EX-99.2 3 dex992.htm MATERIALS PRESENTED AT CAGNY CONFERENCE Materials presented at CAGNY conference
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