March 2003

1
March 2003
2
Table of Contents

• Executive Summary XX
• Vitamin Supplement Review XX
• Weight Management Review XX
• Tea Review XX
• Beauty Review XX
• Appendix XX

3
Executive Summary
4
Wellness Line Review 2003

• Wellness 2002 Size of Line finaled at 250 skus.
  Aggressive inventory clearance of 66 dispos
  resulted in a 250 SOL, (-15) below an objective
  of 265 skus.
• In 2003, the marketing mix will shift to Beauty
  and Beauty Plus. The major repositioning of
  Wellness Beauty will be supported by the launches
  of Healthy Remedies and Planet Spa. In the
  Beauty Plus category, continued brand building of
  SlimWell and VitAdvance will re-vitalize and grow
  the lines.
  
  
  
  
  
  
• Beyond Beauty will continue to remain strong,
  with more impactful products. Strong vendor
  relationships (eg. Bally, Conair, HoMedics) will
  be leveraged to better manage supply and
  inventory.
• Further investigation of Cluster and Wellness
  Global inventory management.
• Wellness 2003 New skus (169 vs. 166) are up
  slightly (2).
• The 2003 size of line goal of 265 skus will need
  to be aggressively achieved through more
  clearance, improved estimating accuracy, and
  internal process improvement.
• Increase catalog pages dedicated to clearance.
• Utilize AIA as a forecasting tool.
• Refinement of product life strategy.

5
Summary Performance of Key Segments 2002-2003

• Fiscal

2002 2003 PP Net Net
Units DP Net Units DP Chg. Pt. Chg.

• VitAdvance 13,685 2,717 56.2 20,000 4,074 57.3
  46.1 1.1pts
• SlimWell 12,008 2,062 54.8 26,000 4,500 56.0 1
  16.5 1.2pts
• Infusions 2,655 789 53.0 3,300 800 60.0 24.3
  7.0pts
• Beauty 8,200 2,658 60.4 16,600 3,168 66.1 102.
  4 5.7pts
• Subtotal 36,548 8,226 56.4 65,900 12,542 59.1
  
• of Total 38 54 58 74
• Total Wellness 95,148 15,143 56.6 114,500 18,30
  0 56.6 20.3 Flat
• The Key segments will account for approximately
  59 of total Wellness demand sales in 2003.
• The launches of Healthy Remedies and Planet Spa
  will drive growth in Beauty, while unproductive
  skus and lines are discontinued/dispod.
• 4 VitAdvance supplements will be introduced in
  2003, and 4 will be Dispod.
• The entire VitAdvance line is on Status due to
  anticipated Repackaging in 1Q 04.
• New flavors, forms, and trial Bite Size Bars will
  drive unit and sales growth in Slimwell.
• The Infusions Tea store will broaden its appeal
  through promotional/seasonal/giftable items. The
  brands in-line skus will be repackaged to add
  better price/value to the customer.

With resourcing
6
Issues/Next Steps

• Regular updates with Product Line Control.
• Refine a process for Wellness planning.
• Gain greater visibility to vendor managed
  Inventory.
• Marketing process fully implemented to identify
  product life, and communication to PLC and
  Merchandising.
• Work with Purchasing, Labs, RD, and Branches to
  manage seamless introduction of reformulated
  and redesigned products.
• Identify cube implications in product selection
  process.
• Need to identify cube implications for clearance
  activity.

7
Wellness Fiscal 1Q 03

• 2002 AC 2003 PP 2003 AC Chg vs. AC Chg vs.
  PP

Campaign 2/1 AC Net 1,043,121 2,000,000
2,370,487 127.2 18.5 DP 55.5 55.5 55.8 0.3
0.3 Units 157,652 346,882 341,865 116.8 -1.4 C
ampaign 3/2 10D Net 4,054,187 1,000,000
1,308,562 -67.7 30.9 DP 56.4 56.9 56.4 0 -
0.5 Units 600,665 186,725 193,686 -67.8 3.7 Cam
paign 4/3 2D Net 4,108,388 6,475,000 5,
573,379 35.7 -13.9 DP 56.7 58.3 58.4 1.7 0.
1 Units 953,323 1,067,198 948,798 -0.5 -11.1 Ca
mpaign 5/4 ES Net 2,858,549 2,700,000 4
,036,658 41.2 49.5 DP 56.8 58.8 57.5 0.7 -1
.3 Units 544,727 453,528 663,669 21.8 46.3 Camp
aign 6/5 ES Net 3,801,448 6,300,000 7,2
76,713 91.4 15.5 DP 61.9 58.3 58.7 -3.2 0.4
Units 585,358 1,066,957 1,151,216 96.7 7.9 Cam
paign 7/6 MP Net 2,193,783 3,250,000 3,
437,621 56.7 5.8 DP 61.4 59.1 59.1 -2.3 0
Units 333,994 533,628 583,127 74.6 9.3 Campaign
8/7 MP Net 4,933,980 6,600,000 8,517,98
9 72.6 29.1 DP 57.1 57.3 56.8 -0.3 -0.5 Un
its 758,539 1,175,941 1,536,253 102.5 30.6 Fisca
l Q1 Net 19,553,081 24,242,200 27,266,4
59 39.4 12.5 DP 58.2 58.1 57.9 -0.2 -0.2 U
nits 3,405,770 4,104,058 4,476,688 31.4 9.1
8
Vitamin Supplement Review
9
Mass Market Vitamin

• Retail Vitamin Sales vs. Avon
• Industry retail dollar sales for vitamin category
  was down slightly in 2001 (-3.2), driven
  primarily by the Letter segment.
• Although Avon demand sales are up 15.3, demand
  sales were short of the 25MM profit plan by
  (45.6).
• 2003 Avon multivitamin SKUs go from 8 in 02 to
  4 in 03, however 03 multivitamin sales are
  projected flat with PY.
• Industry growth for total vitamins in 2002
  wasmodest at 2.9 vs. PY.

