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The month of May usually brings a flurry of holidays in France, the first reluctant blossoms in New York and an inescapable outpouring of new fragrance propositions everywhere.
For the last few years, this has been a time of swelling confidence. But the signs are harder to read this year, judging from the latest figures from the NPD Group, which indicate that the U.S. department-store fragrance business is still shrugging off the aftereffects of its anemic holiday performance, which was saved from oblivion only in the last couple days before Christmas. For the first quarter of this year, department-store fragrances were up 3 percent, according to NPD figures adjusted for the extra week in January.
Using the same parameters, skin care was 7 percent ahead for the quarter, makeup advanced by 6 percent and the entire beauty category gained 6 percent. In the first quarter of 2012, fragrance was ahead by 11 percent, nearly four times this year’s rate of growth. “Fragrance is in a state of repair and rebuilding; it’s recovering and building up momentum,” observes Karen Grant, vice president and global beauty industry analyst at NPD. True, the business has gloried in a dramatic upturn since 2010, but that renaissance started in the pit of a long decline that began in the early days of the millennium.
As for this year, an optimist could look more closely and find some sprouts hinting at a bit of promise in a business that has become a little more fragmented. When NPD looks at the market by olfactive groupings, it is evident that the artisanal and smaller niche players have gained a foothold. For instance, the mandarin category was up 54 percent for the first quarter, adjusted for the extra week in January. Neroli jumped 65 percent in the same period. But the most potent statistic of all is the continued popularity of fragrances priced $100 and above, as the public continues to crave quality. For all of 2012, that category grew by 48 percent—in units, not prices. And the figure does not include gift sets. Considering that this subcategory is less than 10 percent of the $2.9 billion U.S. fragrance market, it represents “a huge opportunity” for growth Grant says. That success could give major manufacturers a bit of license to take some chances. “What is happening in the niche and high-end categories is allowing them to be more experimental and try new things olfactively,” Grant adds.
Another factor is that the cosmetics-department heavyweights are reentering the market. Lancôme’s La Vie Est Belle was one of last fall’s standouts; this year, the Estée Lauder brand will step into the fray with Modern Muse, its first major women’s entry in nearly a decade. In addition, Lauder’s Aramis & Designer Fragrances division will introduce its highly anticipated Tory Burch fragrance and has added scents to a daring Michael Kors color cosmetics and beauty brand. Meanwhile, Coty is planning to make a major statement with Calvin Klein and Procter & Gamble is following last year’s Gucci Premier women’s fragrance with a men’s version this fall. “I hope it will be a good year,” Grant says. “We’ve got some good things happening.”
At the supply end, the equation looks promising. “Innovation is at the forefront of every discussion,” observes Nicolas Mirzayantz, group president of fragrances at International Flavors & Fragrances Inc. Companies—across product categories including personal and fabric care—are beginning to invest in building pillars to protect brand equities. Mirzayantz applauds the participation of the beauty leaders, lending their support to the fragrance category as an integral participant in the holistic experience of beauty, along with color cosmetics and skin care. “The ritual of beauty is all about celebration,” he says. “The consumer is coming back into the category with a stronger appreciation of [worth].” In addition, he says he is beginning to see some companies across the product spectrum begin to invest more on product development.
Jerry Vittoria, president of fine fragrance in North America at Firmenich, says that while the broad market has found growth difficult, “the luxury side is getting bigger and bigger. Everybody is sitting up and taking notice. The consumer wants that quality.” He points out the across-the-board effort made at Lauder this year and Coty’s push behind specialty-store brands like Marc Jacobs, Balenciaga and Bottega Veneta. Clearly the need for more innovation—“more quality in the bottle”—has become apparent. “The juice in the bottle has to be something people haven’t smelled before,” he says.
Howard Kreitzman, vice president of cosmetics and fragrances at Bloomingdale’s, says he is looking forward to the launch of the Tory Burch fragrance this fall. He also points out that the store has had a strong track record with high-end fragrance lines like Jo Malone and Tom Ford Private Blend. Bloomingdale’s currently is reaping strong sales results with Acqua di Parma, which it carries in eight or nine stores. “The challenge for us are those fragrances in broad distribution,” he says, explaining that the launch figures may be strong, but as distribution expands “our customers seem less interested.”
Niche fragrances have become an avenue of growth, agrees Karyn Khoury, senior vice president of corporate fragrance development worldwide at the Estée Lauder Cos. Inc. The appeal of these fragrances is “the incredible quality in the product that the consumer can smell and perceive,” complete with a personality and signature. Khoury adds, “The consumer is telling us she wants the quality and the richness.”
That lesson has never been lost on Veronique Gabai-Pinsky, global brand president of the Aramis & Designer Fragrances division of the Estée Lauder Cos., who has always pursued the artisanal quest for uniqueness. “What’s growing is the super-high end,” she says, admitting that the volume is “very small. But it is growing.” What drives these brands is “appetite for authentic stories and an appetite for quality.” She adds that consumers want to hear “what the fragrance has to say, not what the marketing has to say.”
As an example, she points to her to Ermenegildo Zegna Essenze fragrances that involved buying an entire crop of bergamot in Italy, which combined uniqueness with a genuine story. She observes, “If you do a good job creating something unique and authentic, it will work.”