Natura's Strategic Turnaround and the Implications of the Avon International Sale

Brazil's Natura&Co has embarked on a high-stakes strategic overhaul, pivoting from a troubled global expansion to a focused repositioning in Latin America. The sale of Avon International—a division that dragged Natura into a $1.3 billion debt and a U.S. Chapter 11 filing in August 2023—has become the centerpiece of this transformation. According to a report by Reuters, Natura entered exclusive talks with IG4, a Brazilian private equity firm specializing in distressed company turnarounds, to divest Avon's operations outside Latin America Natura&Co: Charting a New Course for Profitability^[2]. This move reflects a broader strategy to streamline operations, reduce debt, and refocus on core markets where Natura holds a dominant position.

Restructuring Success: From Write-Offs to Recovery

The Avon acquisition in 2019 was initially hailed as a bold step to expand Natura's global footprint. However, the division's financial struggles—exacerbated by a $5.8 billion write-off in Q3 2024—nearly derailed the company's stability Natura Swings Back to Profit, Looks to Sell Avon International^[5]. By Q2 2025, Natura had swung back to profitability, reporting a net profit of $35.8 million, a stark contrast to the $157 million loss in the same period the previous year Avon Products bankruptcy court approval of Natura settlement and $125 million sale^[4]. This turnaround was catalyzed by a series of strategic divestitures, including the 2023 sale of The Body Shop, which reduced its debt-to-EBITDA ratio from 3.5x to 2.8x Natura&Co: Charting a New Course for Profitability^[2].

The Avon International sale, finalized through a $125 million credit bid in a U.S. Chapter 11 court-approved process, further alleviated financial pressure Avon Products bankruptcy court approval of Natura settlement and $125 million sale^[4]. Natura also executed a symbolic $1 sale of Avon operations in six Central American countries to PDC Group, repaying $22 million in receivables and easing debt burdens Natura offloads Avon operations in Central America for symbolic $1 in portfolio streamlining move^[3]. These steps underscore a disciplined approach to deleveraging, with CEO João Paulo Ferreira acknowledging that the Avon-related challenges will persist through 2025 but anticipates tangible benefits by 2026 Natura Swings Back to Profit, Looks to Sell Avon International^[5].

Emerging Market Growth: A New Focus

While Natura's core markets in Latin America have been a lifeline, the company's long-term success hinges on its ability to capitalize on the region's growth potential. Avon LATAM, now a standalone entity, reported 5% revenue growth in Brazil and Mexico in 2024 Natura Offloads Avon International: A Strategic Shift Unfolds^[1]. Natura's Wave-2 project, aimed at optimizing logistics and cost-sharing across key markets like Argentina and Mexico, is projected to drive adjusted EBITDA to R$3.55 billion ($590 million) in 2025 Natura Offloads Avon International: A Strategic Shift Unfolds^[1].

The company's digital expansion is another critical lever. Digital sales currently account for 7.1% of the total addressable market, with significant growth potential as Natura invests in e-commerce platforms Natura Offloads Avon International: A Strategic Shift Unfolds^[1]. This aligns with the global Natural & Organic Beauty market's trajectory, which is expected to reach $150,000 million by 2025, driven by consumer demand for ethical and sustainable products Natura&Co: Charting a New Course for Profitability^[2]. Natura's strong brand portfolio, including Aesop and The Body Shop (prior to its sale), positions it to capture this demand in Latin America, where it holds a 15% market share Natura Offloads Avon International: A Strategic Shift Unfolds^[1].

Implications for Investors

Natura's restructuring has been a necessary but complex process. While the Avon International sale reduces exposure to volatile international markets, it also raises questions about the long-term viability of the brand's direct-sales model. IG4's proposed shift to online platforms for Avon International could mitigate some of these risks, but execution remains uncertain Natura&Co: Charting a New Course for Profitability^[2]. For investors, the key metrics to watch are Natura's debt reduction progress, the performance of its core brands, and the success of its digital transformation.

The company's 2025 guidance—net revenues of R$30.4 billion ($5.07 billion) and adjusted EBITDA of R$3.55 billion—suggests confidence in its new strategy Natura Offloads Avon International: A Strategic Shift Unfolds^[1]. However, short-term volatility is likely, as mid-single-digit revenue declines in Q1-Q2 2025 due to restructuring efforts could test investor patience Natura Offloads Avon International: A Strategic Shift Unfolds^[1]. Analysts remain cautiously optimistic, viewing Natura's pivot as a necessary step toward a leaner, more resilient business model.

Conclusion

Natura's strategic turnaround is a textbook example of corporate resilience in the face of adversity. By shedding underperforming assets and refocusing on its Latin American stronghold, the company has laid the groundwork for sustainable growth. While challenges persist—particularly in transitioning Avon International to a digital-first model—the early signs of recovery, coupled with the region's robust demand for natural beauty products, offer a compelling case for long-term investors. As Natura navigates this transformation, its ability to balance debt reduction with innovation will determine whether this restructuring becomes a success story or a cautionary tale.