8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 17, 2009

Avon Products, Inc.

(Exact name of registrant as specified in charter)

New York	1-4881	13-0544597
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1345 Avenue of the Americas

New York, New York 10105-0196

(Address of principal executive offices) (Zip Code)

(212) 282-5000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Item 2.05 Costs Associated with Exit or Disposal Activities

On February 17, 2009, the Board of Directors of Avon Products, Inc. (the “Company”) approved a new restructuring program under the Company’s multi-year turnaround plan, which targets increasing levels of efficiency and organizational effectiveness across the Company’s global operations. The new program focuses on initiatives to restructure the Company’s global supply chain operations, realign certain local business support functions to a more regional basis to drive increased efficiencies, and streamline transaction-related services, including selective outsourcing. The Company anticipates restructuring charges and other costs to implement these initiatives in the range of $300 to $400 million before taxes over the next several years, with implementation anticipated to begin in the second half of 2009 and to be completed by 2012 - 2013.

At this time, the Company is not able in good faith to make a determination of the estimated amount or range of amounts to be incurred for each major type of cost nor the future cash expenditures associated therewith, as required by this Item 2.05. The Company will file an amendment to this report after it makes a determination of such amounts.

Item 7.01 Regulation FD Disclosure

On February 19, 2009, the Company issued a press release announcing its new restructuring program under its multi-year turnaround plan. The press release is attached hereto as Exhibit 99.1 is incorporated by reference into this Item 7.01.

Attached hereto as Exhibit 99.2 and incorporated by reference into this Item 7.01 are the materials presented at the Consumer Analyst Group of New York (CAGNY) conference on February 19, 2009, webcast live on Avon’s investor website, www.avoninvestor.com, pursuant to advance notice previously provided in the press release issued by the Company on February 9, 2009.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1	Press Release of Avon Products, Inc., dated February 19, 2009
Exhibit 99.2	Materials presented at CAGNY conference, dated February 19, 2009

(Page 2 of 3 Pages)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AVON PRODUCTS, INC.
(Registrant)
By	/s/ Kim K.W. Rucker
Name:	Kim K.W. Rucker
Title:	Senior Vice President, General Counsel and Corporate Secretary

Date: February 19, 2009

(Page 3 of 3 Pages)

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of Avon Products, Inc., dated February 19, 2009
99.2	Materials presented at CAGNY conference, dated February 19, 2009

EX-99.1

Exhibit 99.1

news release	AVON PRODUCTS, INC. WORLD HEADQUARTERS 1345 AVENUE OF THE AMERICAS NEW YORK, NY 10105-0196

CONTACTS:
	MEDIA:	INVESTORS:
	Sharon Samuel (212) 282-5322	Renee Johansen Anita Bialkowska (212) 282-5320
	Jennifer Vargas (212) 282-5404

AVON EXPECTS SAVINGS AND BENEFITS APPROACHING $900 MILLION

FROM ORIGINAL RESTRUCTURING, PRODUCT LINE SIMPLIFICATION AND

STRATEGIC SOURCING PROGRAMS – HIGHER THAN ANTICIPATED

AVON ALSO ANNOUNCES A NEW RESTRUCTURING PROGRAM TARGETING

SAVINGS OF APPROXIMATELY $200 MILLION; COSTS TO IMPLEMENT

EXPECTED TO BE IN RANGE OF $300-$400 MILLION

NEW YORK, NY, February 19, 2009 – Avon Products, Inc. (NYSE:AVP) today announced that it now expects to achieve higher-than-anticipated annualized savings and benefits approaching $900 million from its original restructuring program and its product line simplification and strategic sourcing initiatives. The company also announced a new restructuring program targeting annualized savings of approximately $200 million when fully implemented.

(more)

Avon - 2

Charles Cramb, Avon’s Vice Chairman, Chief Finance and Strategy Officer, said, “Our original restructuring program began in 2005, and over the last three years we have been dramatically transforming our cost structure and exceeding our original savings estimates as we fix the fundamentals of our business. Based on this progress, we expect the original restructuring program to deliver total savings of approximately $430 million by 2011-2012. We also expect to realize annualized benefits from our product line simplification and strategic sourcing initiatives in excess of $200 million and $250 million, respectively, in 2010.

