ProjectCosmeticsIIProjectCosmeticsIIFinalReportFinalReportJuly,2002July,2002ChinaMarketResearchChinaMarketResearch2TableofContentI:ExecutiveSummaryPage3II:AvonGroupPage7III:DabaoGroupPage48IV:AppendixPage703I.ExecutiveSummary4ExecutiveSummaryAvonGroupAvonhastwomainoperationsinChinacurrently–Beautyproductsandotherspecialproducts.•Production-AlltheAvonbeautyproductsareproducedbyAvonManufacturing(Guangzhou)Co.,Ltd;-TheotherspecialproductssuchasunderwearandjewelryareOEMproductsfromotherplants;•Distributionchannel-AlltheAvonproductsaresoldbyAvonProduct(China)Co.,Ltd;-MostofAvonproductsaresoldthroughits4,800franchiseshops(in2001)fromsmalltolargecitesinChina;-SomeAvonproductsaresoldthroughthespecialcountersinthedepartmentstoresandsupermarkets;-Therearestillsomedirectsellings,butthischannelwilldisappeargradually;-AlltheUp2Uproductsaresoldthroughthespecialcountersinthedepartmentstoresandsupermarkets,notbythefranchiseshops;-Ithas79officesin77citiesinChinaandtheofficeswillincreasegraduallyfrom2002;(Tobecontinued)5ExecutiveSummary•MainPromotionMethods:-AVONUp2UMembershipSalesSales+GiftBeautyCenterPOPShowSales+GiftDiscount/Coupon;•AdvertisementExpenditure-RMB90to100millionin2001;-Newspapers/Magazines/Outdoors:65%TV/Radio:35%;•Operatingrevenue(RMBMillion)Category199920002001-Facialcare244381485-Makeup70121187-Bath&bodycare496498-Fragrance&ladycare475746-Up2U7(Soldforlasttwomonthsin2001andwasincludedinmakeupcategory)-Total414635851•Futuretrends-Avonhasplanstoopen8,000to9,000morefranchiseshopsinthenextonetothreeyears;-OpenmoreflagshipshopsinthemidtolargecitestoimprovetheimageofAvonbrand;6ExecutiveSummaryDabaoGroupEstablishedin1985,DabaomainlyfocusesonbeautyproductsinChinamarketatthepresent.•Production-AllproductsaresoldthroughBeijingSanluFactory;•Distribution-AllproductsaresoldthroughBeijingSanluFactory;-DabaoproductswillbesoldthroughBeijingDabaoCosmeticsCo.,Ltdin2002,acompanyfirstregisteredin2002;-MostDabaoproductsaresoldthroughsupermarketsanddepartmentstoresinnearly80citiesinChina;-Dabaoalsohassetupnearly245specialcountersin30citiesinChina;-Nowithas28officesmostlylocatedinthecapitalcitiesoftheprovincesinthecountry;•OperatingrevenueCategory199920002001-SODseries150318382-DAY/NIGHTSHUANG70143155-Otherproducts206983-Total:2395316217II.AvonGroupi:TargetOverviewii:MarketandProductsiii:DistributionChanneliv:SWOTAnalysisandCommentsiv:FinancialAnalysis8YearLegalAffairs&EstablishmentProduct&BrandDistributionTargetOverviewSource:PublicinformationfromAvonIndustryinterviewPwCanalysisAvonGroupinChinaAvonProduct(Guangzhou)Co.,Ltd.wasestablished.AvonManufacture(Guangzhou)Co.,Ltd.wasestablished.19911990AVONbrandlaunched.Avon’sdirectsalesteamexpandedtonearly150,000salespersonsinChina1997AvonbegantosetupdirectsalesnetworksinChina9YearLegalAffairs&EstablishmentProduct&BrandDistributionTargetOverviewSource:PublicinformationfromAvonIndustryinterviewPwCanalysisAvonGroupinChinaDirectsalesactivitieswerebannedbytheChinesegovernmentandAvonbeganchangingitsbusinessmodelfromdirectsalestoshop/countersales.Avon’sshop/countersalesmodeltoreplacethedirectsaleswasapprovedbythegovernment.199810YearLegalAffairs&EstablishmentProduct&BrandDistributionTargetOver...