- 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
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.”
Karen Grant, NPD’s senior global industry analyst and vice president of beauty, notes, “In 2009, we recognize that while consumption will not stop for prestige beauty, it has changed. It has become more careful, more selective and more meaningful. Across all three prestige beauty categories, there were areas that experienced growth despite overall soft performance. We saw growth in premium price, natural and new innovations among trusted brands as well as alternative brand types.”
Resilience Seen in Other Fragranced Consumer Product Categories
Opportunities: Developing Markets and New Categories
“The developing world is growing much faster than the developed world,” says Carlos. “I think that’s going to be further accentuated as a result of this crisis. One would expect that in the BRIC (Brazil, Russia, India and China) countries, where growth rates were very high for the past few years, we will still get fairly decent growth rates moving through 2009 and 2010.”
Globally, he notes, “The challenge is: How do we build some potentially new categories in which fragrances can really deliver? There’s a lot of data out there that says consumers will pay a premium for products, provided they see an inherent benefit. [For example], there’s so much noise being made in the United States about cold-water washing detergents and how environmentally friendly they are. It’s hugely reducing the consumption of electricity. There is an inherent economic advantage. [Consumers’] normal cost of wash is greatly reduced. There will be opportunities, provided you can prove you’re bringing some benefit either economically or [via] a brand point of view, which is very important to a final customer.”
Courtesy of Perfumer & Flavorist magazine.
*NPD Group defines prestige beauty, as it pertains to this report, as “fragrance, makeup, and skin care products sold mainly in U.S. department stores.”
Jeb Gleason-Allured is the editor of Perfumer & Flavorist magazine.