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Fragrance in Good Times and Bad
By: Jeb Gleason-Allured
Posted: October 5, 2009, from the October 2009 issue of GCI Magazine.
- Consumption will not stop for prestige beauty, but consumption habits have changed.
- Fewer launches and line expansions are expected, with the middle market absorbing the biggest hit.
- In times of decreased spending, fragranced consumer products categories suffer to a lesser degree than fine fragrances.
Fine fragrance has suffered the effects of fewer shoppers buying fewer fragrances as a result of the global financial crisis, particularly in the developed world. As a consequence, retailers are destocking and brands are putting new launches on hold. As a recent NPD Group report (www.npd.com) put it, “2008 was different.”
Refocusing the Fine Fragrance Market
In 2008, NPD notes, U.S. prestige fragrance sales totaled $2.68 billion, down 6% from 2007.* Women’s sales dropped 5%, while men’s fell 8%. “However,” the report states, “sales of higher priced gift sets (those priced from $60 to $100) were a bright spot for the fragrance category.” These higher-priced fragrance gift sets represent 65% of 2008 gift set sales, up from 40% in 2005. This “sweet spot,” as NPD calls it, has “grown in both dollars (+12%) and units (+11%) and posted double-digit growth in 2008.” Simultaneously, men’s launches decreased 20%, while women’s actually rose 9%—notably Viva La Juicy, Estée Lauder Sensuous, Ed Hardy and the Harajuku Lovers collection. “Today, [brand owners] are saying, ‘I need to invest more in my basic brands and classics,’ ” says Michael Carlos, worldwide president of Givaudan’s fragrance division. “Everybody is putting more money in classic fragrances to promote them better, sometimes enriching their quality at the same time.”
As for the future, Carlos wonders if the age of endless line extensions and myriad brands is over. “I think you will see fewer launches, [with] everything much more structured and much deeper,” he says. “The market in fine fragrances could be more differentiated between, on one side, aspirational designer brands and then having a lot of mass brands. A lot of what’s in the middle of the market could very well disappear. Fragrance houses will have to adjust to the situation.”
Carlos wonders, “Once we get out of this crisis, is that [fine fragrance] market going to come up or not?” Consumers, he says, may ask themselves, “‘Do I need my five or six scents?’ This is where we have to be aware of what’s happening.”