Susan Kropf & Andrea Jung

Avon Products

Andrea Jung woke up on Jan. 3, 2002, to potential disaster. The Argentine peso had been devalued, the economy was reeling, and Avon Products Inc. (AVP ), the company Jung heads, was going to feel the pain: New York-based Avon relies on Argentina for 5% of its sales. Jung had promised investors earnings of $2.30 a share, and in one devastating moment 5 cents per share had been wiped out. A few months later, Brazil, another important market, went through a similar crisis.

Jung and her No. 2, Chief Operating Officer Susan J. Kropf, have faced quite a few international business and currency challenges since their promotions in late 1999. "There hasn't been an easy quarter since I took over," says Jung, 44. Even so, Avon's stock price climbed 19% in 2002, compared with an average 2% drop for personal-products stocks.

While Jung has updated the Avon product line and launched new ads featuring tennis stars Venus and Serena Williams, it was the more mundane changes that helped Avon overcome its South American problems while improving gross margins. An internal overhaul, which Kropf is overseeing, has already cut 10 days off its inventory turns, reduced product development cycles by more than 40%, and should trim total costs by $230 million during the next three years. "It's never over," says Kropf, 54, a 32-year Avon veteran. "You just keep jumping the bar."

Argentina was ugly, but Avon has done beautifully in many overseas markets in 2002. Central and Eastern Europe is now a $500 million market. Sales in China have increased 30%. And the number of Avon reps in the U.S. is growing for the first time in years. That's a cosmetic improvement that really means something.

KEY ACCOMPLISHMENTS

-- 2002 will be Avon's third consecutive year of double-digit EPS growth

-- The number of active representatives is also growing--up 10% in the most recent quarter

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