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Mass Picks Up Slack from Premium’s Decline

By: Carrie Lennard, Euromonitor International
Posted: November 5, 2010, from the November 2010 issue of GCI Magazine.

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Eastern Europe was the region in which fragrance was the least resilient during the recession—growth was 3% in 2009, down from 11% the previous year. Although the category was far from being at the saturation point before the recession, many consumers had accumulated enough fine fragrances through previous purchases and were able to delay their next purchases. There was evidence in the region of trading down from premium to mass scents, as well as to smaller bottles.

Mass Fragrances Outperform Premium Scents

Global sales growth was poor in mature regions such as North America (-6%) and Western Europe (0%). Those markets are dominated by sales of premium scents, which account for 78% of total fragrance sales in North America in 2009, for example, but was boosted by strong growth in mass-dominated emerging regions, such as Latin America where disposable incomes rose. This led to overall growth of 4% globally in 2009.

There was little evidence of a trade down from premium to mass fragrances in Western regions. Despite the credit crunch occurring in Western Europe and North America, many consumers in Western regions are buying fragrances less frequently rather than trading down to less expensive brands. This is because mass scents also have a somewhat negative image among some consumers in many Western European markets.

Private Label Fails to Make Advances in Fragrance

There were unprecedented levels of private label penetration in many areas of the beauty industry in 2009. However, retail brands are yet to have an impact in scents. Despite the advances made by private label in other categories, private label’s share of global fragrances remained at just 0.5% in 2009, according to Euromonitor. Private label is only really prevalent in North America and Western Europe, where premium scents dominate, and most consumers are unwilling to trade down to mass brands, let alone private label fragrances. Even in countries where private label’s share is very high overall in beauty and personal care, such as Germany (12% in 2009), private label’s share in fragrances is still far below its total beauty and personal care share, at just under 4%.

Fragrances are perceived in most countries as luxury goods and are expected to see little shift in distribution in the next few years. Private label’s share of fragrances is expected to remain marginal, especially compared to other beauty categories, as consumers perceive fragrances as a little luxury, something not associated with private label products. Scents are still primarily bought as a gift or an aspirational product, meaning consumers are not comfortable buying inexpensive fragrances. There also is often a perceived lack of quality in private label scents.