Retail Dollar Gross Sales (MM) 2000-2001 by
Segment

3,360.3 M
3,252.5 M
(3.2)
20.6
19.1
2.2
2.6
25.5
26.3
4.7
52.0
Avon Dollar Demand Sales (MM) 2001(C13 C26)
-2002 (full year) by Segment

20.0 M
47.1
20.2
13.6 M
15.3
11.8 M
29.2
33.1
79.8
70.6
66.9
Avon 2001 Sales C13 26 only Source IRI
Reviews FDM w/ Wal-Mart
10
Vitamin Sales by Class of Trade

• Drug accounts for 39 of vitamin sales, however
  it declined 5 from 2000.
• Wal-Mart alone contributed 28 of category
  dollars.

2001 Dollar Sales of Total Vitamins by Channel
Source IRI Reviews FDM w/ Wal-Mart Note
Excludes Avon
11
Nutrition Industry Trends

• Market Trends
• The vitamin category was down slightly(-3.2),
  driven by declines in the 12 Letter segment.
• Average price per unit of all vitamin segments
  have increased steadily over the past 5 years.
• Industry new product introductions were down
  48.0 in 01 vs. PY due to lack of new product
  innovation.
• Industry growth has been hampered by efficacy
  issues, negative study results, safety questions.

• Competitive Dynamics
• Wal-Mart accounted for almost 1/3 of total
  vitamin sales in 2001.
• Private Label dominates the market, representing
  34 of category sales. Centrum, the next closest
  competitor, follows with 9.0 of the market.
• 34 of vitamins are sold on some promotion.
• When promoted, vitamins are discounted an average
  of 26.
• Advertised specials appear to be the primary
  promotional vehicle for vitamins, followed next
  by price reductions.
• Avon offers fewer pills at a premium price point
  versus top competitors.

Source IRI Reviews FDM w/ Wal-Mart
12
VitAdvance

• 2003 Character of Line

NEW
NEW
NEW
NEW
2003 Disposition
13
Avon Vitamin Sales by Category

• Beauty vitamins (Haircare, AquaNew, Total
  Skin supplements) are projected to grow to 25 of
  the total vitamin business in 2003.
• The single most productive vitamin is Energy
  Advance, followed by Haircare consistently
  representing at least 10 of the total vitamin
  business from 2001 2003.
• The least productive vitamins are Prostate,
  Natal, and the Vitamin Sampler which includes the
  Energy, Menstrual, and Menopause formulas.

2001 Vitamin Demand Sales by Product Family
2002 Vitamin Demand Sales by Product Family
2003 Vitamin Demand Sales by Product Family
Other Sales Contribution Menopause
Support 3.5 Mood Balance 3.3 Immune
Advance 3.1 Menstrual Comfort 3.0 Stomach
Comfort 1.7 Prostate 1.3
Other Sales Contribution Sleep
Support 2.3 Tension Relief 2.3 Immune
Advance 1.9 Cold Season 1.7 Menstrual 1.6 Mood
Balance 1.2 Natal 1.2 Prostate 0.9 Stomach 0.
8 Vitamin Sampler 0.3
Other Sales Contribution Menstrual
Comfort 3.0 Sleep Support 3.0 Tension
Relief 2.3 Cold Season 2.1 Stomach
Comfort 2.0 Immune Advance 2.0 Mood
Balance 1.6 Prostate 1.0 Natal 0.7 Vitamin
Sampler 0.4
14
VitAdvance
2001 2002 2003 2003 vs. 2002
VitAdvance Net (MM) 12,390 13,685 20,000 46.1
DP 61.7 56.2 57.3 1.1pts Units(000) 2,225
2,718 4,074 49.9 SKUs 17 27 27 0 Contributio
n 18.9 14.4 17.5 3.1pts
Active Status/Disc. Additions Reform/Redesign Dis
pod SKUs C26 03
VitAdvance (Begin 03) (End
03) Multis 8 8 Supplements 16 4 4 16 Sa
mplers 3 3 Total 27 4 0 4 27
Calcium Chews Natal Daily Fiber Prostate Aqua
New Stomach Total Skin Mood Balance

• VitAdvance line placed on Status in 2003 due to
  anticipated Repackaging in 1Q 04.

