Natura & Co: the errors and corrections behind the command change

With Fábio Barbosa, the thought of ​​a worldwide platform for magnificence manufacturers is to offer strategy to a conglomerate of various corporations; Natura and Avon are likely to develop into one firm

They’ve already been counted. For months, with shares down 70% in 12 months, struggling to digest the Avon acquisition, a pointy drop in gross sales and a red-tinged backside line, buyers had little doubt that supervisor Roberto Marques had misplaced his situation on Natura & Co.’s world undertaking.

The answer to the goat within the room got here as a shock final Wednesday with the appointment of veteran CEO (and firm director for six years) Fábio Barbosa to succeed Marques as CEO of the holding firm – accompanied by the choice to finish the buildup of the chairman’s place within the title of fine governance.

Talking to journalists and later to analysts, Barbosa repeated the mantra that the thought was to cut back the holding firm’s measurement and provides the 4 divisions – Natura, Avon, The Physique Store and Aesop – extra autonomy to plan and execute their very own methods .

“The group grew to become bureaucratic as a result of construction created to realize some concord between the completely different manufacturers. Now it is over. We’re shedding agility, corporations are resentful that they cannot make some selections domestically,” he stated.

Ultimately, he acknowledged, all of this had a damaging impression on gross sales and margins. Barbosa additionally stated he can be reassessing the areas the place every model will stay, suggesting some markets can be deserted.

The speedy response was optimistic, and the corporate’s shares rose 8% versus B3 for the day.

Nonetheless, analysts and buyers fretted over the dearth of element within the convention name held this morning.

In keeping with Barbosa, the Lean Transition Committee, which is made up of executives from the areas of finance, legislation and human sources and can advise him on the restructuring till the top of the yr, ought to present additional solutions.

However those that intently comply with the seams that led to the change of command current a extra intently linked narrative: the unique thought of ​​constructing a worldwide platform of magnificence manufacturers is deserted to offer strategy to a conglomerate design of various corporations with fashions from completely different companies and techniques.

Avon + nature?

The largest downside on this new design is Avon Worldwide, which has a presence in 38 international locations and has a worn-out model with declining gross sales and has to date been poorly digested by the group.

To resolve this downside, Natura and Avon’s companies will are likely to develop into one sooner or later, assures an individual who’s intently following the matter.

The manufacturers would coexist and Avon would start to include Natura’s values ​​into its merchandise. “Avon must be the Natura of Europe. The thought is to carry ecologically superior merchandise to different international locations with ties to Amazonian communities.”

If these new instructions are confirmed, João Paulo Ferreira, Natura & Co’s Latin America CEO, will achieve a spot within the group, a pacesetter who pleases the market and is seen as somebody who actually understands the enterprise. Right this moment, Avon is led by Romanian Angela Cretu, an govt with extra expertise in merchandise than in administration.

Requested in an interview with journalists about attainable modifications within the management of the 4 divisions, Fábio Barbosa stated that every one have been confirmed of their positions.

What went incorrect?

It is a girl with a twist in technique who must show her value.

Because it started a collection of acquisitions of worldwide manufacturers of magnificence merchandise – first Aesop, then The Physique Store and eventually the gargantuan Avon, an previous dream of controllers – Natura offered the market the concept that it could develop into a Brazilian model of French L’Oréal , which implies a worldwide multi-brand platform.

Roberto Marques embodied this undertaking and, after placing collectively the acquisition of Avon, created the holding firm Natura & CO to hold it out.

The thought was that the centralized construction would enable the exploitation of synergies between the 4 enterprise items (one for every model) and nonetheless be accountable for the general strategic, monetary and human sources planning of all manufacturers within the group.

Over time, nevertheless, the holding turned out to be an costly entity that stifled the decision-making strategy of the enterprise items. Moreover, some shareholders started to argue that the acquisitions made resulted not in a multi-brand firm however in a magnificence conglomerate with 4 very distinct companies.

