With an emphasis on omnichannel strategy and sustainable products, the Brazilian brand just reported US$600 million profits last year. This gives it the opportunity to focus on expanding its presence in Brazil, Peru, Colombia and particularly Chile.
Soaps, shampoo and conditioner bars that avoid generating waste, a refill system to create brand loyalty and collaboration with firms such as I am not Plastic for the use of biodegradable and compostable materials, are the spearheads of Natura in Chile for 2024.
The opening of a store in the wealthy neighborhood of Las Condes in November has been followed by another opening this week in the traditional middle-class commune of Ñuñoa. And several more will come in the country, the company announced.
It is all part of Natura&Co's growth strategy in the South American country. With a strong commitment to omnichannel, they are balancing the work of 120,000 consultants in Chile, their e-commerce and in-person sales, with the additional option of store pick-up.
The firm, part of the Avon holding, estimated at the beginning of the week that it will be able to increase its gross margin in Latin America this year, supported by a strategy of simplifying operations and "tactical" price increases.
"We see room for gross margin expansion in Latam," said João Paulo Ferreira, CEO of the firm for Latin America, in a conference call with analysts after the partial publication of its financial statements for the fourth quarter of last year.
According to Reuters, the executive did not specify a goal, for this year, but in 2023 margin was 63.8% in the region compared to 59.7% in 2022. However, financial director Guilherme Castellan confirmed that the company continues analyzing price increases. "We will be more tactical in this, depending on the country and the macroeconomic situation," he said.
"But, in general, we see room to continue increasing the gross margin, even with cost pressures from some regions," Castellán reinforced.
Yesterday, the firm revealed its financials for 2023, emphasizing that good results reflect the benefits of the strategy defined and implemented 18 months ago, focused on profitability and cash conversion rather than on revenue growth, the integration of the Natura and Avon brands in Latin America and the divestment of non-core assets to deleverage and simplify corporate structure.
Natura &Co consolidated net income in 2023 was 26,700 million reais (US$ 5,362 million), 3.5% more than in 2022. Net profit amounted to 3,000 million reais in 2023 (about US$ 602 million ) compared to a net loss of 2.8 billion reais (US$562 million) in 2022. The adjusted EBITDA went to 2.7 billion reais (US$542 million), and the adjusted EBITDA margin increased 310 points in the year, showing progress in all quarters.
For the company, these results reinforce the coherence in the execution of the financial and operational strategy throughout the year. This includes growth in Latin America, from Brazil (which increased 8.6% compared to the previous year) to the accounting effects of Argentine hyperinflation in the fourth quarter.
Another factor that boosted the firm's profit was the sale of Aesop - concluded in August - for US$2.6 billion. The proceeds from said sale also contributed to Natura &Co's solid net cash position at the end of the year, of 1.7 billion reais. With this and the amortization of 60% of the total debt, the debt/EBITDA ratio became (-0.79x in 2023 compared to 3.5x in 2022.
According to the information released by the firm, this was partially offset by expected declines, both in Avon Latin America (due to the implementation of the so-called “Wave 2”) and in Avon International (related to the reduction of the base of consultants and portfolio optimization strategy).
“At the same time, there was an improvement in the expense structure of the two brands, with an emphasis on the transformational savings generated at Avon International,” the firm announced.
The improved profitability is primarily attributed to gross margin expansion, driven by effective pricing strategies, product mix improvements and product portfolio optimization, along with reductions in general and administrative expenses.
BRAND INTEGRATION
The learnings of 2022 and the successes of 2023 laid the foundations for the ambitious horizons that Natura wants to achieve in 2024.
“Despite the still volatile macro environment in Latin America, we started 'Wave 2', our most important strategic project, which aims to integrate the Avon and Natura brands in the region,” says Fabio Barbosa.
“Projects are underway in Brazil, Peru and Colombia, and lessons learned have already led to a smoother implementation process in Chile earlier this year (…) We continue to expect revenue volatility, but with improved profitability in the year, especially in Argentina," said the CEO.
All so that the holding company is more agile in its corporate strategy, since this way the business units operate with greater autonomy.
“Our simplification agenda made significant progress thanks to the divestments of Aesop and The Body Shop, which allowed us to pay off debt and end the year with a solid cash position. The positive free cash flow, together with a much more solid balance sheet, allowed us to begin to optimize the capital structure, and with this we announced the payment of 979 million reais (US$ 196.6 million) in dividends for this year," added Barbosa.
The group's most recent moves have been the delisting Natura&Co from its ADR (American Depositary Receipts) program at the New York Stock Exchange (NYSE) in January 2024, and in February a relevant event was announced - a possible spin off of Natura &Co Latam and Avon, releasing the full potential of both companies.
CHILEAN EXPANSION
Back to Chile, just before the store opening in Mall Plaza Egaña, Ezequiel Monis, Natura's marketing and sustainability manager, tells América Economía that sustainability is part of the core of the company.
“Sustainability from the beginning has been part of the leadership team, the organization and the company board, which also speaks of our commitment. We are launching the Biome line here in Chile, as the first country outside of Brazil to have the products, to test the public's reception,” details Monis.
Data from market research companies support them: a GFK study states that there are a number of consumers who make final purchasing decisions according to the sustainability of a brand or a product. Especially amongst Generation Z.
That is what Natura aims for.
The team says they are happy after the experience of the performance of both the Las Condes store and the opening of the new Plaza Egaña store, part of a strong expansion plan for this year, which they hope to leverage in the second half with an e- commerce available throughout the country.
“It's going to be a great year for Natura here in Chile, where we have a very strong store expansion plan. And not only expansion, but investment. I think it will be one of the years with the greatest investment in advertising, in marketing strategy to reach the consumer and to create awareness of the brand. Also, last year we started an official platform within Mercado Libre. So, today the idea is that the consumer can find us wherever they want,” concludes Monis.