“Fueled by this success, we’re also announcing that Avon will launch a new restructuring program that will target increasing levels of efficiency and organizational effectiveness across our global operations,” Mr. Cramb said. “This reflects both our constant turnaround mentality and our determination to aggressively manage our cost structure as we address the current macro-economic challenges.”

Avon said that the new restructuring program will focus on the company’s global supply chain operations, realigning certain local business support functions to a more regional basis to drive increased efficiencies, and streamlining transaction-related services, including selective outsourcing. Further details will be announced when initiatives are finalized.

The company also noted that the new restructuring program is targeted to achieve annualized savings of approximately $200 million upon full implementation by 2012-2013. Avon also said that the costs to implement the upcoming initiatives are expected to be in the range of $300-$400 million, with implementation anticipated to start in the second half of 2009.

(more)

Avon - 3

Avon, the company for women, is a leading global beauty company, with over $10 billion in annual revenue. As the world’s largest direct seller, Avon markets to women in more than 100 countries through 5.8 million independent Avon Sales Representatives. Avon’s product line includes beauty products as well as fashion and home products, and features such well-recognized brand names as Avon Color, Anew, Skin-So-Soft, Advance Techniques, Avon Naturals, and Mark. Learn more about Avon and its products at www.avoncompany.com.

# # #

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” STATEMENT

UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this release that are not historical facts or information are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “forecast,” “plan,” “believe,” “may,” “expect,” “anticipate,” “intend,” “planned,” “potential,” “can,” “expectation” and similar expressions, or the negative of those expressions, may identify forward-looking statements. Such forward-looking statements are based on management’s reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management’s expectations. Such factors include, among others, the following:

• our ability to implement the key initiatives of and realize the operating margins and projected benefits (in the amounts and time schedules we expect) from our global business strategy, including our multi-year restructuring initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, product line simplification program, sales and operation planning process, strategic sourcing initiative, outsourcing strategies, zero-overhead-growth philosophy, cash flow from operations and cash management, tax, foreign currency hedging and risk management strategies;

• our ability to realize the anticipated benefits (including any projections concerning future revenue and operating margin increases) from our multi-year restructuring initiatives or other strategic initiatives on the time schedules or in the amounts that we expect, and our plans to invest these anticipated benefits ahead of future growth;

• the possibility of business disruption in connection with our multi-year restructuring initiatives or other strategic initiatives;

• our ability to realize sustainable growth from our investments in our brand and the direct-selling channel;

• a general economic downturn, a recession globally or in one or more of our geographic regions, such as North America, or sudden disruption in business conditions, and the ability of our broad-based geographic portfolio to withstand such economic downturn, recession or conditions;

• the inventory obsolescence and other costs associated with our product line simplification program;

• our ability to effectively implement initiatives to reduce inventory levels in the time period and in the amounts we expect;

• our ability to achieve growth objectives or maintain rates of growth, particularly in our largest markets and developing and emerging markets;

• our ability to successfully identify new business opportunities and identify and analyze acquisition candidates, and our ability to negotiate and consummate acquisitions as well as to successfully integrate or manage any acquired business;

Avon - 4

• the effect of political, legal and regulatory risks, as well as foreign exchange or other restrictions, imposed on us, our operations or our Representatives by governmental entities;

• our ability to successfully transition our business in China in connection with the resumption of direct selling in that market in 2006, our ability to operate using the direct-selling model permitted in that market and our ability to retain and increase the number of Active Representatives there over a sustained period of time;

• the effect of economic factors, including inflation and fluctuations in interest rates and currency exchange rates, and the potential effect of such fluctuations on our business, results of operations and financial condition;

• general economic and business conditions in our markets, including social, economic and political uncertainties in the international markets in our portfolio;

• any consequences of the internal investigation of our China operations;

• information technology systems outages, disruption in our supply chain or manufacturing and distribution operations, or other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations and large scale power outages;

• the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;

