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Growth for the Long-term

By: Briony Davies
Posted: October 5, 2006, from the October 2006 issue of GCI Magazine.

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Manufacturers are exploiting the migration of consumers toward the mass retail environment with innovative strategies geared to this arena. Elizabeth Arden introduced its Curious Britney Spears premium fragrance into the mass market channels to great success, with specially designed smaller packages at price points under $20. Although economic recovery and increasing consumer confidence is in part responsible for the revival of premium fragrances here, manufacturers in other regions can rest assured that creativity and perseverance can go some way toward rescuing a floundering sector.

Waning Sales in Western Europe

The performance of Western Europe, which recorded growth of slightly more than 1%, has been blighted by the region’s present economic difficulties and the increasing availability of premium fragrances through mass market channels and the Internet that brings down unit prices.

France remains the undisputed champion in Western Europe’s fragrances, topping the $10.4 billion sector with a 22% slice. Yet, Spain is rising up the ranks with growth momentum that is expected to see it overtake Germany by 2010, closing the gap on France. The latter has hit saturation point, with sales declining every year for the last three.

Despite this, celebrity and fashion label fragrances have proven unceasingly popular, a phenomenon that has helped sustain the high-end segment, as have the advent of one-off, customized scents and the surprising comeback of old favorite brands. Expanding the consumer core by creating perfumes for teens, tweens and even babies has also contributed to sales. Men’s fragrances are proving more dynamic in the premium segment than the sector as a whole, signalling this as another area with value-generating potential.

Emerging Stars

Eastern Europe, Africa and the Middle East (AME) and Latin America have been the star performers in premium fragrances since 2000. All are benefiting from rising disposable incomes, the influx of women in the workforce and the inspirational nature of these products.