Avon Products sells its manufacturing business in China to TheFaceShop

By Deanna Utroske

- Last updated on GMT

© Getty Images / (kzenon)
© Getty Images / (kzenon)
This week the global beauty company announced having reached an agreement with TheFaceShop, a subsidiary of LG Household & Health Care Ltd, to sell is China-based manufacturing operation. And while Avon will profit financially from the sale, initially not much else will change.

Avon beauty products for sale in and beyond China will still be made at the plant in Guangzhou, China, even after the sale to TheFaceShop is complete (in February of this year, pending regulatory approval).

The plan

Describing the strategy behind the sale, Avon CEO Jan Zijderveld, says, “This transaction is a significant step forward in our efforts to 'Open Up Avon' by operating more efficiently, with a leaner, more agile global infrastructure.” ​And, he goes on to note that, “This agreement provides us with greater operational and financial flexibility.”

According to the press release about the deal, Avon Products will net $44 million in proceeds.

But the company is hoping to gain more, in terms of market intelligence and on-the-ground advantages: The agreement, say Zijderveld, will also allow “us to benefit from the local knowledge, world-class products, R&D expertise and infrastructure of internationally-recognized partners such as LG H&H.”

“By operating with a local structure that fits our purpose, we will be better positioned to capture the significant opportunity in China and the wider Asian market,” ​believes Zijderveld. “We know LG H&H well and believe that they will continue to be a strong partner for Avon as we collectively seek to grow our business in the region.”

The potential

TheFaceShop will also maximize capacity at the factory in order to manufacture product for its own K Beauty brands.

For now the deal looks like a win for both companies: “We are pleased to have reached this agreement with Avon and add a state-of-the-art facility with powerful capabilities to deliver quality products for the fast-growth local market,” ​Suk Cha, CEO of LG Household & Health Care, tells the press.

“Our past interactions with Avon provide us a sound understanding of its brand power and global reach, and we look forward to continuing our relationship with Avon as we both explore ways to grow our product lines, bring desirable products to market faster, and each accelerate our growth across Asia,”​ says Cha.

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DeannaUtroske_Editor_CosmeticsDesign

Deanna Utroske, CosmeticsDesign.com Editor, covers beauty business news in the Americas region and publishes the weekly Indie Beauty Profile column, showcasing the inspiring work of entrepreneurs and innovative brands.

 

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