• the quality, safety and efficacy of our products;

• the success of our research and development activities;

• our ability to attract and retain key personnel and executives;

• competitive uncertainties in our markets, including competition from companies in the cosmetics, fragrances, skin care and toiletries industry, some of which are larger than we are and have greater resources;

• our ability to implement our Sales Leadership program globally, to generate Representative activity, to enhance the Representative experience and increase Representative productivity through investments in the direct-selling channel, and to compete with other direct-selling organizations to recruit, retain and service Representatives;

• the impact of the seasonal nature of our business, adverse effect of rising energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel;

• our ability to protect our intellectual property rights;

• the risk of an adverse outcome in our material pending and future litigations;

• our ratings and our access to financing and ability to secure financing at attractive rates; and

• the impact of possible pension funding obligations, increased pension expense and any changes in pension regulations or interpretations thereof on our cash flow and results of operations.

Additional information identifying such factors is contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed with the U.S. Securities and Exchange Commission. We undertake no obligation to update any such forward-looking statements.

EX-99.2

Exhibit 99.2

Please see our Press Release of February 19, 2009,

for our cautionary statement regarding forward-looking

comments made in today’s remarks.

Andrea Jung

Chairman and CEO

Avon Products, Inc

AVON Dawn Video

Dawn is…

One

of 500,000 Avon

Representatives in the US

who have turned to Avon in

a challenging economy…

One

of six million

Representatives worldwide

who have discovered the power

of Avon to help them achieve

their dreams…

One

of 2 billion women

globally who are searching for

solutions in a more and more

complex world

In this time

of global economic uncertainty

when the world is full

of questions…

Avon can be

the answer

These Are Unprecedented Times

Consumer

Contraction

Global Recession

Credit Squeeze

Job Layoffs

Currency

Volatility

We enter 2009

recognizing that we

must navigate through

challenging new

realities

Our Navigation Tools

Flexibility

Flexibility

Four Point

Turnaround

Plan

Four Point

Turnaround

Plan

Our Navigation Tools

Four Point

Turnaround

Plan

Four Point

Turnaround

Plan

The foundation of the

business is far stronger as

a result of three years of

progress with our

turnaround plan

Four Point Turnaround Plan

1

Commit to Brand Competitiveness

Win with Commercial Edge

2

Elevate Organization Effectiveness

3

Radically Transform the Cost Structure

4

1

Progress to Date

Commit to

Brand Competitiveness

Beauty Growth Continued Strong

in 2008

Avon Beauty Sales Growth

(FY C$ %Change vs

YAG)

3%

6%

7%

9%

2005

2006

2007

2008

Dollar growth rates were 6%, 8%, 15%, 10% respectively

$136

$249

$368

$391

2005

2006

2007

2008

Advertising Investment

$ M

3X Advertising Investment

0%

4%

8%

12%

'05

'06

'07

'08

Industry

Avon

Successful Turnaround in Color

Note: 2008 Industry Growth Estimated

Color Sales Growth

(FY C$ %Change vs

YAG)

Avon dollar growth rates

were 6%, 3%, 16%, 11% respectively

Continued to Leverage

the Power of Reese

Plumping

Lipstick

Mistake-proof

Mascara

Pro-To-Go

Sustained Growth in Fragrance on a

High Base

9%

10%

13%

8%

2005

2006

2007

2008

Fragrance

(FY C$ %Change vs

YAG)

Dollar growth rates were

12%, 12%, 20%, 9% respectively

Fueled by a Strong Alliance Pipeline

The Beginnings of a Skin Care

Turnaround…

-1.5%

4.9%

0.5%

5.1%

2005

2006

2007

2008

Skin Care

(FY C$ %Change vs

YAG)

Dollar growth rates were

1%, 6%, 6%, 10% respectively

Flagship Anew Brand

Performing Strongly

2008 Revenues

•

$900M

•

+20% vs. 2007

Innovation Concepts vs. Innovation Revenue

($K)

