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New Strategic Challenges for Fragrance
By: Rob Walker, Euromonitor International
Posted: November 1, 2011, from the November 2011 issue of GCI Magazine.
- A key trend is likely to be a greater emphasis on the personalization of brands, particularly in the higher value developed markets.
- Gen Y is the key consumer target across developed markets, and a clear differentiation in marketing and advertising, as well as scent, for personal, even intimate engagement through real and virtual platforms, will be required to entice its tech-savvy and demanding shoppers.
- Limited edition branding is likely to become increasingly visible in fragrances, creating an aura around an umbrella brand.
According to Euromonitor International, the fragrance market rebounded quite strongly from the 2008 global financial crisis, fueled by upbeat demand in emerging markets—notably Brazil and Russia. But as consumers brace themselves for the prospect of a double-dip global recession, and as discretionary spending gets squeezed by rising food prices, even in fast-growing emerging markets such as China, points of differentiation between products will become more important if companies are to protect their bottom lines.
What lessons can be drawn from the post-Lehman Brothers era, and how is the strategic playing field for fragrances likely to evolve in the event of a new, potentially more acute global economic slowdown?
Latin America Throws Lifeline Post-2008
When the global credit bubble burst in 2008 and the walls of once seemingly formidable financial institutions began to crumble, the fragrance industry—spearheaded by the likes of L’Oréal, Coty, Procter & Gamble, Avon and LVMH—found a modicum of respite in the emerging markets, particularly those in Latin America.
Brazil, Argentina and Mexico were three of the world’s top five growth markets for fragrances between 2008 and 2010—measured in terms of incremental U.S. dollar value—generating approximately $1 billion of additional retail business between them, according to data from Euromonitor International. Avon Products Inc., for example, picked up $125 million of new retail business across the three markets.