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The Rediff Business Interview/ David Gosling

'Cosmetics users in India want more products, price isn't a problem'

Two years after its entry into the Rs 12 billion cosmetics market in India , global major Avon -- one of the world's leading direct-sellers -- has convinced itself that it is time to sink its roots deeper, firmer, wider. Even as Avon International blames its disappointing Q3 results on the dip in sales in Russia and the Asian flu, Avon India's managing director David Gosling promises: ''One thing's for sure. Avon will be around even after 50 years.''

This, when other equally well-known multinational brands like Revlon, Benckiser, Tupperware are either having a rethink on their Indian operations or have already downscaled them, after learning the hard way that in India, desi brands like Lakme and Tips & Toes enjoy an almost unassailable equity.

Avon's first step was on Delhi in 1996. The second was on Bombay in 1998. And the third? Remember Lord Vaman of the Indian mythology? How the Midget suddenly ballooned into a holy giant to stamp the whole universe with His foot? Gosling says Avon is toning up its multi-hued tentacles for the Big Leap Forward. ''In four years, 100,000 women could be direct-selling Avon in India.'' (Avon posts annual revenues of $ 5.1 billion from markets in 135 countries through 2.6 million independent sales representatives called beauty advisors.)

Ninety per cent of the products for the Indian market will be made in India, unlike other brands that rely on imported stuff. ''Things made in India are better than even imported Avon products,'' he says. The company also plans to graduate to the next level from its current selective advertising. The number of brands will also rise exponentially what with Avon sewing up plans to launch new product lines every month till 2000.

During one such launch in Bombay recently, Anita Bora buttonholed Gosling to find out how MNCs like doing beauty-care business in India.

Why has it taken Avon over two years to establish itself in just two metros?

Because, there are two ways you can go into a new market. You can go in there and invest a hell of a lot of money, you can go national, and you can set up an incredible distribution system, but it's going to be a couple of years before you can sell one product, especially in a country as challenging as India. That's one way of doing it.

Avon prefers to take what I would call a cautious but different approach. Which is to go in, set up shop in one city/province, start to sell products, take a product line and take a brochure, train sales people, get feedback from them, let them tell you what you're doing wrong. That's how we did in China.

We don't want to go in and say, this has worked in Brazil so will work in India too. India is big and important. We prefer to spend time and money to learn what's going on. When we invest more money and build infrastructure all over India in the next two years, we don't wish to face a higher-up saying, "Hey, you really misread south India. Now we're going to close two of those branches because we aren't making money down there."

Germany's Benckiser is downscaling its Indian operations. So is Revlon…

Avon has absolutely no intentions of downscaling. We've been here for two years and done what you can call a medium-scale investment so that we could learn from our consumers and advisors, what exactly makes India tick. In the context of cosmetics direct-selling, we know that now. We are well positioned to expand nationally; next year, we'll be in all the major cities. You will see Avon doubled in size.

What explains your shift from imported premium products to made-in-India Avon cosmetics?

We started with imported products, but for the last two years, we've been working with local manufacturers. About 90 per cent of what you buy from Avon would be locally manufactured. Sales people say they can't figure that out because the quality is the same -- in fact, it is better than our imported products. We now have sufficient control over the manufacturing process in India. However, we import the ingredients to maintain our world class specifications.

One would expect cost advantages from local manufacturing. The point is, is the consumer gaining anything?

At this stage in our evolution, we are still importing nearly all raw ingredients and some packaging to ensure high international standards. So the costs remain comparatively high. (Avon's newest perfume Women of Earth retails at Rs 890 (50 ml) and its miniature version (9 ml) at Rs 240.)

In a market that has a fascination for the made-in-foreign tag, why has Avon chosen to overlook this factor?

I was in your camp until recently. In Central Europe and other Asian countries where I've worked, I have encountered a similar question. Local manufacturing makes everybody say, "That's a big risk, the consumer is going to turn around and say, this was made in India, I won't buy it." It's a small element of the marketing mix, but is important.

When we launched our first made-in-India product, we encouraged people to try it to see if it makes any difference. It didn't. We received no complaints. Why? Remember, I told you we import the ingredients and packaging?

There are reports that Avon will make India an export base to service Southeast Asia.

That's not an immediately correct fact. We want to get ourselves established, expand nationally, develop the business, and build confidence in the supply chain in India. After that we will look at markets in the subcontinent.

With talk of recession all around, do you think premium brands like Avon have a place in the subcontinent?

We don't come into a country with a set formula and say, "Avon is a premium brand which only sells to premium people". We look at the country, we look at the market, and consequently decide what element of that market we want to tap and dominate.

Then we look at other elements -- we want to go national in India. We will also move from the premium into the next segment, which means having a wider range of products with a wider range of pricing. It does not mean giving up our bread-and-butter premium products.

This is very important. Without the premium products, consumers will not buy the less expensive products. They need that aspiration, the pull to buy a brand. We'll launch several product lines as we move forward. Nothing is taboo in terms of what we can achieve in the next ten, 20 or even 50 years. Yes, we will be very much here even after 50 years. It will take an act of government to throw us out.

I don't deny that our users at present are from the upper and the upper middle classes. The pricing, while not low, is certainly affordable when compared to other premium brands. I know the Indian market has a huge untapped segment of middle class women. So we have introduced a lot of the products in smaller sizes to make them affordable.

Cosmetics consumers in India want an international product with superior performance claims which can be substantiated through use, and for which she is prepared to pay. In addition, she wants a broad product-range. That's why Avon is doubling its product line. When we began, we had four or five products. Now we have over 100 to cater to different segments. Our sales have grown over 400 per cent this fiscal.

There is a view that direct sellers are not accountable to anybody.

The Indian Direct Selling Association, a self-regulating body, has formulated a code of ethics for direct sellers in India. A Bombay judge is our independent ombudsman. We set rules and regulations for ourselves. The IDSA is a member of the World Federation of Direct Selling Associations which has among its members Amway, Oriflame, Tupperware, Avon, D K Learning, L B Publishing and Lotus Learning. These associations are very important: consumers can go to consumer courts, but where does the customer go if she has a complaint against a direct seller? It's a protection for the company, the consumer and the sales force.

With two years of direct selling in India behind you, do you think this form of business has a future in India?

Direct selling is getting noticed as a result of the sheer size of the industry. If Avon has 100,000 people all over the country by the end of next year, we're not going to be quiet. So people will see us there and you will have several more direct selling companies. Now there are about 750,000 people in direct selling.

There are different types of direct selling. For Avon, recruiting is important. We try to build the best sales force. But the product is the most important aspect. That is why we spend so much time on product launches. Other so-called multi-level direct marketing companies are basically big recruiting machines, where the product is secondary.

A recent survey by Avon has revealed that women consider beauty as only skin deep, that inner beauty is more important. Does this have any implications for the cosmetics industry? Will women stop using cosmetics in the next millennium?

No. Inner beauty is important, yes, but remember the survey did not say that women would stop using beauty products. Cosmetics promote a sense of well-being which is also important to women.

Avon's products for men are little known in India. Any plans on that front?

We have fragrance products for men. We are planning to expand the range. It is a growing segment internationally and important for Avon, but our emphasis will always be on women's products.

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