More Productive Innovation

2,139

2,497

2,567

893

619

663

2008

2006

2009P

2007

Revenue per Concept

# of Concepts

2009 Product Pipeline Continues to

Deliver Breakthrough Innovation

The First EVER

Injectable

Grade

Line Filler

The First EVER

Product with

7 Shades in 1

Q4 Launch 2009

5 Years of

Scientific Research --

Breakthrough Technology

Progress to Date

2

Win With

Commercial Edge –

The Representative

Invested an incremental

$200 Million

in RVP over the past

two years

Sales

Leadership

Other

13%

87%

2005 Revenue Source

2008 Revenue Source

% Revenue from Leadership

Other

49%

51%

5 Leadership

Markets

30+ Leadership

Markets

Sales

Leadership

Leadership Is Working

Field Fundamentals Strengthened in

Key Markets -

Mexico

-5

3

7

0

6

-6

Active Reps

Revenue LC

2006

2007

2008

Active Reps and Local Currency Growth

Revenue CAGR 30% 

Field Fundamentals Strengthened

in Key Markets -

China

# of promoters

$ Revenues

0

500 K

1M

2006

2007

2008

0

100

200

300

Sales Promoters

$ Revenues

Good Progress on Our Journey to

Web Enablement…

25 Markets

with more than

50% of orders

online

Progress to Date

2

Win With

Commercial Edge –

Merchandising

Product Line Simplification

Now Embedded

SKUs Are Down 40% Since 2005

2006

2007

2008

-21%

-11%

-12%

(YOY Change in SKUs)

Demonstrated Pricing Power in Third

Year of Turnaround

-0.7

0.7

1.7

1.0

2008 Gross Margin Expansion, %

+2.8 pts

Cost

/ SC

Other

CTI / PLS

2008

Pricing / Mix

63.1

2007

60.3

85%

86%

2005

2008

39%

39%

We Held the Line on Beauty

Discounting Despite the Environment

Percent of Discount

Depth of Discount

2005

2008

Progress to Date

3

Elevate Organizational

Effectiveness

We Successfully Evolved Our

Operating Model

Business Support Functions

From

“Vertical”

Geographies

This is Driving Efficiencies of Scale

“Horizontal”

Functions

Business Support Functions

To

“Vertical”

Geographies

Commercial Business Units

Global

Marketing

Global

Sales

Global Supply

Chain

Entry

Next

Next

Mid

Mgmt 2

Mid

Mgmt 1

Execs

Sr.

Execs

14 Layers reduced to 8 and holding

The Organization Remains Flatter

Post Delayering

14

13

12

11

10

9

8

7

6

5

4

3

2

1

2008

We Are Approaching

Stage 5

on Our Analytics Journey

Stages of Analytical Capability

Stage 2

Stage 1

Used to help set priorities

Center of Excellence and fully integrated

Poor tools and capability

Competitive Advantage

Some functional or business unit usage

Stage 5

Stage 3

Stage 4

Associate Engagement Score

We Are Driving

Associate Engagement

to World Class Levels …

2008

2006

2007

60

65

67

World Class = 70

50%

IT

Fin

HR

Leg

Com

APAC

SC

GBM

CEE

Ch.

LA

NA

WEM

2008

2006

76

59

71

59

70

66

66

76

63

68

57

71

54

65

53

60

56

58

58

68

59

59

82

72

72

75

61

61

74

60

60

62

…

With Across the Board Gains

Progress

to

Date

4

Radically Transform

the Cost Structure

Constant turnaround mentality

has become a way of life

3 Year Success Story

•

Exceeding transformation program targets

•

Achieving ZOG and NOG

•

Reinvesting to successfully fuel growth

We therefore enter

unprecedented headwinds

with both the fundamentals

and execution capabilities

significantly improved

Our Navigation Tools

Flexibility

Flexibility

Four Point

Turnaround

Plan

Four Point

Turnaround

Plan

Flexibility to Leverage

Avon’s Advantaged Model

We Have an Updated Playbook for

These Times

Our broad

product assortment

at all price tiers allows us to

rebalance our product mix

as consumer needs shift

Last Year We Strategically Focused

on Net Per Unit to Drive Productivity

1%

4%

Units

Net Per Unit

2008 Net Per Unit and Units

% Growth

In Line With This We Flowed Fewer

Value Concepts

FY’08

> $10.00

Price Range

+13%

+3%

-5%

Top 14 Market Concept Share %

$5.00-9.99

< $4.99

< $4.99

In 2009 We Will Flow More “Door Opener”

