“How does a fragrance speak to an individual consumer?” asked Karen Grant, senior beauty industry analyst at the NPD Group during Cosmetic Executive Women’s “Fragrance Rainmakers” event in New York. Grant and her fellow panelists addressed the current crisis in the fine fragrance industry and outlined solutions for future success.
Grant noted that seven out of 10 men use fragrance today, while eight out of 10 women do the same. Meanwhile, the number of fragrance users and frequency of that usage continues to decline. The industry saw 2008 sales fall 2%; in 2009, the industry went into the holiday season down 10%. While fragrance is widely beloved by consumers, she said, as an industry “we’re not really able to capitalize on that emotional connection with the category.” Part of the problem, Grant explained, has been the “sameness” of many fragrances, olfactively and otherwise: “It’s increasingly [difficult] to create success today.”
Moderator Jenny Fine of WWD Beauty Biz pointed out that 2008’s the top women’s fragrances were Beautiful, Coco Mademoiselle, Light Blue, Chanel No 5, Cashmere Mist, Happy, Pleasures, Euphoria, Sensuous and Romance. Grant noted that the majority of those scents have been at counter for a number of years. The fact that Sensuous is the only recent addition to the top tier, she said, shows that “it’s very difficult for a new launch to create sustainability.” Still, she said, the remarkable performance and resilience of established fragrances prove that “they continue to be important to women and drive business overall.”
Unfortunately, that sustainability is often driven via promotional means. “As much as 50% of the sales of the top brands are coming from gift sets,” Grant noted. This means that the juice is not driving the sale, a situation that is escalating. Fragrances traditionally introduced gift sets after six or 12 months on the market. Today, however, those sets are often introduced as early as three months into a commercial release. Consumers, Grant said, are increasingly focused on deals and aren’t given time to fall in love with a fragrance. In addition, a new launch is typically going to be off-counter within 12 months, exacerbating the lack of familiarity. Grant added that fine fragrance sales between October and December represent about 50% of sales for the year. More than 20% of the business is done in just two weeks. The stakes are remarkably high. The main reason women buy fragrance is confidence, to feel better about themselves, Grant said. “Companies need to reconnect with that.”
Ann Gottlieb, founder of Ann Gottlieb Associates, concurred. Addressing issues in the U.S. market, she said, “We’re not offering fragrance that inspires and is beautiful and as magnificent as it used to be.” Consumers understand this reality, she said, and take their money elsewhere. Gottlieb added that, “We have abandoned the majority of the market in favor of targeting a 25-and-under consumer. Older consumers feel somewhat neglected.” Meanwhile, she explained, “Younger consumers are not particularly loyal.” In fact, despite the industry’s focus on that group, they represent the largest faction leaving the fragrance market.
Marketers hoping to recapture consumer excitement, Gottlieb continued, could take a page from the niche market, which allows for higher price points and juice quality and thus engages consumers. In addition, older women neglected in other channels may find a home in this arena, fleeing a landscape where “everything is too young for them.” Gottlieb added, “The intrigue and appeal of niche is that you don’t see it everywhere.”
Catherine Walsh, senior vice president of American Fragrances echoed her co-panelists’ sentiments, but provided a more global perspective. Looking at the fine fragrance world from a macro perspective, she said, paints a more nuanced picture. The U.S. market is down 10–12%, with U.S. retailers looking at a holiday downturn alone of 2–12%, she acknowledged. Those same retailers are forecasting a flat market through 2011.
Meanwhile, southern Europe continues to be challenged. However, said Walsh, Australia is poised for strength and China could be up by as much as 10% in 2009. Surprisingly, the U.K. fragrance market is also strong.
In the current environment, she pointed out, leading global brands—Chanel, Dior, Armani, Calvin Klein and Hugo Boss—prove resilient. Dolce Gabbana has actually increased market share by as much as 30%. Scents such as Acqua Di Gio are doing very well. Out of the top five global brands, three have cosmetic lines—Chanel, Dior and Armani—proving there is synergistic capacity.
In addition, Walsh underscored the importance of packaging innovation, embodied by “bold creativity.” In addition to highlights such as Fuel for Life, she said, the Harajuku Lovers fragrance line added “excitement and delight for consumers and retailers,” adding it “brings theater into stores.”
On the subject of celebrity fragrances, Walsh pointed out that Jennifer Lopez remains the third largest brand for Coty Prestige and is sold in some 90 countries. This success, however, highlights issues for other brands due to a general “cheapening of celebrity,” which has resulted in consumer fatigue among tier-one scents. In addition, said Walsh, knowing how consumers wish to relate to a celebrity is invaluable. In the case of actress Sara Jessica Parker, Coty has had varied experiences. Lovely, which was easily relatable to Parker’s television persona, was a success. Covet, meanwhile, which tapped into a different side of the celebrity, proved a bigger challenge. Walsh explained that Coty’s next launch with Parker, SJP NYC, again focuses on the personality that the consumer wants.
Walsh concluded that quality is the foundation of fragrance success, noting that Coty is deemphasizing promotional add-ons, instead focusing instead on value. “Know your brand and its values,” she said. “Don’t steer too far from them; know your audience,” whether local or global, and “let it rip. Bring out the most fabulous, best product you can imagine. It has to be the best product in that department.”