars in C13 ‘03 • Iced Tropical Crisp • Iced Cranberry Crisp • Chocolate Toffee Crisp • Enter Weight Control Tablet category with C13 ‘03 with launch of SlimWell Advanced WeightLoss System Launch “New & Improved” reformulated Meal Replacement bars in C21 ’03. • Introduction of 2 new snack bar flavors in C21 ‘03 • S’mores • Chocolate Mint • Re-introduce SlimWell Bite size bars to the Representative & introduce to the Consumer for the first time. • Introduce convenient Shake packettes in the brochure. • Offer promotional/ seasonal limited life concepts for channel energy. • Introduce fresh creative in C13 ‘03 focusing on SlimWell lifestyle & ingredients. • Target more compelling and consumer friendly claims. • Continued emphasis on testimonials & SlimWell success stories.

  31. Tea Review

  32. Mass Market Tea Sales vs. Avon • Increased interest in alternative medicine, including herbal remedies is a factor in increased tea sales. • Flavored teas have also contributed to loose tea sales. • Avon’s Infusions 2003 demand sales projection of $3.3M is +22% above PY. Growth will be fueled by promotional/giftable items as well as higher net per unit per concept. Retail Dollar Gross Sales (MM) 1999-2001 $ 0.8% 0.9% 4.0% Avon Dollar Demand Sales (MM) 2001-2003 $ 22% 35% Source: IRI Reviews: FDM w/ Wal-Mart

  33. Tea Sales by Class of Trade • Most Americans buy tea as part of a planned shopping trip – the majority of tea sales by dollar volume are through the supermarket channel*. • However, as more Americans turn to mass merchandisers’ “superstores” that sell groceries as well as dry goods, most grocery stores are seeing a sales decline for tea. 2001 Dollar Sales of Tea by Channel * Source: IRI Reviews: FDM w/ Wal-Mart In 2000 Wal-Mart took over the number one position as the top grocery retailer in the US

  34. Market Trends Between 1998 – 2000, the tea segment increased 10.3% due in part to the proliferation of flavored teas and new types of herbal teas. Tea has taken on a new form as a natural treatment option - Good news about links between tea consumption & health benefits have convinced many consumers to increase their consumption of tea. Consumers are increasingly price sensitive toward tea. The influence of tea has expanded beyond its traditional form and is being found in unexpected beverages and foods as well as bath and beauty products. Competitive Dynamics Lipton brand owns the tea business with 36% of market share, more than double of its closest competitor Celestial Seasonings. Brands like Celestial Seasonings & Honest Tea have pioneered green and herbal teas in mainstream channels, helping to raise awareness. Mass merchandisers’ Private Label brands rank number three in total tea sales in the US market. Tea sales in supermarkets are falling as mass merchandisers ramp up their development of full-line grocery selections in their stores. Tea Industry Trends

  35. Infusions • 2003 Character of Line Lemon Bliss Tea w/ Multi-vitamins Peach Tea Berry Passion Chamomile Harmony Ginseng Boost (Redesign) Green Tea Zest (Redesign) Echinacea Relief Bedtime Bliss Package of 16 Tea Bags Botanical Bloom Sampler* (C3) Botanical Bloom Canister* (C5) Botanical Bloom Chai Tea* (C7) Dessert Tea Set* Candy Cane Giftable (C23) Promotional NEW NEW NEW NEW NEW NEW * 2003 Disposition

  36. Infusions • Infusions teas placed on status. Brand will be repackaged to add better price/value to the consumer. • 3 New Flavors will be introduced, and 3 unproductive flavors will be discontinued. • 2001 2002 2003 2003 vs. 2002 • Infusions • Net ($MM) $1,990 $2,655 $3,300 24.3% • DP% 54.6% 51.8% 60.0% 8.2pts • Units (000) 691 789 800 1.4% • # Skus 4 6 5 -1 • % Contribution 3.0% 2.8% 2.9% 0.1pts • Active Status/Disc. Additions Reform/Redesign Dispo’d SKUs C26 ‘03 • Infusions (Begin ‘03) (End ‘03) • Teas 6 2 3 6 5 • Promo/Giftsets 5 4 9 0 • Total 6 5 6 3 15 5 Lemon Green Peach Ginseng Botanical Bloom Sampler Bedtime Bliss Botanical Bloom Cannister Botanical Bloom Chai Tea Candy Cane