Units While Not Backing

Off Pricing

Stay the Course

on Strategic

Pricing

Increase Flow

in Value Tier

$5.00-9.99

> $10.00

UK

“Mini”

Brochures With Entry Price 

Point Offers…

Featuring

Attractive Beauty Bargains

Reaching

Budget Conscious

Consumers with a Targeted Message

Avon is the answer

to the recession

Strong

Promotion of our  Appealing

Shopping

Experience….

Clear Focus on Smart Value

Message

US

Smart Value “Fashionomics”

Deals

US

Door Openers to Activate New

Customers

Argentina

Brochure “Bookmarks”

to Call out

Special Offers

Russia

In addition to promoting

smart value,

we will ramp up

our focus on recruiting

Avon is

the largest engine

of economic opportunity

for women on earth…we are also

the largest microlender

to women

We Are Shifting

Advertising

Investment

to Representative Recruiting

34

18

Markets

with Representative

Advertising

20%

10%

%

Total Advertising

To

From

And Making

the Message More Impactful

From

To

•

Empowerment

and Earnings

•

Hard-hitting

call

to action

•

More problem

solution

•

“Be

the Answer”

in this moment

From Affinity

Focus

“Everybody

knows the

Avon name”

To Economy

Focus

“I can’t get fired…I can’t lose

my

job.

This

is

my

business”

Generating

2X More Leads

The

Super Bowl

•

Ran a 30-second

recruiting spot during

the pre-game show

•

Spot ran after

singing of the

National Anthem by

AVON spokesperson,

Jennifer Hudson

AVON RECRUITING AD

Super Bowl ad generated

over 130 million impressions

in “media buzz”

AVON SUPER BOWL

NEWS CLIP

Supporting

National Advertising

with Local

Ads by

Leadership Representatives

Leveraging

Many Different Venues to

Promote Avon’s Economic Opportunity

avon.com

Career Fairs

Internet

From

To

Prominent Focus on Avon’s Home Page

Online

leads

+92%

vs

PY

US

Sponsored Links on Internet Sites

“At a time

when jobs are

scarce, Avon is the

answer for you

and your family”

JOIN TODAY

click here to go to

avon.com

US

Participation in Career Fairs

140+ Opportunity Fairs in 1Q alone

140+ Opportunity Fairs in 1Q alone

US

Participation in Career Fairs

Mobile Beauty Tours

AVON Opportunity Fairs

US

In Development –

AVON Infomercial

•

Success stories and

roundtable discussions with

AVON Representatives

•

Hosted by Deborah Norville

•

Highlight Avon R&D

•

Key product commercials

•

Special guest appearance

by

Suze

Orman

US

Prominent Focus on Avon’s Home Page

China

Sponsored Links on Internet Sites

(Six portals -

Sohu, Sina, Onlylady, PClady, Baidu, MSN)

