Avon 2013 Annual Report Download - page 14

PART I
Packages, consisting of containers and packaging components, are designed by our staff of artists and designers. The design and
development of new Beauty products are affected by the cost and availability of materials such as glass, plastics and chemicals. We believe
that we can continue to obtain sufficient raw materials and supplies to manufacture and produce our Beauty products for the foreseeable
future.
We also continue to implement an enterprise resource planning (“ERP”) system on a worldwide basis, which is expected to improve the
efficiency of our supply chain and financial transaction processes. The implementation is expected to continue in phases over the next several
years. We have completed implementation in certain significant markets.
See Item 2, Properties, on page 18 of our 2013 Annual Report for additional information regarding the location of our principal
manufacturing facilities.
Product Categories
Each of our product categories individually account for 10% or more of consolidated net sales in 2013. The following is the percentage of
net sales by product category for the years ended December 31:
2013 2012 2011
Beauty 73% 73% 74%
Fashion 17% 17% 17%
Home 10% 10% 9%
Trademarks and Patents
Our business is not materially dependent on the existence of third-party patent, trademark or other third-party intellectual property rights,
and we are not a party to any ongoing material licenses, franchises or concessions. We do seek to protect our key proprietary technologies
by aggressively pursuing comprehensive patent coverage in major markets. We protect our Avon name and other major proprietary
trademarks through registration of these trademarks in the markets where we sell our products, monitoring the markets for infringement of
such trademarks by others, and by taking appropriate steps to stop any infringing activities.
Seasonal Nature of Business
Our sales and earnings are typically affected by seasonal variations, a characteristic of many companies selling beauty, gift and decorative
products, apparel and fashion jewelry. For instance, our sales are generally highest during the fourth quarter due to seasonal and holiday-
related patterns. However, the sales volume of holiday gift items is, by its nature, difficult to forecast, and taken as a whole, seasonality does
not have a material impact on our financial results.
Research and Product Development Activities
New products are essential to growth in the highly competitive cosmetics industry. Our research and development (“R&D”) department’s
efforts are important to developing new products, including formulating effective beauty treatments relevant to women’s needs, and
redesigning or reformulating existing products. To increase our brand competitiveness, we have sustained our focus on new technology and
product innovation to deliver first-to-market products that provide visible consumer benefits.
Our global R&D facility is located in Suffern, NY. A team of researchers and technicians apply the disciplines of science to the practical
aspects of bringing products to market around the world. Relationships with dermatologists and other specialists enhance our ability to
deliver new formulas and ingredients to market. Additionally, we have an R&D facility located in Shanghai, China and satellite R&D
operations located in Argentina, Brazil, China, Mexico, Poland and South Africa.
In 2013, our most significant product launches included: Anew Clinical Skinvincible/E-Defense Deep Recovery Cream and Multi-Shield Lotion
(SPF 50), Anew Clinical Absolute Even Multi-Tone Skin Corrector, Solutions Cellu-Break Double Action Anti-cellulite Lotion, Clearskin Liquid
Extraction Strip, Mega Effects Mascara, Super Extend Infinitize Mascara, Ultra Color Lipstick, Totally Kissable Lipstick, True Color Eyeshadows,
Advance Techniques Hair Strengthen and Protect Collection, Skin So Soft Endless Touch Body Moisturizing Collection (Aroma + Therapy in
North America), Elite Gentleman (Avon Alpha in Latin America) Fragrance, Only Imagine Fragrance, Ultra Sexy Fragrance and Avon Instinct
for Her & for Him Fragrances.