Avon appoints new head of China business

Updated: 2012-02-21 10:19

By Li Woke (China Daily)

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BEIJING - Avon Products Inc has decided to put a new executive in charge of its business in China. The news comes at a time when the company has seen its sales decline and is being investigated after allegations of overseas bribery.

John Lin, head of Avon's Canadian unit, will become president of the US cosmetics company's China section next month, said Fang Lei, a company spokeswoman, in Beijing on Monday.

The appointment comes as Avon, a leading global beauty company, searches for a replacement for the current chief executive officer, Andrea Jung, who is to remain the chairman of the New York-based company.

Various media have reported that Avon opened an internal probe in 2008 into whether its China business had violated US anti-corruption laws. In regulatory filings in 2011, Avon disclosed that four company executives were fired in response to suspicions that they had bribed Chinese officials.

Last week, Avon, the largest door-to-door cosmetics seller in the world, reported its annual financial results. Its full-year income from continuing operations was $526 million, or $1.20 per diluted share, down from the $595 million it had in 2010, or $1.36 per diluted share.

It had an operating profit of $855 million, a 20 percent decrease from the year before, and had an operating margin of 7.6 percent, down 230 basis points. Avon's net debt at the end of 2011 was $2.1 billion, up $107 million from the end of the previous year, according to the company's website.

Avon entered the Chinese market in 1990. In 2006, it obtained a direct-selling license in China. Two years later, the cosmetic giant had around 600,000 sales representatives and almost 6,000 shops in the country.

Besides seeing its sales plunge and adopting strategy changes, Avon has faced greater competition from larger cosmetics makers such as Mary Kay Inc, Unilever PLC and Procter & Gamble Co.

Last year, China was the market where about 2 percent of Avon's global sales took place. The company had more than $11 billion in revenue.

"Avon's every strategic adjustment is relatively passive," said a report by the Samsung Economic Research Institute. "The strategy changes may be difficult to avoid, but at least, it should not be too results-oriented and come at the expense of partners' interests.

"The most important issue facing Avon is not just business transformation and long-term strategic planning, but to rebuild its business reputation and establish a more effective and long-term incentive system."