15
VitAdvance 2002 Sales Sorted
Units Net Sales DP
Haircare from within Vitamin 365,741 1,899,096
52.3 Energy Advance 262,318 1,390,822
65.2 Women's Complete II 265,729 1,253,482
56.2 Bone Health 222,767 1,139,576
53.3 Heart Health Formula 187,126 956,002
53.5 Joint Formula 168,433 874,472
55.3 Men's Complete High-potency
Multi-vitamins/Minerals 154,391 753,736
51.7 Women's Complete I 154,343 753,394
55.8 Menopause Support 127,087 697,037
57.4 Kid's Complete Chewable Multi-vitamins/Mine
rals 125,355 563,074 53.9 Memory and
Focus 105,427 554,822 67.2 Menstrual Comfort
System 77,973 429,041 55.6 Sleep Support
Restful Sleep 79,278 423,460 56.8 Bonus
Complete II 63,103 342,341 55.6 Tension Relief
Stress 59,909 326,282 61.1 Cold
Season 56,337 303,420 55.7 Stomach
Comfort 56,880 291,298 62.2 Immune
Advance 54,557 281,940 55.7 Mood and
Balance 42,450 233,062 60.9 Bonus Mens
Complete 38,581 208,196 49.9 Bonus Complete
One 33,870 182,380 52.8 Prostate
Formula 27,124 142,261 53.7 Bonus Kids
Vitamins 24,057 115,175 48.3 Healthy Babies at
Birth Formula 17,294 101,883 65.4 Vitamin
Sampler - Energy, Menstrual, Menopause 56,828 62,
349 44.6
16
Avon VitAdvance 2001 Pricing / Pillvs.
Competition

• Total vitamins on a per pill basis, Avon is
  priced more than double the competitive average,
  even when on discount.
• Avons Heart, Bone, and Energy supplements are
  priced competitively as compared to One a Day,
  but still are slightly higher than Centrum.

Total Vitamins Multi Vitamins Promoted Averag
e Non-Promoted Promoted Average Non-Promoted Pric
e / Pill Price / Pill Price / Pill Price /
Pill Price / Pill Price / Pill
Avon 0.15 0.17 0.18 0.15 0.15 0.15 Private
Label 0.04 0.05 0.05 0.04 0.05 0.05 Centrum
0.08 0.09 0.10 0.07 0.09 0.09 One a
Day 0.09 0.10 0.10 0.08 0.09 0.09 Nature
Made 0.06 0.07 0.08 0.08 0.10 0.11
Mineral Supplements Key Forms Non-Promoted
Price Promoted Average Non-Promoted Price /
Pill Price / Pill Price / Pill Heart Bone Energy
Avon 0.17 0.19 0.20 0.20 0.17 0.17 Private
Label 0.07 0.09 0.09 Centrum n/a 0.18 0.08
0.18 One a Day n/a 0.33 0.17 0.33 Nature
Made 0.09 0.10 0.11 Osteo Bi
Flex 0.08 0.09 0.09 N/A N/A N/A
Source IRI Reviews FDM w/ Wal-Mart NYC
Competitive Shopping
17
Five Basic Programs to Address Womens Health
Concerns

• One PhilosophyFive Programs

Feeling Young Helps mature adults rejuvenate,
enhance endurance, and improve outlook

Feeling Powerful Helps active adults and workout
enthusiasts improve their energy, endurance,
stamina, and performance
Vitality Program
Energy Fitness Program
Daily Health Program
Taking Care A complete nutritional program
formulated for growing young bodies
Feeling Beautiful Optimum support for beautiful
skin, hair, and nails
Feeling Great! Helps men women achieve optimum
nutrition and enjoy life to its fullest
Beauty Program
Kids Program
18
Re-launch VitAdvance A Fresh New Perspective
More compelling consumer friendly
Add diversity to the line

• Products for specific lifestyles
• Easy, clear choices
• Doctor recommended formulas

• Easy on-the-go solutions
• Not just pills
• Interesting regimens

Less commodity driven

• Exclusive value-added bundles
• Proprietary combo products
• Regimen approach

Leverage our beauty heritage

• Fight the signs of aging
• Look and feel your best
• Style is everything!

19
VitAdvance

• Growth Strategies

Branding
Brand Building
Brand Bonding

• New Look Brochure
• Line Re-stage
• Segmentation

• Avon Enrich
• Radiance
• Pfizer for Living
• Wellness.com

Expanding
Nutrition Capabilities
Consumer Reach
Representative Participation

• Avon Enrich
• Field Nutrition Experts
• WNE Compliance
• Sampling
• E-mail Blast
• Testimonials
• Events

• Avon Nutrition Labs
• Avon RD
• Virtual Experts (Industry Partners)

• Professional Sales Force
• Marketing Partnerships

20
VitAdvance Tactical Implications

• 2003
• New Forms of Delivery
• Liquid
• Chews
• Powder
• Avon Enrich (Customer Continuity Program)
• Build upon success of Beauty supplements
• AquaNew
• Skin Formula

• 2004
• Re-design of VitAdvance line for 1Q 04
• Avon Nutrition Lab to replace Roche partnership
• Avon will lead the process, but will leverage the
  functional expertise and capabilities of proven
  industry leaders.

21
Weight Management Review
22
Bars/Shakes/Supplements Overview
Industry Retail Dollar Gross Sales (MM)
2000-2001 by Segment

2,788.7 M

• Avon 2003 Weight Management demand sales
  projected up 118.5 due to the following
• Introduction of new Snack Bar flavors.
• Introduction of new Gourmet Meal Replacement
  Bars.
• Introduction of Bite Size Bars Shake Packettes
  for consumer convenience and trials.
• Entry into Weight Management Tablet category.
• New creative approach effective C13 03.

