While 2001 was a miserable period for retailers, it has turned out to be one of the best yet for Avon Products (AVP). Not only has the 115-year-old cosmetics and beauty company moved into retail outlets with J.C. Penney (JCP), it's recruiting more Avon Ladies than ever (see BW Online, 1/22/02, "A Makeover Has Avon Looking Good"). BusinessWeek Associate Editor Diane Brady recently met with Chairman and CEO Andrea Jung and her second-in-command, President Susan Kropf, to discuss their partnership and plans for the company. Edited excerpts from their conversation follow:
Q: When Andrea took over the top job, people thought Avon was going out on a limb with the move into retail. Were both of you seen in the company as renegades?
Kropf: I don't think we were seen as renegades, but we both saw the need for bold moves. I think we may have come to those conclusions in different ways. I personally felt we had enough stability and strength in the core business, and trust in Andrea, to take some of these steps. I knew we couldn't rely [only] on direct selling. I think Andrea coined the phrase that the brand is bigger than the channel, and she said we owed it to ourselves to test that theory. I knew we could do this.
Q: Andrea, were you nervous that Susan might leave when you got the CEO job?
Jung: Sure. I think that [with us,] one plus one equals three. I'll never forget the day when I told analysts that the brand is bigger than the channel and that, in addition to [following our] core strategies, we would go into retail. I remember being in Susan's office to talk about the fear of alienating our representatives. She looked at me and said: "We trust you. Just trust me. I will make sure it's communicated properly."
She embraced the change [without sacrificing] the credibility and loyalty of the organization. They may have been inspired by my ideas, but they looked at her to see that this was truly a place we could go.
Q: What attracted you to Avon in the first place?
Jung: Many things, but mainly the vision. I came here in 1993 as a consultant. I got to see the opportunities as well as the research. This company was about economic independence for women way before they could vote. If I created a company today, I couldn't create a legacy that's so exciting. It didn't just have an earnings-per-share goal. It has a unique channel, [although it needs to be] modernized. It has a truly global portfolio. I was mesmerized by the possibilities of what this company could be.
Q: How has the culture changed since you came on board?
Jung: We have a more courageous strategy, which affects the culture. We are more results-oriented -- we measure ourselves more. You've got to meet your numbers. We were a little looser on that kind of thing before. We've made some tough calls with people. I think the discipline factor is a lot higher.
Kropf: The other thing I would say is that, although we've been very global for a number of years in terms of the dispersion of our businesses, we were not necessarily operating with a real global mindset. Everybody was wherever they were, doing their own thing. Now we look at integrating across markets and across functions. We have global brands, global career programs, global initiatives. That was a very big change from five years ago.
Q: Marketing is much more central to this company than a number of others. Is that the most important component in your success so far?
Jung: We're taking a single-channel company and moving it into multichannels. But grand plans don't mean anything if you can't implement them. We feel proud that this stuff is happening, not that we conceived it. We've identified the levers for growth, but it's going to take a real reconfiguration of our value chain. We have to de-resource certain areas and re-resource others to transform the company.
Kropf: It takes a lot of years to change things. We have to stick with it. We've had one of the best years in recent memory for our U.S. business in a year when the retail business is practically in a meltdown. We had a strategy, and we stayed on it, refining it and honing it. I think the next three years are going to make the last two look like nothing. There was so much building of the foundation in the last few years. Now we're ready to raise the building to transform this business in a significant way.
Q: What are some of the toughest decisions you've made?
Jung: There hasn't been one easy quarter for us.... We've been thrown a lot of curve balls. What I feel best about is that those [are the times that] test the real mettle of an organization. If we had delivered eight consecutive quarters in a bullish economy with no curve balls and tailwind, I would feel great but less proud. We don't allow the word "victim" here. When there's a recession, we have value products and employment opportunities. We have an advantage here.
Q: Your mantra is that you're the company for women, yet the two of you don't like to draw attention to the fact that Avon now has female leadership. Doesn't it make a difference?
Kropf: I personally don't think that it does. Maybe, on the periphery, there is a greater personal affinity for the products we sell. In terms of the leadership, the strategy, the disciplines, the analytical rigor, it doesn't matter if you're a man, woman, dog, or cat. There is no gender consideration.
Q: But it's harder to say you're a company for women if you're led by men.
Kropf: Sure. And I do think that it's inspiring to our representatives. They come up and say, "Dear, I'm just so happy to see a woman at the top." That does mean something. But if you're asking whether we would be leading a different way or taking a different managerial strategy, the answer is no.
Jung: It clearly is inspirational to representatives and associates worldwide. They see that the glass ceiling has been broken at Avon.
Q: Let's talk about your career trajectory. Andrea, you went to Princeton and studied English Lit. Where did you want to go with that?
Jung: Certainly not on the path to becoming a CEO. I had a love of literature and writing. It was happenstance that I was friends with two men who went into a training program at Federated Department Stores and they said, no matter what you do, it's a good hands-on consumer-focused business. I went and fell in love with the business.
Q: Susan, you did get an MBA. Did you know right away that you wanted to be in business?
Kropf: No. I studied English first. I graduated in 1970. I wanted to be a teacher and realized I hated it. At the time, I lived at home with my parents. I wanted to get out of the house and be financially independent, so I went to an employment agency on 42nd Street, and happened to interview here at Avon.
I was offered a couple of jobs from employers and took this one because it happened to be in Rockefeller Center. One thing led to another. I never thought I would be president of this company, but I was always achievement-oriented. When I got here, I didn't have any formal business training, so I went back to school at night and got my MBA. What bothered me was my inability to read a balance sheet and understand the financials.
Q: Where are you taking the company in the next few years?
Jung: The exciting part of our next few years is the all-encompassing business transformation. Starting in the core business, we are attracting more people to sales. We're modernizing the channel, the advertising, the products. We changed the product first. We renovated the advertising. Then we worked on the direct-sales channel, with more training, Internet enabling, and a real focus on the sales and leadership program. We renovated the [retail-store operation] and the brochure. Then we put it all together and have the best performance we've had in a decade.
Q: The Avon Lady almost seems like an antiquated concept, yet you've boosted your number of reps. Why does direct selling still work?
Kropf: It's a combination of having very good quality products -- a lot of direct-selling companies are more about the selling opportunities than the brand -- with great relationships. The idea of relationships being the basis of a business opportunity, even if it's contemporized, can really work. This year, with the September 11 tragedy, people don't even want to negotiate a mall. We're providing more opportunities to our reps, and we're giving them better products to sell.