Exclusive: Avon Romania grows turnover and profit on shrinking market. What were the growth engines?

The direct selling market in Romania slightly shrunk last year, to sales of EUR 174 million generated by the four companies included in an analysis by Romania-Insider.com. This was below the EUR 180 million the year before, and the only player on this market which managed to increase both its turnover and profit was Avon. The company also made more than half of the market – EUR 113.8 in turnover and EUR 18 million in profit, Romania-Insider.com has learned. How will it perform in 2011?

“We expected this crisis to come earlier in our field, the cosmetics market dropped more than we expected at the end of 2010,” Razvan Diratian (in picture), general manager with Avon Romania tells Romania-Insider.com. “The projections have radically changed. Euromonitor says we will have a marginal market increase this year. I expect the decline to diminish, but it is hard to believe we will have a radical change. It all depends on the evolution in the last months, we are cautious, after seeing a deepening of the market decline in the last months. There is still uncertainty in the economy,” Diratian explained. The market dropped by 10 percent in the first half of the year but Avon managed to gain market share and post increases on all segments, according to data from MEMBR, quoted by Avon. Last year, the first half of the year was an important source for increasing revenues and profit for Avon in Romania. 'The growth engines were the sale force, over 130,000 Avon representatives[...], merchandising our brochures, the services we offer to our clients and the fact that, unlike our competitors, we continued to invest in advertising and communication,” said Razvan Diratian. When VAT increased, Avon kept prices at the same level for six months and on some segments even reduced them, Diratian further explains. “On an organizational level we cut the non-productive expenses and we invested more in motivational programs and competitions for our sales force, in promoting and launching new products,” he goes on. Cost aware consumers turned more and more to value products. “In Avon's case, over half of the sold products are in the mass market category – average pricing. However, value products (economy) gain more ground, reaching 42 percent of the sale volume. The 6 percent difference is made of premium products,” the Avon Romania manager goes on. Direct selling products market in Romania

Company | 2010 turnover in mln EUR | 2010 profit in mln EUR | 2009 turnover in mln EUR | 2009 profit in mln EUR / Avon | 113.8 | 18 | 112.5 | 17.1 / Oriflame | 23.3 | 0.12 | 23.5 | 0.87 / Amway | 21.6 | 0.6 | 27.7 | 2.2 / Forever Living Products | 15.2 | -0.87 | 17.1 | 1.1