43.6
2,033.3 M
18.1
16.9
11.0
Avon Demand Sales (MM) 2002-2003 (projection) by
Segment

26.0 M
212.0
11.9 M
64.8
62.5
Note Granola Cereal Bars include brands such
as Quaker, General Mills, Kellogg and Nature
Valley Source IRI Reviews FDMX (Excl. Wal-Mart)
23
Bars/Shakes/Supplements By Class of Trade

• All Snack Bar channels posted significant growth
  over 2000 sales, with Food as the dominant
  channel (71).
• All Liquid/Powder channels posted growth over
  2000 sales, with Food accounting for the majority
  of liquid and powder dollars 46.
• 30 of Liquid / Powder category dollars were sold
  through Wal-Mart in 2001.
• All Weight Control Pill channels posted
  significant growth over 2000 sales, with Wal-Mart
  accounting for the largest portion of category
  sales 37.

Snack Bar/Granola Bar 2001 Dollar Sales by Channel
Weight Management Powders 2001 Dollar Sales by
Channel
Weight Management Pills 2001 Dollar Sales by
Channel
Source IRI Reviews FDM w/ Wal-Mart Note
Excludes Avon
24
Key Learnings Weight Control

• Market Trends
• The Liquid/Powder category (with Wal-Mart) is up
  substantially in 2001 18.1, at 1.4 billion in
  sales.
• The Snack Bar/Granola Bar category (with
  Wal-Mart) posted significant gains in 2001,
  16, reaching 1.6 billion in sales.
• Meal Replacement/Sports Bars have outperformed
  granola/cereal bars in terms of growth (17),
  and now represent 600M.
• The Tablets category (with Wal-Mart) almost
  doubled in 2001 43.6, reaching 526 million in
  sales.

• Competitive Dynamics
• Wal-Mart accounted for almost 1/3 of total
  liquid/powder sales in 2001.
• Ultra Slim Fast dominates the liquid weight
  control segment, representing 64 of sales.
• Slim Fast and Private Label are the leading
  brands within the meal replacement/sports bar
  segment, together representing 25 of sales.
• Wal-Mart accounted for the largest proportion
  37 of candy/tablet sales in 2001.
• Metabolife 356 is the leading brand within
  Tablets, representing 42 of sales.

25
SlimWell

• 2003 Character of Line

Oatmeal Raisin Chocolate Crunch
Brownie Chocolate Frosted Peanut Honey Peanut
Crunch
Meal Replacement Bars
Iced Tropical Crisp (C13) Iced Cranberry Crisp
(C13) Chocolate Toffee Crisp (C13)
Gourmet MealReplacement Bars
Cappuccino French Vanilla Dutch Chocolate
Meal Replacement Shakes
Smores (C21) Chocolate Mint (C21) Rich Caramel
Snack Bars
NEW
NEW
NEW
NEW
NEW
Advanced WeightLoss System (C13)
Dietary Supplements
Shake Packettes (C13) Cappuccino French
Vanilla Dutch Chocolate Bite Sizes (C13/16)
Oatmeal Raisin Chocolate Crunch Brownie
Chocolate Frosted Peanut Iced Tropical Crisp
(C13) Iced Cranberry Crisp (C13) Honey Peanut
Crunch Chocolate Toffee Crisp
Trial/Convenience Sizes
Botanical Tea (C11)
Tea
NEW
NEW
NEW
NEW
C21 Reformulation 2003 Disposition
26
SlimWell
2002 2003 2003 vs. 2002
SlimWell Net (MM) 12,003 26,000 116.6 DP 54
.8 56.0 1.2pts Units(000) 2,062 4,500 118.2
SKUs 6 21 15 Contribution 12.6 22.7 10.1pts
Active Status/Disc. Additions Reform/Redesign Dis
pod SKUs C26 03
SlimWell (Begin 03) (End 03) Bars 4 3 3 4
6 Shakes 2 1 3 Snack 1 2 3 Bite
Size 3 4 6 7 6 Supplements/Teas 2 2
Giftsets 1 1 Total 6 4 13 9 11 21
Gourmet Bars (3) Extruded (4) Cappuccino
Shake Bite Size (7) Snack Bars (2) Bite
Size Advanced Weight Loss System Botanical
Tea

• SlimWell Extruded Meal Replacement bars placed
  on Status due to Reformulation in 4Q 03.
• New forms (e.g.. Granola) will be added to create
  diversity within the SlimWell bar line.
• New Bite Size Bars will add unit energy and
  generate Customer trial.
• Enter the tablet category with the introduction
  of Advanced Weight Loss System in C13 03, and
  further extend the SlimWell brand into a more
  comprehensive Weight Loss system.

27
Avon Weight Management Pricing vs. Competition

• NuSkin Pharmanex hold a super-premium price
  point, nearly one and a half times the average.
• Slim Fast brands severely undercut competitors on
  a per serving basis in both shakes and meal bars.
• SlimWell bars and shakes are mid priced on a per
  serving basis.

