Avon Products Inc. Has Filed for Chapter 11 Bankruptcy Because of Growing Talc-Related Liabilities

August 21, 2024

On Monday, August 12, 2024, Avon Products Inc. initiated Chapter 11 bankruptcy proceedings to address its financial obligations and legal challenges arising from allegations that its talc-based products caused asbestos exposure, leading to severe health issues such as mesothelioma.

Avon faces over 380 pending injury claims and has already spent $225 million in court costs defending itself against personal injury lawsuits and settlement payments. As stated by the company's chief restructuring officer, it lacks the funds to handle ongoing and potential legal cases. The company’s total debts amount to $1.3 billion, with liabilities associated with talc claims totaling $78 million.

Avon is selling its operations outside the United States to Natura & Co., a company based in Brazil. Natura & Co. bought Avon in 2020. After Avon finishes its bankruptcy process, Natura plans to buy its non-US operations for $125 million and provide $43 million in Chapter 11 financing to support Avon during bankruptcy. If Natura succeeds, it will gain control of Avon's businesses, free from their debts, and plans to reduce $530 million of the $1.27 billion it is owed.

Established in 1886, Avon is renowned for its sales of cosmetics, skincare, perfume, and personal care items and its iconic "Avon lady" sales representatives. In 2023, the "Avon lady" sales channel contributed to 87% of the company's net revenue. Despite its long-standing success, Avon has faced declining revenues in recent years due to factors such as inflation, the COVID-19 pandemic, the war in Ukraine, and increased competition.