Brazil’s Fragrance Market Is Rapidly Growing but Can It Save Avon Products by Itself?

Avon must successfully market fragrances and generate sales in Brazil to survive, but can this alone sustain the company over the long term?

Jul 14, 2014 at 4:24PM

When it comes to selling perfumes and skin care products, there is no bigger money-maker than Brazil. This might come as a surprise to many readers as some might think that the biggest fragrance market in the world would be the United States, France, or even China. Surprisingly, all of those guesses would be wrong. To find the world's biggest fragrance market, which came in at a whopping $6 billion last year, look no further than the largest country in South America.

In fact, according to a Canadian market research firm in a recent report, Brazilians use three times as much perfume as Americans do on a volume basis. Fragrance and skin care products companies worldwide are aggressively investing in this market, including struggling beauty product company Avon Products (NYSE:AVP), which manufactures and sells a large assortment of beauty, fashion, and home decor merchandise. Unfortunately, Brazil alone may not be enough to turn things around at Avon.

Disappointing results
Avon Products is almost certainly in need of a new growth opportunity. While it possesses millions of independent sales reps and sells thousands of unique products, the company has been marked by years of sales declines. A quick glance at its sales results for the past three fiscal years tells the unfortunate truth at Avon, especially when compared to beauty product competitors L'Oreal and Revlon (NYSE:REV).   


Company Name

FY 2011

FY 2012

FY 2013

Avon Products

$11.1 billion

$10.6 billion

$9.96 billion


$15.21 billion

$18.17 billion

$17.99 billion


$1.35 billion

$1.4 billion

$1.49 billion

The situation is direr when the profitability of these three companies is taken into account.

Company Name

FY 2011

FY 2012

FY 2013

Avon Products

$513 million

$(42.5 million)

$(56.4 million)


$1.95 billion

$2.4 billion

$2.44 billion


$53.4 million

$51.1 million

$(5.8 million) 

While Revlon has its own share of problems, it is clear that Avon needs a sales boost to keep its net profit from sliding even further downhill. It is for this reason that Avon appears to be headed for Brazil to try its luck with consumers there.

Pinning hopes on Brazil
Brazil will likely remain a major focus of Avon's management. In fact, in its latest 10-K filing with the SEC, Avon lists Brazil as a "Major Country". Perhaps that should be THE major country since Brazil has become the company's No. 1 single market. In fact, Brazil made up 20.2% of the company's entire revenue base, while the United States made up just 12.3% of it.

It should come as no surprise then that Avon recently announced a partnership agreement with beauty product developer Coty (NYSE:COTY) to distribute Coty's products in Brazil. The agreement benefits both companies as it gives Coty a stronger foothold in the Brazilian market and bolsters Avon's product line in its most important market.

Foolish takeaway
While focusing on Brazil is probably a smart move for Avon Products, it is unlikely to turn around the company's revenue and net profit for positive growth in the future. Even if Avon's agreement with Coty is hugely successful, the partnership is unlikely to solve the company's overall problems.

Brazil makes up 20% of the company's total revenue, which is exceptional, but if its Brazilian operation were to suddenly experience a 50% increase in revenue, that would only make up for the decline in total revenue that the company has experienced since fiscal 2011. Therefore, investors in Avon Products should keep in mind that while the company's focus on Brazil is creditable, it is unlikely to cause a meteoric rise in the company's financial results. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers