Avon Lady Jung Answers CEO Call

Avon President and Chief Operating Officer Andrea Jung's promotion to CEO makes her one of the leading women executives in corporate America. Jung succeeds Charles Perrin and will retain her duties as Avon president. The position of chief operating officer is yet to be announced.

The transition is the second such announcement by a major cosmetics company inside of a week; Revlon tapped rival exec Jeffrey Nugent to succeed a departing George Fellows (¹ (Also see "Revlon CEO Nugent Brings Business Discipline, Marketing Expertise To Post" - HBW Insight, 8 Nov, 1999.)).

Although Jung is relatively new to Avon, having joined the direct seller in January 1994 from Neiman Marcus, she has used her background in retail and marketing to move quickly through the company ranks.

The exec served as Avon's head of North American marketing operations and senior VP and president of marketing before becoming president in January 1998 and chief operating officer in July 1998.

Jung is credited with directing the revamp of Avon's image and helping the firm expand into alternative forms of distribution beyond the direct-sell format. Under her leadership, Avon opened a string of kiosks across the country and a flagship store and spa in New York City (² (Also see "Avon entering spa market in late 1998, expanding Anew Night Force franchise." - HBW Insight, 27 Oct, 1997.)).

The Perrin-Jung team also has been charged with implementing Avon's earlier re-engineering effort designed to achieve $400 mil. in savings by 2000, of which $200 mil. was reinvested in global advertising (³ (Also see "Avon to invest $200 mil. in global advertising by 2000, execs tell investors." - HBW Insight, 3 Nov, 1997.)). Most recently, Avon vowed to invest $100 mil. in "brand-building activities" (⁴ (Also see "Avon Investing $100 Mil. In Brand-Building, Infrastructure Activities In 2000" - HBW Insight, 25 Oct, 1999.)).

Jung's appointment to the helm of Avon comes at a transitional time for the company. In addition to being in the midst of major restructuring, Avon's beauty business has slumped in recent quarters, especially in the U.S. Following price and promotional adjustments, however, fourth quarter beauty sales are expected to bring in low single digits (⁵ (Also see "Avon Beauty Sales Up 3% In September-October Period, CEO Says" - HBW Insight, 25 Oct, 1999.)).

In spite of the challenges facing Jung, Avon says her "thorough knowledge of the company and the global beauty industry" is a significant contributor to her ability to "mobilize the organization during this period of significant change."

Jung is recognized as a capable, goal-oriented leader in the business community. Business Week named her one of the "Executives to Watch in 1999" along with Microsoft's Bill Gates and Amazon.com's Jeffrey Bezos and declared her a "shoo-in" to become Avon's next CEO. Fortune put her on its list of the "50 Most Powerful Women in American Business" in 1998 and 1999.

While Jung's appointment as Perrin's successor does not come as much of a surprise, the timing of the transition may raise eyebrows in the investment community. Perrin has served in the top spot for just over a year, having been appointed CEO in July 1998 to succeed a retiring James Preston.

At the time, Wall Street took issue with the addition of a male outsider to Avon's top spot when three female executives - including Jung - were waiting in the wings. Perrin, who moved to Avon from Duracell, was said to possess needed global management capabilities to take the company forward.

One explanation may be that Jung, 41, needed an extra year of priming before taking over as CEO. However, at the time of his appointment, it appeared that Perrin, who served on the company's board since 1996, was intent on staying.

In addition to Jung, Susan Kropf and Christina Gold, who were VP and president-Avon US and VP-global direct selling development, respectively, were considered practical choices to succeed Preston.

As home-grown execs with long-term experience at the direct-seller, Kropf and Gold differed from Jung, who was fresh from the retail side of the industry. Avon's reason for choosing Jung as Preston's eventual successor may have been rooted in the fact that the exec could contribute in new ideas and a more prestige focus to the company.

Perrin is retiring to devote his attention to his family foundation established to fund programs targeted at underprivileged youth.

Outside director Stanley Gault has been elected to succeed Perrin's duties as chairman. Gault, the former chairman and CEO of Goodyear Tire & Rubber Company and Rubbermaid, has been a director of Avon for the past 14 years, the company said.