SlimWell Balanced Slim Fast Meal NuSkin
/ Atkins Meal Bars on the Go Bars Herbalife Phar
manex Advantage
CDSS 12.99 5.79 16.95 33.50 29.99 Cost per
Serving 1.30 0.97 1.21 3.35 2.00 Cost per
Day 1.30 1.93 2.42 6.70 4.00 Servings 10 6 14
10 15 Weight per Bar (g) 50 56 40 65 60
SlimWell Balanced Slim Fast Ultra Slim
Fast Ultra Slim Fast NuSkin / Meal Shake Slim
Fast Shakes Shakes Cans Herbalife Pharmanex
CDSS 12.99 4.99 6.89 6.99 23.95 23.95 Cost
per Serving 0.81 0.38 0.53 1.17 1.09 2.40 C
ost per Day 0.81 0.77 1.06 2.33 2.18 4.79 Se
rvings 16 13 13 6 22 10
2001 Competitive Pricing
28
Weight Management Competitive Size of Line
Breakfast / Powders Meal Bars Lunch
Bars Snack Bars Nuts Aloe Drink Soup
SlimWell 3 7 0 3 0 0 0 SlimFast 4 SlimFast/9
Ultra 7 2 5 0 0 0 Herbalife 7 total 4 (5
weightloss 2 high protein) (high
protein) 0 0 1 1 2 Unicity 4 total 2 (2 to be
discontinued upon stockout) (high
protein) 0 0 0 0 0
29
SlimWell

• Growth Strategies

Branding
Brand Building
Brand Bonding

• New Look Brochure
• Key Line Extensions
• Flavors
• Ingredients
• New Product Forms
• Supplements
• Chewies
• Reform/ Redesign
• Promotional

• Avon Enrich
• Radiance
• Wellness.com

Expanding
Nutrition Capabilities
Consumer Reach
Representative Participation

• New TPM Network
• Avon Nutrition Labs

• Marketing Partnerships
• Prevention
• PromoteIT Fitness Centers
• Snack Bar Fund Raiser

• Events
• (The SlimWell Challenge)
• Bite Size Sampling
• SlimWell Boot Camp
• SlimWell Success Kit

30
SlimWell Tactical Implications

• Introduce Gourmet Bars in C13 03
• Iced Tropical Crisp
• Iced Cranberry Crisp
• Chocolate Toffee Crisp
• Enter Weight Control Tablet category with C13 03
  with launch of SlimWell Advanced WeightLoss
  System Launch New Improved reformulated Meal
  Replacement bars in C21 03.
• Introduction of 2 new snack bar flavors in C21
  03
• Smores
• Chocolate Mint
• Re-introduce SlimWell Bite size bars to the
  Representative introduce to the Consumer for
  the first time.
• Introduce convenient Shake packettes in the
  brochure.
• Offer promotional/ seasonal limited life concepts
  for channel energy.
• Introduce fresh creative in C13 03 focusing on
  SlimWell lifestyle ingredients.
• Target more compelling and consumer friendly
  claims.
• Continued emphasis on testimonials SlimWell
  success stories.

31
Tea Review

32
Mass Market Tea Sales vs. Avon
Retail Dollar Gross Sales (MM) 1999-2001

• Increased interest in alternative medicine,
  including herbal remedies is a factor in
  increased tea sales.
• Flavored teas have also contributed to loose tea
  sales.
• Avons Infusions 2003 demand sales projection of
  3.3M is 22 above PY. Growth will be fueled by
  promotional/giftable items as well as higher net
  per unit per concept.

0.8
0.9
4.0
Avon Dollar Demand Sales (MM) 2001-2003

22
35
Source IRI Reviews FDM w/ Wal-Mart
33
Tea Sales by Class of Trade

• Most Americans buy tea as part of a planned
  shopping trip the majority of tea sales by
  dollar volume are through the supermarket
  channel.
• However, as more Americans turn to mass
  merchandisers superstores that sell groceries
  as well as dry goods, most grocery stores are
  seeing a sales decline for tea.

2001 Dollar Sales of Tea by Channel
Source IRI Reviews FDM w/ Wal-Mart In 2000
Wal-Mart took over the number one position as the
top grocery retailer in the US
34
Tea Industry Trends

• Market Trends
• Between 1998 2000, the tea segment increased
  10.3 due in part to the proliferation of
  flavored teas and new types of herbal teas.
• Tea has taken on a new form as a natural
  treatment option - Good news about links between
  tea consumption health benefits have convinced
  many consumers to increase their consumption of
  tea.
• Consumers are increasingly price sensitive toward
  tea.
• The influence of tea has expanded beyond its
  traditional form and is being found in unexpected
  beverages and foods as well as bath and beauty
  products.

• Competitive Dynamics
• Lipton brand owns the tea business with 36 of
  market share, more than double of its closest
  competitor Celestial Seasonings.
• Brands like Celestial Seasonings Honest Tea
  have pioneered green and herbal teas in
  mainstream channels, helping to raise awareness.
• Mass merchandisers Private Label brands rank
  number three in total tea sales in the US market.
• Tea sales in supermarkets are falling as mass
  merchandisers ramp up their development of
  full-line grocery selections in their stores.

35
Infusions

• 2003 Character of Line

Lemon Bliss Tea w/ Multi-vitamins Peach Tea Berry
Passion Chamomile Harmony Ginseng Boost
(Redesign) Green Tea Zest (Redesign) Echinacea
Relief Bedtime Bliss
Package of 16 Tea Bags
Botanical Bloom Sampler (C3) Botanical Bloom
Canister (C5) Botanical Bloom Chai Tea
(C7) Dessert Tea Set Candy Cane Giftable (C23)
Promotional
NEW
NEW
NEW
NEW
NEW
NEW
2003 Disposition
36
Infusions
2001 2002 2003 2003 vs. 2002
Infusions Net (MM) 1,990 2,655 3,300 24.3
DP 54.6 51.8 60.0 8.2pts Units
[phone] 800 1.4 Skus 4 6 5 -1
Contribution 3.0 2.8 2.9 0.1pts
Active Status/Disc. Additions Reform/Redesign Dis
pod SKUs C26 03
Infusions (Begin 03) (End 03) Teas 6 2 3 6
5 Promo/Giftsets 5 4 9 0 Total 6 5 6 3 15 5
Lemon Green Peach Ginseng Botanical Bloom
Sampler Bedtime Bliss Botanical Bloom
Cannister Botanical Bloom Chai Tea Candy Cane

• Infusions teas placed on status. Brand will be
  repackaged to add better price/value to the
  consumer.
• 3 New Flavors will be introduced, and 3
  unproductive flavors will be discontinued.

