13th Apr 2012

Avon Calling

Iconic cosmetics company Avon Products Inc has named Sherilyn McCoy as its new CEO after a four-month search for an outside hire to help turn the company around. Avon has lately seen major sales losses in its crucial overseas markets of Brazil and Russia, shrinkage and demoralisation of its US direct-sales force, and a scandal involving accusations of international bribery culminating in an ongoing federal probe. On top of that, Avon’s board last week rejected an unsolicited $10 billion buyout bid from Coty, the fragrance company behind scents for Beyoncé, Adidas and Lady Gaga. This all comes in a year when Avon’s share price fell by 30%.

The hiring of McCoy, coming just days after Coty’s acquisition bid, is seen by analysts as a sign the board hopes to resist the takeover, as the naming of a new CEO complicates the bid process.

Sherilyn McCoy comes to Avon from pharmaceutical giant Johnson & Johnson. She was promoted to Vice Chairman of J&J in December 2010, but was passed over for CEO two months later when J&J went with Alex Gorsky, another recently appointed VC, for the top job.

McCoy spent 30 years with the company, having started in 1982 as a chemist in the personal products unit. She ran the pharmaceutical division from 2009 and gets marks from analysts for successfully reshaping it into a well-run and well-positioned business. Over the past couple of years she steered J&J through some major patent expirations while maintaining the buoyancy of the brand’s profile with new medicines for prostate cancer, stroke prevention and psoriasis.

Nevertheless Avon’s share price fell still further following the announcement of McCoy’s appointment. One analyst blamed investors’ lack of familiarity with McCoy, the previous Avon CEO’s continued involvement as Chairman, and the announcement coming so quickly on the back of the offer from Coty as the reasons for the nervousness.

McCoy’s first 100 days with Avon aren’t going to be easy. High on her agenda will be crisis control in the overseas markets, as turning around those sales figures is the most effective reply to worried shareholders. She will also have to contend with her predecessor who will be sitting across the table from her in the boardroom as she proposes any new initiatives. She will want to make an immediate impact and show strong leadership as she pursues her goals in the coming months. The best way to silence the doubters fast and lay the groundwork for Avon’s future effectively will be with a clear, detailed and focused 100 Days Plan.

Hilda Goold

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