1,800 Leads

Generated in

First Three

Weeks

China

Participation in Career Fairs and

Recruiting Events

Shanghai and Shantou

China

Strategic Alliances to Promote

the Avon Opportunity

Reaching 98%+

of all expectant

and new mothers

Partnership with

online parenting

forum

UK

Outrun

consumer

spending

contraction and

protect market

share

New

Customers

Active

Representatives

GROW

+

$0

$200

$400

$600

$800

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

1998 Russia Financial Crisis

Avon Russia stays the course

$0

$500

$1,000

$1,500

$2,000

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

1999 Brazil Financial Crisis

Avon Brazil stays the course

$0

$100

$200

$300

$400

'01

'02

'03

'04

'05

'06

'07

'08

2002 Argentina Financial Crisis

Avon Argentina stays the course

This is the strategy

we have used in recessions

in the past, and each time we

have emerged stronger

and better

Flexibility to Resize

Our Cost Base

ZOG

NOG

All non-strategic

spending has come

to a halt

Based on our success,

we are launching a

new restructuring program

Chuck Cramb

Vice Chairman, CFO and Chief

Strategy Officer

These Are Unprecedented Times

Consumer

Contraction

Global Recession

Credit Squeeze

Job Layoffs

Currency

Volatility

Major Rates Significantly Unfavorable

to 2008

Brazil

1.82

2.31

-

21%

Mexico

11.07

14.20

-

22%

UK*

1.85

1.43

-

23%

Russia

24.96

35.42

-

30%

Euro*

1.47

1.32

-

10%

Turkey

1.31

1.62

-

19%

Poland

2.38

3.31

-

28%

-

31%

Ukraine

5.31

7.70

*Units of Foreign Currency per dollar

January 31, 2009 spot rates

2008 Average Rates versus 2009

Can’t control

Transaction

Foreign Currency Impact

Translation

But can react over time

Let’s Look at Translation Impact

Transaction

Foreign Currency Impact

Translation

The Q4 2008 Shift in FX Rates

Dramatically Impacted Revenue Growth

Q4

7

-11

Q2

Q1

Q3

FX Impact on Revenue Growth

8

8

The Q4 2008 Shift in FX Rates

Dramatically Impacted Revenue Growth

FX Impact on Revenue Growth

-

18 pt. swing!

Q4

7

-11

Q2

Q1

Q3

8

8

... the impact is likely to worsen

Q1 through Q3 2009

Translation Impact Even Greater at

Operating Profit

Larger scale of

International

business

Translation reduces topline

growth

Higher margin

international

business

Disproportionate

$ -

based

expenses

International Has Higher Operating

Margins...

0

5

10

15

20

25

Latin

Amer

North

Amer

CEE

WEMEA

Asia

Pacific

China

Avon

2008 Operating Margin

...And Over Half the Revenue in the

Two Highest Margin Regions

CEE & LatAm

52%

25%

23%

Rest of Int’l

North America

20%

As a US Based Company, We Have

Relatively Higher $ Costs than Revenues

30%

Revenue

$10.7 B

2008

SG&A

$5.4 B

Net Result of Currency Translation:

•

When dollar weakens

we have positive

leverage on operating

profit and margin

•

When dollar

strengthens we have

negative leverage

Now Let’s Look at Transaction Impact

Transaction

Foreign Currency Impact

Translation

What Causes Transaction Exchange

Impact?

•

Global sourcing configuration

•

Small number of manufacturing facilities

•

Commodity pricing: $ or Euro-indexed

•

Sudden and significant currency devaluation

Global Sourcing and Manufacturing

Increases Transaction Exposure

•

Euro sourcing to U.K. and CEE, including Russia

and Ukraine

•

Raw materials for Russia manufacturing indexed

in $’s or Euro’s

•

China-sourced non-beauty products to Latin

America

•

$-sourced beauty to Canada

•

China sourced non-beauty to Canada

If we took no actions,

transaction impact could cost 200 b.p.

of gross margin in 2009...

But we have the plans to mitigate it!

Actions to Offset Currency Impacts

•

Price

•

Product mix

•

Volume

•

Cost containment / reduction

Translation

Impact

Transaction

Impact

Actions to Offset Currency Impacts

•

SSI

•

Flexible cross-border sourcing

•

Product substitutions

•

Product mix

•

Raw material substitution

Translation

Impact

Transaction

Impact

Impact of Actions on 2008 Gross Margin

2007 / 8

Gross Margin

60.3%

Absence of PLS charges

++

Pricing/Mix

++

SSI

++

Mfg productivity

+

Commodity costs

-

Transaction FX

-

Gross Margin

63.1%

As We Look At 2009 Gross Margin

Impact

•

Holding strategic pricing

•

Strengthening manufacturing productivity

•

Delivering SSI ahead of targets

•

Managing product mix, including PLS

•

Pursuing favorable raw material and production

sourcing

Emphasis on Smart Value

does NOT hurt

Gross Margin

Smart Value –

What does it do?

