It’s not time for fragrance suppliers to be wallflowers.
This story first appeared in the April 29, 2011 issue of WWD. Subscribe Today.
In a fragrance market characterized by product oversaturation, sluggish U.S. performance, enormous potential abroad, unrealized sales from indifferent and frustrated segments of the consumer population and a shifting retail landscape, fragrance supplier executives agree that sitting on the sidelines isn’t a recipe for success. A period of experimentation is taking root as suppliers and their fragrance brand partners test novel marketing concepts, breach new retail channels and address audiences outside of their comfort zone.
“In the last two to three years, the fragrance world has been on a roller coaster,” said Matt Frost, director of global marketing for fine fragrance and beauty care at International Flavors & Fragrances. “The prestige fragrance market, having been hit by the recession, is still in a little bit of shock and is trying to find its footing again.”
According to The NPD Group, U.S. prestige fragrance sales rose 1 percent — the slowest growth among three prestige beauty categories — to generate $2.5 billion last year. In mass excluding Wal-Mart, SymphonyIRI Group reported dollar sales for the top 20 men’s fragrances dipped 1.76 percent to nearly $193 million and dollar sales for the top 20 women’s fragrances inched ahead 0.3 percent to almost $311 million for the 52 weeks ended Feb. 27.
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Despite the unimpressive fragrance sales, flavor and fragrance manufacturers have rebounded rather impressively from the global recession. According to Leffingwell & Associates’ estimates, sales volume at the top six flavor and fragrance industry players climbed around 16 percent to nearly $14.7 billion in 2010. For the fragrance and flavor niche as a whole, Leffingwell noted company sales grew 10 percent to reach $22 billion in 2010, making the year “remarkably successful with some of the largest year-to-year gains in recent years.”
So, what’s the problem? Buying a fragrance today can be downright confusing, faced with a dizzying array of fragrance extensions. Klaus Stanzl, president, scent and care, global life essentials at Symrise, cited industry data revealing 35 percent of women’s launches are new brands and 42 percent of men’s launches are new brands. “Brands are slowly moving away from launching as many flankers and limited editions as they did in the past,” he said. “This will be a slow transition. I think it will be five years until we see more newness.”
The celebrity fragrance phenomenon, which has helped propel a flanker deluge, doesn’t appear to be fading — at least, yet. “This will be a big celebrity holiday season with several on the docket,” said Cosimo Policastro, executive vice president of fine fragrance at Givaudan. Debra Butler, vice president, creative marketing at Firmenich, sounded a similar chord, saying, “People are looking still to brand new brands with publicity and high consumer impact value already premade.”
However, Butler praised efforts to cultivate lasting brands. “We made the consumer addicted to this newness, and now we are taking a more measured approach,” said Butler. “We will see a cleaning up,” said Syed Shamil, Mane America’s vice president, marketing and innovation for fine fragrance, North America.
“We are moving from a place where the product could represent nice values and appeal to many different people, but not really stand out from the crowd, to a place that in order to succeed you have to stand out, have a point of view, be quite polarizing,” Frost declared. He singled out Paco Rabanne’s Lady Million with its “unapologetic gold-digging” marketing proposition for making a bold statement in the marketplace.
Frost emphasized that the “segmentation of consumers is becoming more and more important.” That segmentation can occur by age — and young consumers are of particular interest — or by fragrance usage. “There are Gen-Y consumers who are using the product. It is just that, in that group, there is greater percentage that aren’t. If we focus on reconnecting with nonusers, I think we have a shot at reengaging them,” said Policastro, discussing a recent Givaudan study on 16- to 29-year-olds. Butler said Firmenich is putting money and energy toward figuring out what lapsed and nonusers like and dislike. “They want everyday fragrances, [but] they have different needs,” she said.
Luring new fragrance users is dependent on scent, marketing and distribution. Policastro said young customers “gravitate to fragrances that are more classically designed because it’s new to them.” Stanzl and Frederic Jacques, Mane’s vice president of fine fragrances for North America, stressed social media, associated with mass more than prestige launches, is essential to draw young consumers. And alternative distribution channels, particularly television and Web shopping, could initiate new consumers into fragrance, although many supplier executives are skeptical. “This is where the opportunity lies,” said Jacques, a believer in Internet fragrance shopping.
Business is swinging to emerging markets — IFF, for instance, forecast they will account for 50 percent of sales in 2015, up from 44 percent now — and fragrance and flavor companies are expanding their global footprints as a result. Examples abound. Symrise has a new Perfumery School in Chennai, India. Mane has planted offices in Ghana and Nigeria. Givaudan officially opened its new Fragrance Creative Centre in São Paolo, Brazil, last year.