Avon thinks younger, wealthier

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Avon Products will call on a different group of consumers -- younger and wealthier -- with a new line exclusively for department stores.

Avon took the wraps off its retail line, Becoming, at a meeting with analysts last week. The line will be launched in the second half of 2001 at "Avon Center" in-store shops within Sears, Roebuck & Co. and J.C. Penney Co. stores.

The launch will be backed by an ad campaign from J. Walter Thompson USA, New York, that will include TV and print ads tagged, "Becoming you." TV ads feature slice-of-life moments such as a woman arriving home from a blind date and a mother packing her grown son's belongings to make way for a meditation room.

PARTNERS HELP OUT

Avon said it will spend $10 million to $15 million to set up the Avon Centers -- including fixtures and marketing -- and that its partners will contribute additional funds. Advertising spending is expected to equal 10% to 15% of Becoming's sales annually through 2005. Sales are projected at $10 million to $15 million in up to 150 stores in 2001 and are expected to rise to as much as $80 million in 2002, when the line expands to 500 stores.

The Becoming line is designed to avoid cannibalizing the core Avon brand, which will continue to be the sold by Avon ladies worldwide, said President-CEO Andrea Jung. The Becoming brand will encompass a full line of beauty products targeted at women 25 to 35 with average annual household incomes of $50,000. That's a younger, more affluent consumer than the target for Avon's core direct-sales brand.

Ms. Jung stressed the company remains committed to its direct-selling model, but said Avon had identified a large opportunity in the retail segment. She quoted market research studies that found 18% of women polled like the Avon brand but not direct sales. Those women on average were younger and more affluent than the usual Avon customer, and preferred to shop at retail, Ms. Jung said.

OBSERVERS SKEPTICAL

Analysts have encouraged Avon to step up its marketing and image-building activities during the last year. Yet several were skeptical about the latest initiative.

Andrew Shore, an analyst with Deutsche Bank, questioned the potential to upgrade the brand of a partnership with Sears and Penney's. "Everyone who'd gone to Penney's has come back with leprosy," he said. "J.C. Penney's and Sears are not destination stores for cosmetics."

Charlotte Beers, JWT's chairman, countered with the example of Kmart Corp. and its Martha Stewart Everyday line. The housewares brand has sold well and helped improve Kmart's image, she said.

Ms. Jung added Avon already has had some success with other upscale venues, such as its year-old Avon Centre Spa in New York's Trump Tower and its higher-price Anew skincare line.

Two other analysts, Salomon Smith Barney's Wendy Nicholson and Catherine Lewis of Morgan Stanley Dean Witter & Co., also questioned whether a commitment of $10 million to $15 million would be enough to launch Becoming. Ms. Nicholson noted the investment is too small, particularly compared with Avon's plans to spend an additional $100 million promoting the core brand. That advertising will continue to be handled by Avon's in-house operation.

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