  37. Avon Infusions 2001 Pricing / Unitvs. Competition • On a per unit basis, Avon’s Infusions provide less tea at a higher price point versus the mass market competition. • Tazo, Starbuck’s premium brand is the only competitor priced higher than Avon’s Infusions. • Bag / Loose Tea Non-promoted price / unit Servings Price / Serving • Avon Infusions 2.99 16 $0.19 • Lipton 2.49 25 $0.10 • Celestial Seasonings 2.99 20 $0.15 • Bigelow 2.95 20 $0.15 • Twining 2.95 25 $0.12 • Tazo 4.95 24 $0.21 Sources: CUS, COM, Competitive Shopping

  38. Tactical Implications • Transition the Infusions brand form commodity price/package/efficacy to “bridge”. • Shift packaging from disposable carton to reusable tin. • Increase bag count. • Introduce functional teas, i.e. vitamin infused. • Continue to offer flavored/specialty teas. • Focus on and educate the consumer of the benefits of tea consumption through stronger claims and more compelling brochure executions.

  39. Beauty Review

  40. Avon Size of Line 15.6% 56.1% Avon Demand Sales (MM) 2002-2003 (projection) by Brand $ 102.0% 14.1% Avon Wellness Beauty Sales & Concepts • Lack of appealing fragrances, undesirable packaging, and uncompelling brochure executions contributed to the unsuccessful launches of Vitatonics, Electricity & Restoring in 2001 & 2002. • 2002 Beauty sales growth of 14% was modest, fueled by the introductions of Soy, Edamame, Ginseng Asian Pear. • Major re-positioning of the Wellness Beauty supported by the introductions of Healthy Remedies and Planet Spa is expected to drive Beauty sales growth in 2003. • 2003 size of line will return to 201 level due to aggressive disposition.

  41. Market Trends Major trends driving the spa market: Increased stress. Re-definition of beauty from “glamorous beauty” to “natural beauty” born of health & wellness. Trend to self improvement. Consumer attitudes show an increased emphasis on a “holistic” approach to Wellness (complete body & mind renewal). Consumer trends show an increased focus on healthy lifestyles putting greater emphasis on prevention and fitness. Recent economic slowdown will tempt consumers to spend less on day spa services and skew them towards less expensive at home treatments. Competitive Dynamics The spa industry is growing rapidly and is projected to grow at an average annual rate of more than 20% per annum in the services area. The Body Care segment of the Spa industry (including services) is expected to grow +117.5%, to $3.48 billion in 2003. Responding to the opportunity presented by the tremendous proliferation of overnight and day spas, mass market & premium brands have entered the at home treatment spa segment. Spa Related Beauty Products Industry Trends Source: US market Analysis 2000 study commissioned Avon Global

  42. Market Trends Health warnings, environmental concerns and organic attitudes have contributed and will continue to contribute to the growth in popularity of natural-based personal care products. Consumer trends reflect a growing tendency of Americans to self medicate for minor & chronic illnesses. Competitive Dynamics Sales of natural personal care products are expected to grow between 20% - 25% over the next several years. Most players in the natural personal care market are small, independent companies; However, consumer demand is driving mainstream beauty companies to enter the natural products market. Within the alternative medicine market, herbal remedies accounted for 93% of sales in 2001. Problem / Solution Natural Care Beauty Products Industry Trends Source: The Natural Personal Care Products Market PIPAL Research Jan. 2003

  43. Beauty • 2003 Character of Line White Tea (C9) South Pacific (C9) Mediterranean Olive (C19) African Shea Butter (C23) 3 Giftsets (2\C16, 2\C21, 1\C25) Planet Spa Cold Sore Lip Calm Cold Season Balm Cooling Muscle Salve Calming Kit Total Body Cooling Spray Aloe Cooling Gel 1 Giftset Healthy Remedies 3 In line Products 1 Giftset (C23) Ginseng Asian Pear Mandarin Fragrance Spray Mandarin Body Lotion Mandarin Shower Gel 1 Giftset (C25) Mandarin 11 existing concepts* Soy & Edamame ** 2003 Status, Anticipated 2004 disposition

