Avon grows despite brazil's bumpy economy.

AVON PRODUCTS INC. has been growing at an aerobic pace during Brazil's good and bad years; today the company commands a leadership position in a host of segments in which it competes with other domestic and international brands.

"Our unit sales in Brazil are up 14% this year thus far," said Eduardo Bruder, Avon's vice president of corporate communications, in Sao Paulo. That growth rate is above the Brazilian industry average of 10% annual expansion, which continues even when the economy contracts--as it did slightly in 2003.

A major reason for Avon's success in Brazil, as elsewhere in the world, is its massive representative sales force.

"Our sales force of representatives ended 2003 growing by 10% to 880,000, the largest sales force in the world for Avon--if not any other company in one country," said Mr. Bruder. "The number of units sold in Brazil ranked number two in the world for Avon, and we ranked number three in net sales--after the devaluation."

Brazil's currency, the real, is now worth about three to one U.S. dollar, only a few years after the government attempted to set parity.

Part of the allure of being an Avon salesperson is the job shortage in Brazil. Unemployment was above the 13% rate in April, according to the national statistics institute IBGE. Another reason for Avon's growth in Brazil is that the market is naturally attuned to cosmetics. In a recent global Avon survey, 76% of women respondents indicated that cosmetics are a necessity rather than a luxury; yet in Brazil the percentage was about 87%, one of the highest rates in the world, according to Mr. Bruder.

Given the size of the Brazilian market--with a population of more than 170 million, Avon rolls out some 200 new products a year in the country.

"Of the products we develop and launch for the Brazilian market--if not the Latin American market--some 20 to 30% may be used by other countries, like our Moments fragrance, which was picked up well in several countries in Asia, especially in Thailand," said Mr. Bruder.

To help keep that pipeline filled with new products, Avon is expanding its research and development capability in Brazil.

Big Expansion Plans

"We will open a new $100 million R&D facility here in 2006, following our startup of a satellite program last year," said Mr. Bruder. "We're one of Avon's five R&D centers around the world, in part because development costs are lower here," he said.

One of the fastest growing areas for Avon is men's products, for which sales are expanding at a rate two or three times that of women's products, said Mr. Bruder. Still, men's products only represent some 10% of the overall market, and won't catch up to the volume of women's products any time soon, he added.

What Makes Brazil, Brazil?

Among Brazilian product trends, fragrance, color and climate factors are typically different from those in the U.S. or Europe, Mr. Bruder said.

"We have a trend going now for fresh scents, although in Brazil, bathroom cleaning products smell like pine, whereas in New York they might smell like lavender," he said. "On the other hand, our Brazilian baby products now have a lavender scent, and that wouldn't be the case in New York," he observed.

Color trends are driven in part by the effort to match the broad spectrum of Brazilian skin tones.

"It's both cultural and aesthetic," Mr. Bruder explained.

Brazil's mix of races is more extensive than any other country in the region. Climate, too, is a major factor in differentiating Brazilian products.

"In Brazil, heavier creams will never be appreciated as much as in the northern hemisphere, where you have heavier creams because of the harsh winters," Mr. Bruder said.

One launch campaign going on now is for a new version of Anew Clinical, which is called Renew Clinical in Brazil. The product is being offered by representatives for 50 reals (about $17) with the guarantee that if customers don't like it after two weeks of use, they are offered a refund.

"It's a bold move because we may give out one or two million jars," Mr. Bruder said. The campaign includes print and television support with a budget of about $4.6 million.

COMMENTS OR QUESTIONS ON THIS ARTICLE OR ON OTHER ISSUES IN THE LATIN AMERICAN MARKET CAN BE DIRECTED TO MR. THURSTON AT [e-mail].