By  on February 11, 2011

Party fatigue is setting in for the celebrity fragrance scene.

Nine years ago, Bernd Beetz, chief executive officerof Coty Inc., had the enviable task of appearing onstagewith Jennifer Lopez to unveil the introduction of herfirst fragrance, Glow. That simple act added a new pillarto Coty’s business and hurled an adrenaline jolt into theheart of the fragrance market. It energized an industrythat had begun to suffer from a relevance deficit, asyoung adults stampeded to spend their gift dollarson iPods and designer bags. With an age target of 15- to 25-year-olds, Lopezbrought the answer—first-year sales of $80 million.

That success triggered a rush by fragrance manufacturers to sign up everyceleb with even the slightest name recognition. But a Darwinian process hasbegun to grip the market, separating one grade of celebrity from another. Notevery star can still expect to make it big. “Only the biggest superstars will behugely successful in terms of market share and longevity,”one fragrance marketer sniffs. (Sorry, Snooki.)

Judging from the grumblings of retailers (who are backedup by the latest sales figures), it’s time to change the musicto something more up-tempo—bigger stars and fragranceideas with broader shoulders. Every executive fromdepartment stores to big-box retailers say they are gettingmore selective in picking which celebrity scents to launch.

No wonder. For 2010, celebrity scents hit a 14 percentdecline in the prestige market, according to The NPDGroup. Women’s celeb scents eked out a 1 percent increase,but men’s nose-dived by 48 percent, due to a lack of powerful launches. Admittedly, the category comprises only a small percentage of department store sales. The “locomotive,” as one expert puts it, is the mass market—in particular, the promisedland, known as the Wal-Mart planogram, where celebrity scents once could expectto live happily for five years. Now it’s closer to three, say some experts.

A blockbuster like Beyoncé Heat by Beyoncé Knowles scored twice, explodingfirst in department stores in February 2010, before dropping to 21 by June. (Its firstflanker, Beyoncé Heat Rush, launching this month, is expected to boost departmentstore sales again.) Meanwhile, the original scent was a solid number one on thetop 10 list of mass women’s launches—all of which were celebrity scents—compiledby the Symphony IRI Group, which doesn’t include figures from Wal-Mart. Buteven with all the star power, sales of women’s celebrity scents were up only 1 percentand men’s were down 2 percent, according to IRI.

Celebrity has become the name of the game in mass, commanding the lion’sshare of launch revenue. Victoria Gustafson, vice president of beauty vertical atIRI, analyzed the introductory results of launches over $300,000 for the lastthree years. In 2008, seven women’s celebrity scents generated $10.7 million insales, representing 72 percent of dollars produced by all the launches that year.By 2010, 12 launches produced $24.7 million in sales for a whopping 89 percentof launch dollars.

One mass retailer complains, “The industry ended up doing too many dealswith celebrities. There are too many flankers and not enough advertising.”Another big-box retailer asserts that celebrity brands must evolve into a moresustainable day-in, day-out proposition. She praises Halle Berry for getting behindand promoting her brand, producing consistent results. Virtually everyone pointsto the staying power of Elizabeth Taylor’s White Diamonds, the 1991 grandmotherof celebrity scents that still ranks number one on IRI’s list of women’s brands.

The success of White Diamonds exemplifies the coupling of a wildly popularstar with great product execution. Karen Grant, vice president and global industryanalyst at NPD, draws a parallel with the success of Jessica Simpson’s shoe business.“The styling is wonderful, they’re current and they’re comfortable,” she says of theshoes. “You don’t care that it’s Jessica Simpson. You just say these are great shoes.

“If you want to do it in fragrance, take that same logic and say what can we doto make this a great fragrance—amazing packaging, something novel, somethingolfactively that’s going to excite,” she continues. “The celebrity association is lessthe driver and it is more of a vehicle to get exposure and elevate.”

Even though retailers generally say they’re getting moresceptical about launch propositions, they haven’t lost theirappetite for the big prospects, like next year’s Lady Gagaintroduction from Coty, which is also planning a big newBeyoncé launch in the fall. Anticipation is building for theJustin Bieber women’s launch in the summer and ElizabethArden’s Taylor Swift scent in the fall.

Unfazed by the static over the sales gyrations, Coty’s Beetz sayshe doesn’t pay attention to the ups and downs of the market.What matters, he says, is to focus on the right “pockets ofrelevance to the consumers,” formed by the most viable celebrities.If he can market to that pocket of relevance, his business will thrive, he says,noting that his Playboy, Beyoncé and Halle Berry businesses are all on fire.

Elizabeth Arden, another pioneer in the revival of the celebrity category, is still abig believer in star power, especially with the Swift launch on the horizon. E. ScottBeattie, president, chairman and ceo of Arden, acknowledges that the category isoverpopulated and going through a normal maturation and consolidation process,but he asserts the brands of substance will rise to the top.

Beattie maintains that analysts are sorely mistaken in focusing on the U.S.,which does only 16 percent of the global fragrance business and has flat salesto boot. In comparison, the global business has been showing a 6 percent gainon a compounded basis for the last five years. “American celebrities travel wellaround the world,” he says.

It is axiomatic in the business to look for stars with international appeal—likeDavid and Victoria Beckham. The more units manufactured, the lower the costof goods, the more money available for advertising and promoting and the morebrand awareness. The threshold to long-lived success is breaking through the$50 million net sales barrier, according to one manufacturer.

But getting there is tougher than ever. Says David Wolfe, creative directorof trend forecasting firm The Doneger Group: “The consumer is getting kindof numb. The celebrity fragrance business is probably more successful thancelebrity fashion, but both are at the saturation point.”

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