Avon hopes to rebound without help of Coty
The newly completed U.S. headquarters for Avon Products Inc. are seen on September 14, 2011 in New York City.
Stacey Vanek Smith: The door-to-door make up company Avon got a buyout offer this morning from Coty for $10 billion. Coty is world's biggest perfume maker. It makes perfume for the likes of Calvin Klein and Stetson. In a statement, Avon says it wants nothing to do with the offer.
Here to talk about this with me is Kent Grayson, a professor of marketing at Northwestern's Kellogg School of Management.
Kent Grayson: Good morning.
Vanek Smith: So Avon has rejected this offer this morning. I think they're looking for a new CEO. What makes Avon an attractive buy for Coty, then?
Grayson: For Coty in particular, Avon has experience in two areas that Coty does not. One is experience with a wider range of products. Coty has tended to focus on fragrances, and Avon has had experience with a wider range of health and beauty aid products. And you know, Avon also has this really interesting skill in networking marketing -- capitalizing on social networks.
Vanek Smith: The original social networks.
Grayson: Well yeah, the original social networks, exactly right.
Vanek Smith: What is the future of Avon now? Coty has said it's not going to pursue a hostile bid, so presumably that offer is off the table. What do you see as the future of Avon?
Grayson: Well, as everyone knows, Avon needs to solve its existing problems and get back on track. And the source of these problems to me is not completely clear, but it has to do with in part the ethical problems they've been having in China, partly to do with some cultural issues and using the networking marketing model and applying it in different countries, and partly just to do with relationships with their distributors. But let's remember that Avon is one of the original network marketing countries, they have a huge strength, they have a huge sort of intellectual property in that area, and I think if they focus on that, they will be able to turn things around.
Vanek Smith: Kent Grayson is a professor of marketing at the Kellogg School of Management at Northwestern. Prof. Grayson, thank you.
Grayson: Thank you very much.