Avon 2014 Annual Report Download - page 13

Specifically, due to the nature of the direct-selling channel, we compete on a regional, often country-by-country basis, with our direct-selling
competitors. Unlike a typical CPG company which operates within a broad-based consumer pool, direct sellers compete for representative or
entrepreneurial talent by providing a more competitive earnings opportunity or “better deal” than that offered by the competition. Providing
a compelling earnings opportunity for our Representatives is as critical as developing and marketing new and innovative products. As a
result, in contrast to a typical CPG company, we must first compete for a limited pool of Representatives before we reach the ultimate
consumer.
Within the broader CPG industry, we principally compete against large and well-known cosmetics (color), fragrance and skincare companies
that manufacture and sell broad product lines through various types of retail establishments and other channels, including through the
Internet. In addition, we compete against many other companies that manufacture and sell more narrow beauty product lines sold through
retail establishments and other channels, including through the Internet.
We also have many global branded and private label competitors in the accessories, apparel, housewares, and gift and decorative products
industries, including retail establishments, principally department stores, mass merchandisers, gift shops and specialty retailers. Our principal
competition in the fashion jewelry industry consists of a few large companies and many small companies that sell fashion jewelry through
department stores, mass merchandisers, specialty retailers and e-commerce.
We believe that the personalized customer service offered by our Representatives; the amount and type of field incentives we offer our
Representatives on a market-by-market basis; the high quality, attractive designs and prices of our products; the high level of new and
innovative products; our easily recognized brand name and our guarantee of product satisfaction are significant factors in helping to
establish and maintain our competitive position.
International Operations
As of December 31, 2014, our international operations were conducted primarily through subsidiaries in 59 countries and territories outside
of the U.S. In addition to these countries and territories, our products were distributed in 41 other countries and territories.
Our international operations are subject to risks inherent in conducting business abroad, including, but not limited to, the risk of adverse
foreign currency fluctuations, foreign currency remittance restrictions, the ability to procure products and unfavorable social, economic and
political conditions.
See the sections “Risk Factors – Our ability to conduct business, particularly in international markets, may be affected by political, legal, tax
and regulatory risks” and “Risk Factors – We are subject to financial risks related to our international operations, including exposure to
foreign currency fluctuations and the impact of foreign currency restrictions” in Item 1A on pages 7 through 18 of our 2014 Annual Report
for more information.
Manufacturing
We manufacture and package the majority of our Beauty products. Raw materials, consisting chiefly of essential oils, chemicals, containers
and packaging components, are purchased for our Beauty products from various suppliers. Most of our Fashion & Home products are
purchased from various third-party suppliers. Additionally, we design the brochures that are used by the Representatives to sell our products.
The loss of any one supplier would not have a material impact on our ability to source raw materials for our Beauty products or source
products for our Fashion & Home categories or paper for the brochures.
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.
See Item 2, Properties, on pages 18 through 19 of our 2014 Annual Report for additional information regarding the location of our principal
manufacturing facilities.
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