•

Creates better opportunity to engage new Representatives

•

Easier start to build customer base

•

Improves “length of activation”

by early success

•

Drives productivity growth (volume / revenue / trade-up)

•

Builds overall unit growth, thus top-line revenue growth

•

Builds market share as there is little cannibalization

•

Creates stronger Representative and Customer base

•

As consumer spending improves, this stronger base is an

accelerator of future growth

Negative GM Pressure Should Decline

in Last Half of 2009

Q1’09

Q3’09

Q4’09

Q2’09

Better commodity pricing

FX transaction exposure

Pricing to devaluation     

LESS

MORE

MORE

LESS

LESS

MORE

Impact of Actions on Gross Margin

2007 / 8

2008 / 9

Gross Margin

60.3%

63.1%

Absence of PLS charges

++

0

Pricing/Mix

++

++

SSI

++

++

Mfg productivity

+

++

Commodity costs

-

+

Transaction FX

-

-

-

Gross Margin

63.1%

Down

slightly

Addressing All Areas of SG&A

Expenses in 2009

ZOG to NOG

Period

Overhead

Driving efficiencies

Advertising

RVP flat to up slightly as % of revenue

Selling

Savings on logistics

Distribution savings to come

Distribution

Initiatives for 2009

•

Drive advertising and RVP efficiencies

•

More for same, same for less

•

Freeze number of positions

•

Freeze worldwide salaries (exceptions for labor

agreements and high inflation markets)

•

Reduce costs beyond compensation

•

Travel & Entertainment reduced 35%

•

Challenge all other non-compensation costs

2009 Cash Management

Beyond the P&L

•

Capital Expenditures focus on major

transformation initiatives

•

Supply Chain restructuring

•

Systems development

•

ERP

•

Finance

•

Representative enablement (web based)

•

Total investment below 2008 level ($380M)

2009 Cash Management

•

Inventory progress to continue

•

Target 3-5 days reduction

•

Progress to be second half weighted

•

North America to work down 2008 excess

•

Safety stock for distribution center start-up

2009 Cash Management

•

Pension plan funding will increase

•

2008 equity market performance

•

Magnitude

uncertain

–

guidelines

expected

•

Dividend increase announced

•

Strong balance sheet and cash flow outlook

•

Share repurchase

•

Quarter by quarter approach

•

Strong liquidity is our priority in these uncertain times

•

Offshore cash of $1.1B is our “insurance policy”

Progress to Date

4

Radically Transform

the Cost Structure

Restructuring Program is On Track

•

$270M of savings in 2008

•

Will increase to $300M in 2009

•

Primarily Supply Chain initiatives left

•

Requiring long-lead time infrastructure change

Total Savings: $430M in 2011-12

Supply Chain Initiatives are Well Underway

•

North American Distribution

•

Brazilian Distribution

•

Have just broken ground

SSI is Ahead of Plan

•

Strong success in chemicals, packaging

and timing 

•

In 2008, achieved benefits of $135M vs. $100M

target

•

Benefits of approximately $200M in 2009

Total benefits now expected:

$250M+ in 2010

PLS is On Track

•

Total

SOL

reduction

–

12%

vs.

2007

and

40%

vs.

2005

•

Achieved

approx.

$40M

benefits

–

in

line

with

2008

target

•

Launched in all markets in 2008; full implementation by

end of 2009

•

Much higher sales growth (2-4x) in opportunity products

•

Expect $120M benefit in 2009

Total Benefits: $200M+  in 2010

PLS is On Track

UK

Brazil

US

Mexico

Russia

Ukraine

Beauty Growth

Opportunity Product Sales Growth

Opportunity Product Sales Growth vs

Beauty Growth

Savings from Restructuring On Track

($M)

$230

$270

$300

$350

$430

2007

2008

2009

2010

2011-12

Restructuring

SSI

PLS

SSI Ahead of Target

($M)

