Troubled by insurmountable challenges, Avon filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware. This decision was driven primarily by many talc-related lawsuits, mounting debts, and strategic missteps.
Avon faced more than 200 lawsuits alleging that its talc-based products, commonly used in face powders and eye shadows, were linked to cancer risks. The financial burden of these litigations tallied up to $225 million in costs for defending personal injury lawsuits and settlement payments, contributing to more than $1.3 billion in debt.
The COVID-19 pandemic, international trade disruptions, and heightened competition in the beauty industry further strained Avon's financial stability. Despite these adversities, the company's operations are set to continue, with no expected job cuts, as Avon’s North American business has been under the management of LG Household & Health Care Ltd. since 2016. The bankruptcy proceedings aim to offload significant debt and restructure the company’s obligations without hampering core business functionalities.
Internationally, the company's operations will continue unaffected by the U.S.-Based litigation. This is largely because Avon Products Inc. functions as a holding company, with the operational businesses outside the U.S. not part of the Chapter 11 filing.
Notably, Avon’s parent company, Natura & Co, plans to repurchase Avon's trading activities outside the U.S. once bankruptcy proceedings conclude, potentially reinvigorating the brand by shedding some financial liabilities. As it maneuvers through the complexities of Chapter 11, Avon is expected to reassess its strategic direction to better align with modern market dynamics and consumer expectations.
