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Fragrance Markets: Reinvigorating Fragrances

By: Briony Davies
Posted: October 2, 2007

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Mature Markets Expand
Performance in 2006 was not solely due to new wealth in emerging markets; sector players have also been striving to reignite growth in the developed regions. Together, Western Europe and North America account for nearly 60% of fragrance value sales, and both regions are marked by high launch rates, short shelf lives for new scents and competitive, fragmented markets. Despite these difficulties, companies are beginning to succeed in lifting value growth, and both markets saw gains of more than 2% in 2006.
Premium fragrances are driving growth in both Western Europe and North America, but the lower end of the segment and discounting are driving dynamism. In the U.S., for example, manufacturers are exploiting the migration of consumers toward mass retailers with innovative strategies to suit this channel.

Tapping into Wider Trends
Increasingly, the industry is using color trends as inspiration for new scents. U.S.-based Arylessence works with color forecasters to create a palette that conveys an identified trend, which it then translates into notes and accords. The company was inspired, for example, by a palette that includes coral and deep blue (based on a lifestyle trend Arylessence termed “Exotica,” epitomizing freedom, escapism and adventure) to create fragrance combinations of green curry and mango, and Tahitian sugarcane and papaya. Arylessence also illustrates how fragrance companies are increasingly tracking food fads as predictors of future scent trends.

Limited editions are another way for fragrances to stay fresh and to cut across the constant hype in such a launch-heavy sector to stand out from the other product launches. They often tap into a high profile event of the moment to benefit from the publicity surrounding it, or mark the coming of a new season or holiday. Thierry Mugler, for example, introduced a limited edition box set of fragrances linked with the 2006 film Perfume: The Story of a Murderer.

Speciality fragrances are emerging as a fast-growing niche, and artisanal fragrances are helping to revive the industry’s status as an art form. It also helps to educate consumers how ingredients react with the body’s own perfume to smell differently on different people. What all this means for the industry is a more discerning consumer, a reinvigoration of the premium fragrances segment and a willingness to trade up for quality.

Future Focus on the East
The outlook is rosy for fragrances, which is forecast to keep pace with the overall cosmetics and toiletries market at a steady 3% yearly through 2011. This demonstrates that efforts to generate greater demand worldwide are paying off. Yet, there is still more that manufacturers could do to lift sales, primarily by attracting consumers in the little-penetrated Asia-Pacific market.