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The Only Way is Up

Contact Author Oru Mohiuddin, Senior Beauty and Personal Care Analyst, Euromonitor
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The global fragrance market in 2015 was marked by an impressive recovery, reaching $45.7 billion, up 6% over 2014, the fastest growth recorded over 2010–2015 (see F-1).

For the first time, premium fragrances exceeded the growth in the mass segment, gaining close to 7% in 2015, compared to 5.7% for mass. Investment in niche perfumery, personalization and exclusive collections are producing the desired impact as premium players increasingly seek to garner a piece of this lucrative market.

Trading Up Goes Global

Regional dynamics show evidence of an expanding consumer base trading up to premium brands, resulting in slower growth in mass fragrances, including the traditionally mass-orientated Latin American region.

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Fearing a stagnant market, several fragrance houses responded by innovating with alternative formats and customizable options, such as Chanel’s purse spray formats and Philosophy’s My Philosophy Perfume Collection for mixing one’s own fragrance.

Fewer Scents, More Impact

Reviving the market also requires curbing excessive launch activity in favor of fewer but more impactful perfumes. For example, Jean Paul Gaultier, which witnessed flagging sales over 2010–2015 (-1.2% CAGR), was regained by Puig in 2016.

Fragrance players active in the resilient luxury segment have seen their market positions strengthen.

Puig plans to launch the first major fragrance in 2017 to allow time to reinvent the brand narrative and elevate its status by streamlining its portfolio and focusing on the two main collections: Classique and Le Male. Doing so may require a complete rethink of the human body bottle shape, a concept that may have been rendered irrelevant to today’s consumers.

Strategic Acquisitions to Proliferate

Several acquisitions of niche perfumeries also characterized 2015, including Penhaligon’s and L’Artisan Parfumeur by Puig, Serge Lutens by Shiseido, and Editions De Parfums Frédéric Malle and Le Labo by Estée Lauder, which has more recently consolidated its luxury portfolio with the acquisition of By Kilian, purveyor of bespoke perfume and scented jewelry.

Fragrance players active in the resilient luxury segment have seen their market positions strengthen. This helps minimize risk and bolsters an image of a genuinely luxury player. In addition, playing in the luxury segment has become crucial, especially as consumers seek individualized scents.

Niche perfumeries convey a unique value, experience and a story to the fragrance user.

These scents’ limited availability and infrequent launches are a driving force for accelerated growth. The high markups fortify the brands’ market share and profitability. This, in turn, funds further development in personalized scents and expansion by way of tactical distribution—such as by opening stand-alone stores—that is reinforced the brand DNA.

There are caveats that luxury brand acquirers cannot neglect. Niche perfumeries convey a unique value, experience and a story to the fragrance user. Hence, entrapping a niche brand in company politics risks diluting its value.

While integrating niche brands and exploiting synergies may seem like a profit-boosting measure, sustaining the brand narrative requires that such brand owners are granted autonomy and the ability to continue working independently to remain truly unique.

Active Innovations

The popularity of niche offerings and near-customization is creating the impetus for more defined innovation that aligns with evolving lifestyles. In skin care, anti-pollution is gaining ground as more consumers live in urban congested cities, while tea players now boast a wide range of energizing teas to help consumers with demanding lifestyles to improve their health and wellbeing. The fragrance industry has a contribution to make. 

Scent will remain the core product, but digital natives visit stores with a fountain of knowledge, prerequisites and a set of brands already in mind.

With the rise of energizing teas, drinks and skin care products comes the emergence of mood-enhancing (lifting or calming) fragrances similar to Acorelle’s Extraits d’Emotions and Weleda’s scents, which are aimed at giving a sensorial boost.

Meanwhile, Velds’ Prends-Moi claims to aid weight loss by suppressing appetite. With fragrances set to enhance consumers’ lifestyles around healthy minds and bodies, the industry will be able to expand its growth avenues beyond beauty.

The Next Generation of Fragrance Lovers

These types of innovations, as well as storytelling scents and fragrances suited to aspiring lifestyles, looks and specific events, are likely to resonate well with younger consumers. These digital natives are set to redefine fragrance consumption as their perceptions, and brand preferences are influenced by active bloggers and social media users.

Scent will remain the core product, but digital natives visit stores with a fountain of knowledge, prerequisites and a set of brands already in mind. In addition, perfume bottle design, its alignment with fashion trends and embodiment of a scent, is more likely than ever to influence olfactory perceptions.

Digitally-engaged millennials are also excited by personalization.

Perhaps not all can afford it, but customizable scent is set for democratization. For example, Victoria’s Secret launched the Fantasies Fragrance Studio comprising 19 scents that users can mix and match, while a U.K.-based inventor designed the Perfume Blender that gives users pre-set options to dispense near-customized scents by setting the ratio at which two different “juices” are pumped through the atomizer.

This shows that premium fragrances trends are trickling down to the mass segment—or, to view it in a different light, premium choices are reaching a broader demographic, redefining what can be classified as mass.