37
Avon Infusions 2001 Pricing / Unitvs. Competition

• On a per unit basis, Avons Infusions provide
  less tea at a higher price point versus the mass
  market competition.
• Tazo, Starbucks premium brand is the only
  competitor priced higher than Avons Infusions.

Bag / Loose Tea Non-promoted price /
unit Servings Price / Serving
Avon Infusions 2.99 16 0.19 Lipton 2.49 25 0.10
Celestial Seasonings 2.99 20 0.15 Bigelow 2.95 20
0.15 Twining 2.95 25 0.12 Tazo 4.95 24 0.21
Sources CUS, COM, Competitive Shopping
38
Tactical Implications

• Transition the Infusions brand form commodity
  price/package/efficacy to bridge.
• Shift packaging from disposable carton to
  reusable tin.
• Increase bag count.
• Introduce functional teas, i.e. vitamin infused.
• Continue to offer flavored/specialty teas.
• Focus on and educate the consumer of the benefits
  of tea consumption through stronger claims and
  more compelling brochure executions.

39
Beauty Review

40
Avon Wellness Beauty Sales Concepts

• Lack of appealing fragrances, undesirable
  packaging, and uncompelling brochure executions
  contributed to the unsuccessful launches of
  Vitatonics, Electricity Restoring in 2001
  2002.
• 2002 Beauty sales growth of 14 was modest,
  fueled by the introductions of Soy, Edamame,
  Ginseng Asian Pear.
• Major re-positioning of the Wellness Beauty
  supported by the introductions of Healthy
  Remedies and Planet Spa is expected to drive
  Beauty sales growth in 2003.
• 2003 size of line will return to 201 level due to
  aggressive disposition.

41
Spa Related Beauty Products Industry Trends

• Market Trends
• Major trends driving the spa market
• Increased stress.
• Re-definition of beauty from glamorous beauty
  to natural beauty born of health wellness.
• Trend to self improvement.
• Consumer attitudes show an increased emphasis on
  a holistic approach to Wellness (complete body
  mind renewal).
• Consumer trends show an increased focus on
  healthy lifestyles putting greater emphasis on
  prevention and fitness.
• Recent economic slowdown will tempt consumers to
  spend less on day spa services and skew them
  towards less expensive at home treatments.

• Competitive Dynamics
• The spa industry is growing rapidly and is
  projected to grow at an average annual rate of
  more than 20 per annum in the services area.
• The Body Care segment of the Spa industry
  (including services) is expected to grow 117.5,
  to 3.48 billion in 2003.
• Responding to the opportunity presented by the
  tremendous proliferation of overnight and day
  spas, mass market premium brands have entered
  the at home treatment spa segment.

Source US market Analysis 2000 study
commissioned Avon Global
42
Problem / Solution Natural Care Beauty Products
Industry Trends

• Market Trends
• Health warnings, environmental concerns and
  organic attitudes have contributed and will
  continue to contribute to the growth in
  popularity of natural-based personal care
  products.
• Consumer trends reflect a growing tendency of
  Americans to self medicate for minor chronic
  illnesses.

• Competitive Dynamics
• Sales of natural personal care products are
  expected to grow between 20 - 25 over the next
  several years.
• Most players in the natural personal care market
  are small, independent companies However,
  consumer demand is driving mainstream beauty
  companies to enter the natural products market.
• Within the alternative medicine market, herbal
  remedies accounted for 93 of sales in 2001.

Source The Natural Personal Care Products Market
PIPAL Research Jan. 2003
43
Beauty

• 2003 Character of Line

White Tea (C9) South Pacific (C9) Mediterranean
Olive (C19) African Shea Butter (C23) 3 Giftsets
(2\C16, 2\C21, 1\C25)
Planet Spa
Cold Sore Lip Calm Cold Season Balm Cooling
Muscle Salve Calming Kit Total Body Cooling
Spray Aloe Cooling Gel 1 Giftset
Healthy Remedies
3 In line Products 1 Giftset (C23)
Ginseng Asian Pear
Mandarin Fragrance Spray Mandarin Body
Lotion Mandarin Shower Gel 1 Giftset (C25)
Mandarin
11 existing concepts
Soy Edamame
2003 Status, Anticipated 2004 disposition
44
Avon Planet Spa Pricing vs. Competition

• Mary Kays spa themed Terme dIsola specialty
  bath products focus on skin benefits using
  natural extracts.
• Origins spa themed Ginger specialty bath
  products are a fragrance story with skin
  benefits.
• Except for the body scrub form, Avon is the most
  price competitive versus the competition.
• Bath Body Works True Blue spa line consists
  of products that provide a marvelous manicure,
  a fabulous facial a perfect pedicure, and
  body beautifiers.

