Brazil’s Natura Wants to Take Rainforest Chic Global With Avon

(Bloomberg Businessweek) -- On a pleasant Tuesday in May, dozens of beauty influencers gathered at the New York Botanical Garden in the Bronx for a vegan lunch and a panel on sustainability in cosmetics. As they sipped passion fruit caipirinhas, the young women snapped photos of lotions and soaps featuring exotic ingredients such as murumuru and priprioca.

They’re the types of products that made host Natura Cosmeticos SA a beauty giant in Brazil—and that the 50-year-old company wants to bring to the rest of the world. With its agreement in May to buy Avon Products Inc., Natura is accelerating its global ambitions and betting its brand of natural, ethically sourced cosmetics will appeal to millennial and Generation Z consumers who increasingly want sustainable goods.

The company wants to attract social media enthusiasts such as Ava Lee, a New Yorker who was at the Bronx event. “I love that all Natura Brasil products are clean and sustainable,” says Lee— @glowwithava on Instagram—who often posts photos of cosmetics for her almost 24,000 followers. “It’s hard to come by products that smell this good and at the same time are very gentle on the skin and don’t cause irritations.”

Natura’s $2 billion purchase of Avon—the very company it had long emulated with its door-to-door direct-selling model—will make it the world’s fourth-biggest cosmetics company and among the largest focused on natural products. About 80% of its products are vegan. The challenge will be staying loyal to its sustainable roots as it rapidly grows. Executive Chairman Roberto de Oliveira Marques says the “value propositions that are the very essence of Natura” are appealing to consumers, particularly millennials, who look for “authenticity” in products and the companies that make them.

Purpose-driven brands resonate more with young consumers, according to researcher Euromonitor International. About 60% of millennials responding to a lifestyle survey said they felt they could make a difference in the world through their choices and actions, compared with about 45% of baby boomers.

Founded in 1969 as a store in São Paulo, Natura soon migrated to the direct-sales model, adding 2,000 consultants over the next decade. Novelties, such as offering product refills in the 1980s and a line of soaps and creams that could be used by both new moms and babies in the 1990s, fueled steady sales growth in a country known for an obsession with good looks. But though Brazilians are leaders in plastic surgery and popularized the infamous Brazilian wax, the national concept of beauty is more natural—think of model Gisele Bündchen, with her signature loose hair, strolling to the chords of The Girl from Ipanema in the opening ceremony of the 2016 Olympic Games in Rio de Janeiro.

“Natura’s broader portfolio, more focused on wellness as opposed to only beauty, puts it in a unique position to expand abroad,” says David Marcotte, a retail analyst with Kantar Consulting. “In other markets, you see the movement of beauty going into wellness. In Brazil it started the other way around. That’s the grounding for their success.”

After expanding into other Latin American countries, Natura gets 30% of its revenue from outside Brazil. The company began widening its scope in the past decade, buying a controlling stake in Australian luxury skin-care brand Aesop in 2013 and British soap and perfume maker the Body Shop in 2017. It’s taken steps to bring its sustainable ethos to those brands. Natura brought the Body Shop’s marketing campaigns back to the cruelty-free cause that jump-started the brand in the 1970s. It’s also taken the fair-trade model it uses to procure its ingredients from the Amazon and expanded it to the African communities that provide moringa oil to the Body Shop. At Aesop, packaging changes will reduce plastic consumption by 124 tons per year.

It’s unclear how much Natura will transform Avon, whose sales plunged by half over the past 10 years, to $5.25 billion, in fiscal 2018 amid competition from trendier brands. The company had given up on the U.S., selling the last of its stake in the American operations earlier this year, to focus on international markets. But it’s still struggled to adapt to changing consumer tastes.

Although Avon, like many other cosmetics makers, uses natural ingredients in some of its products, it doesn’t focus on that segment of the market. But its mission of empowering women, a key tenet since its founding 133 years ago, is directly in line with Natura’s ethos. The acquisition will give the Brazilian company access to 27 new markets—including in China and Eastern Europe—as well as greatly expand the direct-sales model, which Natura says it can modernize and diversify.

Marques plans to turn the combined companies’ army of 6 million direct sellers into social media sellers and influencers—who increasingly drive millennials’ cosmetics purchases. Natura is also giving door-to-door associates payment machines and helping them open their own web stores. “This powerful sales network that gets into consumers’ homes already existed offline, and now it’s converting itself into an online network,” Marques says.

The plan is in line with the trends of the industry, says Elton Morimitsu, an analyst at Euromonitor. “We’re already seeing several brands abandoning the use of influencers with millions of followers,” he says. “They’re betting instead on microinfluencers with several thousands of followers, because the conversion rate into sales that the brand will have will be much higher.”

Natura doesn’t sell only through its consultants; it’s made several brands available in drugstores, cut deals to sell other products at big retailers, and opened 52 proprietary stores, mostly in Brazil, to showcase its goods. It also has its own virtual store and is using the network of Body Shop franchisees in Southeast Asia to open Natura locations there. It made a discreet entry into the U.S. as well, opening two stores in the New York area, the world’s largest cosmetics market.

There are no plans to expand quickly in the U.S., Marques says. Until that changes, American consumers need to rely on online shopping and influencers such as Ana Kcira, whose @fashionstylefoodie on Instagram has about 45,000 followers. She posted a photo of herself spraying Natura’s pataua oil, a hair strengthener, on a friend’s braid while standing on a bridge in Central Park. The unexpected meeting of Manhattan’s skyline and fashionable women with an ancient ingredient extracted from one of the Amazon’s tallest palm trees generated almost 700 likes. —With Tiffany Kary

To contact the editor responsible for this story: James Ellis at jellis27@bloomberg.net, Kara Wetzel

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