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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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In recent years, the cult of celebrity helped drive sales in fragrances with more shelf space devoted to pop stars, actors, fashion labels, models and even authors. Although the risks of celebrity endorsement are apparent—the selling power of particular icons is only as strong as their image—the trend shows no sign of abating. Kylie Minogue is the latest star to jump on the bandwagon with an agreement with Coty, which also works with Jennifer Lopez, Sarah Jessica Parker and Victoria and David Beckham.

Coziness with celebrities also has proved successful for Elizabeth Arden, with carefully chosen stars used to generate appeal among a range of consumer groups. With Britney Spears and Hillary Duff targeting the teens to 20s segment, the company is hoping for a hit among baby boomers with its Danielle Steele fragrance.

As the celebrity trend becomes more mature, this focus on catering for diverse demographics will enable manufacturers to eke out the sector’s maximum potential. Expanding the consumer core by creating perfumes for new groups such as babies has contributed to sales. Givenchy, Guerlain, Burberry and Bulgari have launched baby fragrances in the U.S., and if fruitful, could take these to other markets.

Tough Run Ahead

Although the power of celebrity remains strong, some of the more innovative launches this year include unusual brand partnerships, such as Eau de Stilton in the U.K. and International Ltd.’s Beautimatic Fragrance Pour Homme in Egypt. The likely success of such novelty launches is questionable.

Strategies more likely to be prosperous in the long-term are those that focus on protecting share in developed markets, and capturing the potential that exists in emerging markets by ensuring endorsements are adapted to local preferences. For example, a fragrance from Bollywood actress Amisha Patel could prove popular in India. With a forecast CAGR of 2.2% to 2010, significantly lower than that of mass fragrances, manufacturers will not have an easy ride.