Lotions Scrubs Price Price / oz. Size
(oz.) Price Price / oz. Size (oz.)
Avon 9.50 1.42 6.7 17.50 1.67 10.5 Mary
Kay 10.00 1.25 8.0 10.00 1.67 6.0 Bath Body
Works 15.00 2.50 6.0 20.00 1.25 16.0 Origins
20.00 2.99 6.7 30.00 1.42 21.2
Wash Fragrance Mist Price Price / oz. Size
(oz.) Price Price / oz. Size (oz.)
Avon 8.50 1.27 6.7 9.50 2.38 4.0 Mary
Kay 9.00 1.13 8.0 18.00 10.59 1.7 Bath Body
Works 15.00 0.94 16 n/a n/a na/ Origins 21.00
2.47 8.5 35.00 20.59 1.7
Source marykay.com, origins.com, bath and body
works competitive shopping in NYC Jan.03
45
Beauty
2001 2002 2003 2003 vs. 2002
Infusions Net (MM) 7,186 8,200 16,600 102.4
DP 58.4 60.4 66.1 5.7pts Units
(000) 2,451 2,657 3,440 29.5
Skus 35 59 36 -23 Contribution 11.0 8.6 14
.5 5.9pts
Active Status/Disc. Additions Reform/Redesign Dis
pod SKUs C26 03
Beauty (Begin 03) (End 03) Vitatonics 28
28 0 Giftset 3 2 0 Avon
Spa 10 10 0 Giftset 1 2 0
Soy/Naturals 3 11 3 8 12
Giftset 3 2 2 0 Healthy Remedies 6 6
Giftset 1 1 0 Planet Spa 15 15
Giftset 3 0 1 Total 3 56 30 0 53 36

• 38 Beauty skus from 2001 will be dispod in 2003
  (Vitatonics, Electricity, Restoring).
• Soy and Edamame placed on Status (11 skus) in
  2003. Anticipated dispo in 2004.
• Launch of Healthy Remedies adds a total of 6
  In-Line skus, and 1 Giftset.
• Launch of Planet Spa adds a total of 15 In-Line
  skus, and 4 Giftsets.

46
Tactical Implications

• Build Planet Spa sales through promotional
  giftsets, GWPs, PWPs
• Link existing beauty brands with cross category
  products
• Incense
• Aroma diffusers
• Candles
• Build upon Healthy Remedies with the introduction
  of
• Teeth Whitening
• Menopause related products

47
Appendix

48
Total Wellness 2001-2003
2001 2002 2003PP 2003PP vs. 2002 2002 vs.
2001 2002 vs. 2001

• Demand Net (MM) 65.5 95.1 114.5 20.3 45.3
• Units (000) 10,248 15,143 18,300 20.8 47.8
• DP w/Resourcing 56.4 56.6 56.6 0.0pts 0.2pt
  s
• DP w/out Resourcing 56.4 57.1 58.3 1.2pts 0
  .7pts
• Net Per Unit 6.39 6.28 6.26 -0.4 -1.7
• Catalog Net (MM) 41.9 61.3 68.7 12.0 46.4 In
  creased Catalog frequency driving growth.
• Units (000) 6,159 8,798 10,614 20.6 42.8
• DP 58.4 58.1 60.0 1.9pts -0.3pts
• Net Per Unit 6.80 6.97 6.47 2.5
• Brochure Net (MM) 0.0 0.8 n/a 0.0 Transition
  away from Brochure executions
• Units (000) 0 166 0.0 due to low
  productivity.
• DP 0.0 51.2 51.2pts
• Net Per Unit 0.00 4.54 0.0
• New Net (MM) 15.0 15.8 24.0 52.5 4.8
• Units (000) 2,226 2,225 3,386 52.2 -0.1
• DP 58.6 58.5 60.0 1.5pts -0.1pts

49
Wellness by Category 2001-2003
2001 2002 2003PP 2003PP vs. 2002 2002 vs. 2001

• Total Wellness Net (MM)
• Net 65.5 95.2 114.5 20.3 45.4
• Units 10,248 15,148 18,300 20.8 47.8
• DP 56.4 56.6 56.6 0.0pts 0.2pts
• Net Per Unit 6.39 6.28 6.26 -0.4 -1.7
• SOL 148 250 265 6.0 68.9
• Beauty Net (MM)
• Net 7.2 8.2 16.6 102.5 14.1
• Units 2,451 2,657 3,440 29.5 8.4
• DP 58.4 60.4 66.1 5.7pts 2.0pts
• Net Per Unit 2.93 3.09 4.83 56.4 5.3
• SOL 41 59 36 -39.0 43.9
• Sales Contribution 11 9 15 5.9pts -2.4pts
• Beauty Plus Net (MM)
• Net 17.9 39.5 57.5 45.5 121.0
• Units 3,094 6,443 9,187 42.6 108.2
• DP 60.3 56.0 58.0 2.0pts -4.3pts
• Net Per Unit 5.78 6.13 6.26 2.0 6.1

