Avon, the icon of direct-to-consumer cosmetics, is in serious financial trouble. The company has filed for bankruptcy in the United States in an attempt to deal with a huge debt and a wave of lawsuits related to allegedly carcinogenic talc in its products. What does this mean for the future of the brand?
Avon, founded in 1886, has become a symbol of women’s entrepreneurship and strength. The brand has allowed many young Polish women to earn their first money, and almost every woman has an Avon consultant among her friends. The company gained popularity thanks to its direct sales model, in which consultants visited customers’ homes, presenting the latest products. Thanks to this, Avon has become one of the most recognizable cosmetic brands in the world.
Avon’s $1.3 billion debt
But in recent years, the company has struggled with growing competition and market changes. Consumers increasingly choose to shop online, which has undermined Avon’s traditional direct-to-consumer model. In addition, problems related to the talc allegations and a general decline in brand trust have left the company in a difficult financial situation.
Avon Products Inc. filed for bankruptcy in the United States in August 2023. This decision was made as part of a restructuring aimed at sorting out the company’s financial liabilities, which amount to $ 1.3 billion. The cause of Avon’s problems is, among other things, a wave of lawsuits related to allegations of the use of talc, which, according to the lawsuits, was supposed to cause cancer – reported the British The Guardian.
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Talc – a controversial ingredient that shook up Avon’s business
Talc, a natural mineral commonly used in cosmetics, has become a major flashpoint for Avon. The company is currently burdened with 386 lawsuits accusing it of using talc (considered carcinogenic) in its products sold before 2016. In the face of these accusations, Avon has already spent $225 million on legal defense. Although the company’s management emphasizes that all the allegations are unfounded and that the talc used by Avon has passed rigorous tests confirming the absence of asbestos, the reputational crisis has hit the company with great force – reports the portal Bankier.pl
What’s next for Avon’s business?
Despite declaring bankruptcy, Avon intends to continue its operations outside the United States. The company has stated that its customers and consultants in countries such as Poland will not feel any changes. The brand promises that it will continue to provide cosmetic products that meet the highest safety standards. In turn, the Brazilian company Natura, the owner of Avon, plans to buy back shares outside the United States for $125 million, which is intended to further strengthen the brand’s position on the global market – informs the American Forbes.
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The Future of Avon: A Chance for Rebirth or Ultimate Decline?
Avon now faces a key challenge: will it survive and restructure its operations, or will it be remembered as a cosmetics giant that failed to cope with the challenges of the modern market? The decision to file for Chapter 11 bankruptcy gives the company a chance to reorganize, but the future of the brand remains uncertain.
Natura, which previously acquired Avon, could play a key role in this process. Its plan to buy back shares outside the US is aimed at maximizing the value of assets and streamlining liabilities, which could give Avon a new chance to survive and grow.
Update:
Avon Statement
Avon contacted our editorial team and sent a statement, which we publish below:
The lawsuits in the United States regarding talc in Avon products relate to products sold in the United States before 2016. We believe the allegations regarding their safety are completely without merit and are defending against them in court. Because this legal process involves only our holding company, Avon Products, Inc., Avon’s operations outside the United States are not affected by the proceedings and will not be affected.
This means that nothing changes for our customers, associates, Consultants or other stakeholders in Poland. At Avon, everything remains the same – we continue to deliver on our strategic initiatives while providing customers around the world with the same beauty offering they know and love.
We want to emphasize that the safety of our products is our priority, which is why we only use cosmetic talc that has been tested to be asbestos-free. This natural mineral is widely used in the cosmetics industry. Avon strictly adheres to all regulations regarding ingredients and safety, and each of our cosmetics is subjected to rigorous testing, so you can use it without worries.
Eva Sin,
Head of Integrated Communications
Avon Cosmetics Poland
