Avon to Close Jewelry Manufacturing in San Sebastian; Caguas-based Direct Selling Operations Not Affected
CAGUAS, Puerto Rico
Feb 1, 2002
Avon Products, Inc. (NYSE: AVP) today announced that it is closing its jewelry manufacturing facility in San Sebastian at the end of April this year. The closure will result in the loss of approximately 320 positions. Avon also said that its direct selling and distribution operations, which employ more than 400 regular and temporary associates in Caguas to support the island's 18,000 independent sales representatives, will not be affected by the closure.
The decision is part of a company-wide Business Transformation Strategy to improve operating efficiencies. The closure of the San Sebastian facility completes Avon's restructuring of jewelry manufacturing. Earlier initiatives included facility closures in Aquadilla and the Dominican Republic in 1998 and Ireland in 1999.
In closing San Sebastian, the company has decided to exit jewelry manufacturing entirely, and to outsource the full jewelry line by purchasing finished goods from Asia. The company noted that nearly all its jewelry and fashion competitors have moved their manufacturing operations to the Far East, where costs are significantly lower, and quality and service are comparable to U.S. standards.
Avon said its Puerto Rican jewelry manufacturing team had confronted significant competitive challenges since 1998. While service and quality performance had continued to improve, operating costs to run the business had increased at an accelerated rate. Consumer preferences have continued to shift to more complex jewelry and fashion items that require more costly labor and assembly, and are less expensive to produce in Asia.
Leon Zlotnick, Avon's general manager in Puerto Rico, said, "This has been a very difficult decision, especially because our manufacturing associates at San Sebastian have done everything possible to drive the operation to an improved competitive position. Unfortunately, the external cost pressures are too great, and we have therefore made the decision to exit jewelry manufacturing and focus our entire investment in Puerto Rico on Avon's successful and growing direct selling business."
Direct Selling Continues To Thrive. Mr. Zlotnick said that with more than $100 million in sales, Avon's direct selling business in Puerto Rico has never been stronger. The company has maintained direct selling operations on the island since 1954. During the past five years alone, Avon has invested nearly $12 million for capital improvements, including a new office building, a new warehouse facility, modernization of shipping lines, and new technology.
"Avon enjoys the highest sales volume of any beauty company in Puerto Rico, and the island serves as the largest distribution center for our products in the Caribbean, " Mr. Zlotnick said. "Avon has been in direct selling for 116 years. This is without doubt our core business and a key area of continuing investment. Looking ahead, we see continued growth for our direct selling operations in Puerto Rico, and we are firmly committed to growing our business here, serving our customers and continuing to provide earnings opportunities to our sales representatives."
Avon is the world's leading direct seller of beauty and related products, with $5.7 billion in annual revenues. Avon markets to women in 139 countries through 3.4 million independent sales Representatives. Avon product lines include such recognizable brands as Anew, Skin-So-Soft, Advance Techniques Hair Care, beComing and Avon Wellness. Avon also markets an extensive line of fashion jewelry and apparel. More information about Avon and its products can be found on the company's award-winning web site http://www.avon.com/.
SOURCE: Avon Products, Inc.
Contact: Media - Leon Zlotnick, +1-787-653-0000, ext. 2203, or Victor
Beaudet, +1-212-282-5344, or Investors - Renee Johansen, +1-212-282-5320, all
for Avon Products, Inc.
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