  44. Avon Planet Spa Pricing vs. Competition • Mary Kay’s spa themed “Terme d’Isola” specialty bath products focus on skin benefits using natural extracts. • Origins spa themed “Ginger” specialty bath products are a fragrance story with skin benefits. • Except for the body scrub form, Avon is the most price competitive versus the competition. • Bath & Body Works “True Blue” spa line consists of products that provide a “marvelous manicure”, a “fabulous facial” a “perfect pedicure”, and “body beautifiers”. Lotions Scrubs Price Price / oz. Size (oz.) Price Price / oz. Size (oz.) Avon $9.50 $1.42 6.7 $17.50 $1.67 10.5 Mary Kay $10.00 $1.25 8.0 $10.00 $1.67 6.0 Bath & Body Works $15.00 $2.50 6.0 $20.00 $1.25 16.0 Origins $20.00 $2.99 6.7 $30.00 $1.42 21.2 Wash Fragrance Mist Price Price / oz. Size (oz.) Price Price / oz. Size (oz.) Avon $8.50 $1.27 6.7 $9.50 $2.38 4.0 Mary Kay $9.00 $1.13 8.0 $18.00 $10.59 1.7 Bath & Body Works $15.00 $0.94 16 n/a n/a na/ Origins $21.00 $2.47 8.5 $35.00 $20.59 1.7 Source: marykay.com, origins.com, bath and body works competitive shopping in NYC Jan.03

  45. Beauty • 38 Beauty skus from 2001 will be dispo’d in 2003 (Vitatonics, Electricity, Restoring). • Soy and Edamame placed on Status (11 skus) in 2003. Anticipated dispo in 2004. • Launch of Healthy Remedies adds a total of 6 In-Line skus, and 1 Giftset. • Launch of Planet Spa adds a total of 15 In-Line skus, and 4 Giftsets. • 2001 2002 2003 2003 vs. 2002 • Infusions • Net ($MM) $7,186 $8,200 $16,600 102.4% • DP% 58.4% 60.4% 66.1% 5.7pts • Units (000) 2,451 2,657 3,440 29.5% • # Skus 35 59 36 -23 • % Contribution 11.0% 8.6% 14.5% 5.9pts • Active Status/Disc. Additions Reform/Redesign Dispo’d SKUs C26 ‘03 • Beauty (Begin ‘03) (End ‘03) • Vitatonics 28 28 0 • Giftset 3 2 0 • Avon Spa 10 10 0 • Giftset 1 2 0 • Soy/Naturals 3 11 3 8 12 • Giftset 3 2 2 0 • Healthy Remedies 6 6 • Giftset 1 1 0 • Planet Spa 15 15 • Giftset 3 0 1 • Total: 3 56 30 0 53 36

  46. Tactical Implications • Build Planet Spa sales through promotional giftsets, GWP’s, PWP’s • Link existing beauty brands with cross category products • Incense • Aroma diffusers • Candles • Build upon Healthy Remedies with the introduction of: • Teeth Whitening • Menopause related products

  47. Appendix

  48. Total Wellness 2001-2003 • 2001 2002 2003PP 2003PP vs. 2002 2002 vs. 2001 2002 vs. 2001 • Demand Net ($MM) $65.5 $95.1 $114.5 20.3% 45.3% • Units (000) 10,248 15,143 18,300 20.8% 47.8% • DP% w/Resourcing 56.4% 56.6% 56.6% 0.0pts 0.2pts • DP% w/out Resourcing 56.4% 57.1% 58.3% 1.2pts 0.7pts • Net Per Unit $6.39 $6.28 $6.26 -0.4% -1.7% • Catalog Net ($MM) $41.9 $61.3 $68.7 12.0% 46.4% Increased Catalog frequency driving growth. • Units (000) 6,159 8,798 10,614 20.6% 42.8% • DP% 58.4% 58.1% 60.0% 1.9pts -0.3pts • Net Per Unit $6.80 $6.97 $6.47 2.5% • Brochure Net ($MM) $0.0 $0.8 n/a 0.0% Transition away from Brochure executions • Units (000) 0 166 0.0% due to low productivity. • DP% 0.0% 51.2% 51.2pts • Net Per Unit $0.00 $4.54 0.0% • New Net ($MM) $15.0 $15.8 $24.0 52.5% 4.8% • Units (000) 2,226 2,225 3,386 52.2% -0.1% • DP% 58.6% 58.5% 60.0% 1.5pts -0.1pts • Net Per Unit $6.76 $7.09 $7.10 0.2% 4.8% • # Concepts (inc.Redesign) 118 128 147 14.8% 8.5% • Net per Concept $128 $123 $164 32.8% -3.4% • # SKUs (inc. Redesign) 142 168 186 9.5% 18.3% • Net per Sku $106 $94 $131 39.3% -11.4% • Existing Net ($MM) $26.8 $45.6 $44.7 -2.0% 69.8% Strategy focused on strengthening sales of Core • Units (000) 3,934 6,574 6,954 5.8% 67.1% Brands. • DP% 58.3% 57.9% 60.0% 2.1pts -0.4pts • Net Per Unit $6.82 $6.93 $6.42 -7.4% 1.6% • Clearance Net ($MM) $0.1 $4.3 $8.0 86.0% 2774.2% In-Catalog Clearance, Outlet, and Flyer • Units (000) 27 772 1,647 113.2% 2719.1% participation significantly increased to drive • DP% 43.0% 44.0% 47.0% 3.0pts 1.0pts inventory efficiency. • Net Per Unit $5.47 $5.58 $4.87 -12.8% 2.0% • Demo Net ($MM) $21.6 $22.7 $34.4 51.4% 4.9% Demo sales strengthened due to New Product • Units (000) 2,907 3,172 5,490 73.1% 9.1% Productivity and Catalog frequency. • DP% 54.7% 56.4% 57.8% 1.4pts 1.7pts • Net Per Unit $7.44 $7.15 $6.26 -12.5% -3.9%

