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The fragrance segment’s position as a discretionary category meant it was inevitably going to be hit during the economic downturn. While consumers still need to bathe and clean their teeth, resulting in relatively consistent growth rates for bath and oral care, fragrances were far more at the mercy of consumer whims. According to Euromonitor International, global fragrance growth slipped one percentage point to 4% in 2009.
However, even before the onset of the recession there were cracks appearing within the industry—value growth had already fallen from 7% in 2007 to 5% in 2008. Could it be that the recession is, in fact, the least of the segment’s worries?
As consumers opted to cut their spending on fragrances, many brand owners have carefully chosen lower risk strategies for new product innovations. Brand extensions accounted for the bulk of new launches in 2009 and continue to do so in 2010. Extensions remain a popular way for brand owners to introduce new fragrances requiring less risk and marketing spend compared with launching a totally new brand.
But how will this tactic affect the segment in the long term? Some suggestions from within the fragrance sector indicate the vast number of new fragrance launches and increasingly crowded marketplace will actually damage the industry over the longer term. The saturated scent market arguably has contributed to consumer confusion and apathy, making it very difficult for a brand to stand out.