Natura and Avon centered on direct gross sales; Aesop, an organization for extra artisanal merchandise with excessive added worth; The Physique Store is a series of shops. “This set has by no means been a platform for magnificence manufacturers,” says a senior govt on the firm.

An costly – and inefficient construction

Final yr alone, the funding value the group greater than R$ 550 million. If the preliminary thought was that the account wouldn’t exceed 0.8% of income, its relative weight elevated as the corporate’s income fell till it reached 1.4%.

Disturbed by the scale of the account, and much more so by the paradox about how these prices must be allotted, analysts and buyers had urged the corporate to downsize. Roberto Marques’ reply was that the construction is extraordinarily environment friendly and there’s little room for financial savings as 90% of the prices are operational.

With the centralization of planning and decision-making by the holding firm, the CEOs of the person items grew to become “uncomfortable and claustrophobic,” as one supervisor put it.

“The holding firm will resolve which areas every model will function in, however every CEO will resolve what product traces there can be when there can be fewer traces. They’ll have targets and make selections, with loads of freedom,” stated Fábio Barbosa.

falling efficiency

After doing surprisingly effectively within the first yr of the pandemic, with its market worth peaking at almost BRL 84 billion in July final yr, Natura has confronted a downward development.

Rising world inflation pushed up enter costs and eroded synergy beneficial properties, the conflict in Ukraine triggered gross sales in Europe to fall, the third Covid wave in the US triggered The Physique Store franchisees to be overcrowded on the flip of the yr . Along with the macro components, there have been additionally administration errors.

One of many essential causes for the decline in gross sales in Brazil was the change within the remuneration of Avon consultants to align them with the Natura mannequin.

With the thought of ​​lowering income and rising engagement, compensation grew to become much less transactional and extra centered on rising productiveness. Because of this, the advisor base shrank sharply and productiveness beneficial properties didn’t materialize, immediately impacting income.

The person for the job?

Fábio Barbosa made a profession and have become recognized far past the patron items business. He presided over the banks ABN Amro Brasil and Santander in addition to the highly effective Febraban. And after a stint at Grupo Abril, throughout which he was unable to reverse the media firm’s decline, he started serving on the boards of administrators of main corporations reminiscent of Itaú, Suzano and Ambev alongside Natura.

Talking to journalists, conscious that his background might be questioned, Barbosa careworn that he spent various years at Nestlé earlier than transferring to the monetary sector.

Within the convention name with the analysts, two of the supervisor wished to know the way he thinks his experiences might contribute to the success of the cosmetics firm.

“There’s a sense that Natura might have designed a extra strong succession course of by recruiting an business chief with multinational expertise,” stated a non-public analyst on the buy web pagestressing that Natura has seen administration modifications extra ceaselessly than fascinating, and with some selections which can be no less than questionable, reminiscent of that of Roberto Lima, who got here from the telephone firm Vivo and had been within the publish for 2 years.

“Anybody who wonders if Fábio is the appropriate man for the function does so as a result of they nonetheless do not perceive what’s being achieved. He understands and would not want to grasp the sweetness business. He would be the agent of transformation from one undertaking to a different. The CEOs of each firm want to grasp the enterprise,” says one govt.

Barbosa may be very near controllers Guilherme Leal, Luiz Seabra and Pedro Passos and shares the identical appreciation for sustainability in enterprise as they do. On the helm of ABN Amro Brasil, he pioneered this agenda within the Brazilian monetary system within the Nineties.

On this sense, the selection of its title additionally represents a reaffirmation of the founders’ values, which have been compromised within the midst of the dysfunction created by the earlier mannequin.

Simply over a yr in the past, Danone’s poor monetary efficiency led to CEO Emmanuel Faber being fired and the corporate’s sustainability being touted by some as a distraction from what actually issues. This yr, one other star of so-called stakeholder capitalism, Unilever, grew to become the goal of comparable polls.

Essential reference in ESG within the native market, Natura has not gone by this. However the worry is unquestionably there – and that was evident in Barbosa’s last message to journalists on Wednesday: “It is vital that an organization like this has good outcomes to indicate that with this head we are able to truly achieve success.”

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