  49. Wellness by Category 2001-2003 • 2001 2002 2003PP 2003PP vs. 2002 2002 vs. 2001 • Total Wellness Net ($MM) • Net $ $65.5 $95.2 $114.5 20.3% 45.4% • Units 10,248 15,148 18,300 20.8% 47.8% • DP% 56.4% 56.6% 56.6% 0.0pts 0.2pts • Net Per Unit $6.39 $6.28 $6.26 -0.4% -1.7% • SOL 148 250 265 6.0% 68.9% • Beauty Net ($MM) • Net $ $7.2 $8.2 $16.6 102.5% 14.1% • Units 2,451 2,657 3,440 29.5% 8.4% • DP% 58.4% 60.4% 66.1% 5.7pts 2.0pts • Net Per Unit $2.93 $3.09 $4.83 56.4% 5.3% • SOL 41 59 36 -39.0% 43.9% • % Sales Contribution 11% 9% 15% 5.9pts -2.4pts • Beauty Plus Net ($MM) • Net $ $17.9 $39.5 $57.5 45.5% 121.0% • Units 3,094 6,443 9,187 42.6% 108.2% • DP% 60.3% 56.0% 58.0% 2.0pts -4.3pts • Net Per Unit $5.78 $6.13 $6.26 2.0% 6.1% • SOL 39 79 133 68.4% 102.6% • % Sales Contribution 27% 42% 50% 8.7pts 14.2pts • Beyond Beauty ($MM) • Net $ $40.4 $47.4 $40.4 -14.8% 17.4% • Units 4,702 6,042 5,673 -6.1% 28.5% • DP% 54.3% 56.4% 57.1% 0.7pts 2.1pts • Net Per Unit $8.59 $7.85 $7.12 -9.3% -8.6% • SOL 68 72 96 33.3% 5.9% • % Sales Contribution 62% 50% 35% -14.6pts -11.9pts • Mix shift to Beauty and • Beauty Plus. Beyond • Beauty remains strong. • 2002 SOL was 250, (-15 skus) vs. 265 Plan • Major repositioning of Wellness Beauty supported by the introductions of Healthy Remedies and Planet Spa. • New Forms, Bite Size bars, and Shake Packettes in Slimwell will drive sales and unit growth.4 New VitAdvance Supplements introduced in 2003.Expand Infusions Tea store through promotional and seasonal items.* Net of RTV. • Continue to leverage Brand name products: Bally, ConAir, Homedics. • 76 skus in Beyond Beauty are "Discontinued“ and will be liquidated by the beginning of '04.

  50. Wellness Size of Line 2002-2003 • Bringback • Redesign Total Total • Reform Active Status Active + Discontinued Disposed Size of • New Concepts New SKUs SKUs SKUs SKUs SKUs SKUs SKUs Line • First Quarter 2002 32 37 0 59 43 102 75 18 159 • 2003 32 52 0 118 35 153 159 37 275 • Second Quarter 2002 45 75 0 106 42 148 105 1 252 • 2003 43 57 0 165 44 109 124 29 304 • Third Quarter 2002 22 26 2 72 37 109 170 0 279 • 2003 24 26 0 183 41 224 105 45 284 • Fourth Quarter 2002 27 28 0 87 36 123 174 47 250 • 2003 32 39 12 177 50 227 93 55 265 • TOTAL 2002 126 166 2 66 • 2003 131 174 12 166 PP • Highlights • Significant increase of Discontinued skus relates to the Refinement of the Product Life strategy, primarily in Beyond Beauty. • Dispo increase achieved through In-Catalog Clearance, Outlet, and RTV.

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