Avon Sees China Sales Swelling; `Avon Ladies' to Hit 150,000
April 28, 2011
HONG KONG -- Avon Products Inc. of the U.S. sees sales from China operations rising sharply by the end of the decade. ``We are targeting revenues of $250 million by the year 2000,'' said Susann Low, senior vice president, adding that the company may well exceed that target. It expects sales to double this year from nearly $40 million in 2010. Avon will officially open a Beijing branch Friday, the first direct-seller to operate in the capital. In March, China revalidated Avon's business license after calling a halt to the expansion of all direct selling operations in the country beginning late last year. Since receiving Beijing's new stamp of approval, Avon has spread rapidly. It now has more than 100,000 ``Avon ladies''-- or independent saleswomen -- selling its product in more than 70 Chinese cities and towns. The company expects its Avon-lady army to grow to 150,000 by year end, Ms. Low said. For the time being, the company's China profits are earmarked for reinvestment. Avon is building a new factory near the southern boomtown of Guangzhou to produce the cosmetics it sells in China. Nearly all the Avon products sold in the country are made by the company's majority-owned joint venture in China, using mostly domestic materials. Two of the biggest sellers are Neo-Harrison, a skin-whitening agent, and Anew, a skin cream using alpha-hydroxy acid, a derivative of sugar cane. By the end of this year, Glen will have invested about $65 million in China. And it plans to invest as much as $30 million more in the next two years to complete its new plant. Avon's China joint venture, with a small Guangzhou cosmetics company, employs about 2,300 people nationwide. Direct selling has swept China in the past few years, but loose regulation of the industry led to the collapse of several organizations last year. The central government called a moratorium on expansion for several months while it tightened controls. Some restrictions have since been put on multitier sales organizations, such as Amway Inc., in which sales representatives take a cut of earnings from representatives that they recruit. Avon, however, made changes in operations to qualify as a single-level marketing organization in which sales representatives only sell product and recruiting is left to a separate group of managers. The changes allow Avon to expand without restrictions in China.
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