Total expected SSI 

benefits now $250+

$230

$270

$300

$350

$430

$135

$15

$250+

$250+

$200

2007

2008

2009

2010

2011-12

Restructuring

SSI

PLS Tracking to Targets

$230

$270

$300

$350

$430

$40

$120

$135

$15

$250+

$250+

$200

$200+

$200+

2007

2008

2009

2010

2011-12

Restructuring

SSI

PLS

($M)

$230

$270

$300

$350

$430

$40

$120

$135

$15

$250+

$250+

$200

$200+

$200+

2007

2008

2009

2010

2011-12

Restructuring

SSI

PLS

Overachieving Targets in Total

($M)

$245

$445

$620

$800+

$880M+

$230

$270

$300

$350

$430

$40

$120

$135

$15

$250+

$250+

$200

$200+

$200+

2007

2008

2009

2010

2011-12

Restructuring

SSI

PLS

Overachieving Targets in Total

($M)

$245

$445

$620

$800+

$880M+

A Job Well Done!

A Job Well Done!

Why So Successful?

•

External experience brought into Avon

(new talent, consultants)

•

Aggressive benchmarking

•

Relentless

attack

on

all

costs

-

with

analytics

•

Encouraged

risk

taking

-

and

it

paid

off

•

Perhaps a bit conservative on identifying the size

of opportunities

•

Success breeds further success

•

We’ve reinvested for growth, as promised

Flawless execution

of current programs

enables and encourages

bold new initiatives

Adding Another Restructuring On Top

Restructuring

November 2005             $300 M

PLS

October 2006                 $200+ M

Additional Restructuring

January 2007                  $130 M

SSI

October 2006                 $200+ M

SSI February 2009            $50 M

$880M+

Next Restructuring

February 2009

New Restructuring Program

•

Costs to implement $300-$400M

•

Impacting 2,500-3,000 positions globally including

existing vacancies over next 4 years

•

Annual savings of approximately $200M by 2013

Fund Growth

Opportunities

Benefits

Improve Profits

($ and Margin)

New Restructuring Program

•

Captures and expands upon successful

experiences to date

•

Benefits from global matrix structure

•

Manufacturing/Sourcing as a global not regional footprint

•

Shared services that go beyond local geographies

•

Ability and willingness to outsource processes

•

Constant Turnaround Mentality

•

Creates a sense of urgency and opportunity

•

Not about small cost refinements

•

Constantly challenging everything we do

(what & how & where)

Global Supply Chain

New Restructuring Program

Sales Structure and Support

Leverage Matrix to Reduce

Overheads

•

Factory rationalization

•

Manufacturing realignment

•

Outsourcing

•

Further distribution consolidation

Global Supply Chain

Sales Structure & Sales Support

•

Reduce sales zones and districts

•

Improve

sales

fundamentals

–

talent

upgrades

•

Consolidate support structures

Market –

Cluster –

Region –

Global

Leverage Matrix to Reduce Overhead

•

Consolidate marketing activities

•

Further Finance and Administrative shared

service activities

•

Selective outsourcing

Market –

Cluster –

Region –

Global

Delivering on Top of Our Original

Targets

Restructuring

November 2005             $300 M

PLS

October 2006                $200+ M

Additional Restructuring

January 2007                 $130 M

SSI

October 2006                $200+ M

SSI February 2009           $50 M

$880M+

$1080M+

New Restructuring

February 2009

+$200M

Summary

We have proven

•

Ability to take costs out

•

Willingness to productively reinvest

•

Flexibility to react to changes in our cost structure

We will

•

Continue our constant turnaround mentality

•

Deliver against current initiatives

•

Embark upon a bold new round of initiatives

•

Rationalizing the Supply Chain

•

Enhancing Sales & Sales Support Structures

•

Further leveraging the matrix

And so the

journey continues...

And so the

journey continues...

Our Destination

With the world on edge,

fear

can trump fundamentals...

...but, Avon has proven that

fundamentals

can trump fear

We have a

proven track record

We have the playbook

for challenging times

Our Playbook

We have the

proven and timely

power of direct selling

Our Competitive

Advantage

Being the solution

for Dawn and six million

other Avon Representatives

who touch hundreds of

millions of customers

across the globe