Mix shift to Beauty and Beauty Plus.
Beyond Beauty remains strong. 2002 SOL was 250,
(-15 skus) vs. 265 Plan Major repositioning of
Wellness Beauty supported by the introductions of
Healthy Remedies and Planet Spa. New Forms,
Bite Size bars, and Shake Packettes in Slimwell
will drive sales and unit growth.4 New
VitAdvance Supplements introduced in 2003.Expand
Infusions Tea store through promotional and
seasonal items. Net of RTV. Continue to
leverage Brand name products Bally, ConAir,
Homedics. 76 skus in Beyond Beauty are
"Discontinued and will be liquidated by the
beginning of '04.
50
Wellness Size of Line 2002-2003

• Bringback
• Redesign Total Total
• Reform Active Status Active
  Discontinued Disposed Size of
• New Concepts New SKUs SKUs SKUs SKUs SKUs SKUs S
  KUs Line
• First Quarter 2002 32 37 0 59 43 102 75 18 159
• 2003 32 52 0 118 35 153 159 37 275
• Second Quarter 2002 45 75 0 106 42 148 105 1 252
• 2003 43 57 0 165 44 109 124 29 304
• Third Quarter 2002 22 26 2 72 37 109 170 0 279
• 2003 24 26 0 183 41 224 105 45 284
• Fourth Quarter 2002 27 28 0 87 36 123 174 47 250
• 2003 32 39 12 177 50 227 93 55 265
• TOTAL 2002 126 166 2 66
• 2003 131 174 12 166 PP

• Highlights
• Significant increase of Discontinued skus relates
  to the Refinement of the Product Life strategy,
  primarily in Beyond Beauty.
• Dispo increase achieved through In-Catalog
  Clearance, Outlet, and RTV.

51
Beauty Size of Line 2002-2003

• Bringback
• Redesign Total Total
• Reform Active Status Active
  Discontinued Disposed Size of
• New Concepts New SKUs SKUs SKUs SKUs SKUs SKUs S
  KUs Line
• First Quarter 2002 11 13 0 12 27 39 22 0 61
• 2003 7 7 0 10 14 24 42 8 58
• Second Quarter 2002 8 9 0 16 29 45 26 0 71
• 2003 11 11 0 21 14 35 34 12 57
• Third Quarter 2002 0 0 0 16 28 44 27 0 71
• 2003 7 7 0 28 14 42 22 18 46
• Fourth Quarter 2002 5 5 0 21 23 44 22 7 59
• 2003 7 7 0 35 14 49 4 17 36
• TOTAL 2002 24 27 0 7
• 2003 32 32 0 55

• Highlights
• 38 Beauty skus from 2001 will be dispod in 2003
  (Vitatonics, Electricity, Restoring).
• Soy and Edamame placed on Status (11 skus) in
  2003. Anticipated dispo in 2004.
• Launch of Healthy Remedies adds a total of 6
  In-Line skus, and 1 Giftset.
• Launch of Planet Spa adds a total of 15 In-Line
  skus, and 4 Giftsets.

52
Beauty Plus Size of Line 2002-2003

• Bringback
• Redesign Total Total
• Reform Active Status Active
  Discontinued Disposed Size of
• New Concepts New SKUs SKUs SKUs SKUs SKUs SKUs S
  KUs Line
• First Quarter 2002 4 7 0 26 13 39 4 4 39
• 2003 9 28 0 68 20 88 43 11 120
• Second Quarter 2002 21 50 0 69 10 79 15 0 94
• 2003 11 25 0 93 18 111 34 1 134
• Third Quarter 2002 7 11 2 35 4 39 66 0 105
• 2003 3 3 0 96 18 114 23 20 117
• Fourth Quarter 2002 5 6 0 40 10 50 61 16 95
• 2003 6 7 12 100 33 133 22 22 133
• TOTAL 2002 37 74 2 20
• 2003 29 63 12 64

• Highlights
• VitAdvance line placed on Status in 2003 due to
  anticipated Repackaging in 1Q 04
• SlimWell Extruded Meal Replacement bars placed
  on Status due to Reformulation in 4Q 03.
• New forms (eg. Granola) will be added to create
  diversity within the SlimWell bar line.
• New Bite Size Bars will add unit energy and
  generate Customer trial.
• Enter the tablet category with the introduction
  of Metaboost in C13 03, and further extend the
  SlimWell brand into a more comprehensive Weight
  Loss system
• Infusions Teas placed on Status. Brand will be
  repackaged to add better price/value to the
  consumer. 3 New Flavors will be introduced, and
  3 Unproductive flavors will be discontinued.
  

53
Beyond Beauty Size of Line 2002-2003

• Bringback
• Redesign Total Total
• Reform Active Status Active
  Discontinued Disposed Size of
• New Concepts New SKUs SKUs SKUs SKUs SKUs SKUs S
  KUs Line
• First Quarter 2002 17 17 0 21 3 24 49 14 59
• 2003 16 17 0 40 1 41 74 18 97
• Second Quarter 2002 16 16 0 21 3 24 64 1 87
• 2003 21 21 0 51 12 63 56 6 113
• Third Quarter 2002 15 15 0 21 5 26 77 0 103
• 2003 14 15 0 59 9 68 60 7 121
• Fourth Quarter 2002 17 17 0 26 3 29 91 24 96
• 2003 19 21 0 42 3 45 67 16 96
• TOTAL 2002 65 65 0 24
• 2003 70 74 0 47

• Highlights
• Beyond Beauty will need to be aggressively
  merchandised in Clearance vehicles
• 9 Bally skus will remain Active and available to
  the Customer every campaign
• AIA in C3, C13, C16, C25 will help to improve
  operational estimating and control
  inventories