The Strategic Direction of Natura &Co
Natura &Co's sweeping structural reorganization has reached a decisive milestone. By initiating the final step of its corporate simplification and capital restructuring phase, the Brazilian company is turning the page on its global expansion to kick off a new growth cycle. According to press releases published by Natura's Investor Relations, this new strategic phase focuses on Latin America, a region where the company already maintains a leading position in the beauty and personal care sector.
This pivot is accompanied by a major shift in corporate governance. João Paulo Ferreira officially stepped down as CEO at the end of September after a decade in executive roles, a period during which Natura tripled its revenue and consolidated its leadership in Latin America.
Key Takeaways
- International divestment: The group has entered into a binding agreement to sell off its international operations to streamline its capital structure.
- Focus on profitability: The strategy centers on a geographic region that generates a 14.6% recurring margin.
- Local innovation: The company aims to bolster its market position through local seed funding.
How has Natura &Co streamlined its operations?
To finance this strategic shift, management has dismantled subsidiaries located far from its geographical core. The company detailed the signing of a binding agreement for the sale of its Avon International business to the investment fund Regent. This asset transfer covers markets in Europe, Africa, and Asia, marking a retreat from the Northern Hemisphere. The finalization of this transaction specifically excludes Avon's operations in Russia.
Optimizing the regional portfolio
The streamlining process also extended to the peripheral regions of the Americas. As a result, the group divested its operations in Central America and the Caribbean, which were grouped under the Avon CARD entity.
This division, encompassing the brand's activities in Guatemala, Nicaragua, Panama, Honduras, El Salvador, and the Dominican Republic, was sold to the PDC Group for €20 million. By offloading these markets, the company is concentrating its logistical and financial resources on South American economies, which offer better economies of scale.
Why divest from Europe in favor of Latin America?
The planned sale of the Avon International entity highlights the diverging business environments on either side of the Atlantic. The European market requires an increasing number of substances, such as fragrance allergens, to be individually listed on packaging.
These requirements lead to large-scale product reformulations and relabeling. This inevitably creates new operational burdens for any distributor wishing to operate on the European continent.
The profitability of the South American market
Conversely, Latin America offers the Brazilian group a particularly resilient bedrock of profitability. Consolidated results demonstrate the appeal of this strategic retreat: for the fiscal year, Natura's recurring profitability (or continuous operating margin) in Latin America reached 14.6%, a notable increase of 130 basis points (1.3 percentage points) compared to the previous year. This momentum even accelerated at the end of the year, with the region's recurring EBITDA margin (the indicator measuring operating profit before interest, taxes, depreciation, and amortization) peaking at 16.1% in the fourth quarter. These financial indicators stand in stark contrast to the structural costs inherent in maintaining a global presence.
What financial challenges are still hindering profitability in Brazil?
While the strategic refocus on Latin America is driven by a logic of profitability, on-the-ground operational execution remains subject to macroeconomic uncertainties. The published financial statements reflect the headwinds the group is facing in its domestic market.
A strained first quarter
The beginning of the year revealed vulnerabilities within the distribution network. In the first quarter, the company reported a net revenue of 4.7 billion reais. EBITDA stood at 346 million reais, limiting the EBITDA margin to 7.3%. This performance stems directly from a broader economic slowdown in Brazil, coupled with a decline in overall activity and a drop in the number of active sales representatives.
These early-year results also bore the brunt of the Avon integration. The relaunch of operations in the Argentine market, following the merger initiated in the second half of the year, weighed heavily on structural costs.
Operational hurdles in the second quarter
The second quarter confirmed these strains. Total revenue reached 5.2 billion Brazilian reais, but profitability in Brazil faced several hurdles. The group reported product shortages across certain lines due to supply chain disruptions. Temporary tax timing differences and a sluggish domestic consumer environment also constrained the company's ability to maximize its local margins.
How is the market adapting to the inclusive shade trend?
The strategic focus on Latin America, a region characterized by immense phenotypic diversity, aligns with a market context that demands greater personalization. According to a report by Grand View Research, competition in the color cosmetics market is heavily shifting toward complexion-driven innovation.
Brands must now offer inclusive shade ranges formulated to suit a wide variety of skin tones, which is shifting production standards and forcing legacy players to significantly expand their pigment variants. At the same time, consumer behavior is evolving toward multifunctional cosmetic solutions. Today's buyers prioritize complexion-focused cosmetics that require an exact match, not just in shade, but also in undertone.
What role does local innovation play with Natura Ventures?
To ensure a steady pipeline of local innovations and stay ahead of new beauty tech trends, Natura &Co is deploying a strategy of direct investment in early-stage companies. The goal is to structure a venture capital ecosystem tailored to its regional ambitions.
The launch of the Brazilian seed fund
According to an article in the trade publication BeautyMatter, the company has launched Natura Ventures, a new investment arm based in São Paulo. Co-managed with impact investing firm Vox Capital, this structure boasts an initial commitment of 50 million reais (approximately €8.5 million) spread over three years. The funds are earmarked for investment tickets ranging from 2 to 10 million reais, aimed at backing up to 15 Brazilian seed-stage beauty startups.
How is the company improving its environmental footprint?
The refocusing on the South American market is also underpinned by the strengthening of the company's environmental track record, a vital intangible asset for a group whose identity is historically intertwined with Amazonian biodiversity. This positioning is supported by concrete impact metrics.
The company has prevented the emission of more than 1.8 million tons of CO2 since 2007, conserved over 21,000 hectares of Amazon rainforest, and reduced or removed over 4.7 million tons of carbon. These actions bolster the brand's image among local consumers who are increasingly demanding when it comes to ecological traceability.
What is the future outlook?
By divesting its international assets to forge a highly integrated regional base—backed by a network of local startups—the company has successfully built a highly specialized infrastructure.
