FRAGRANCE SALES WILT IN GERMANY
Byline: Melissa Drier
FRANKFURT — Is the fragrance market slowing down in Germany?
At its annual press conference during the Beauty World trade fair here, the German Perfumery Association reported that women’s perfume sales rose 2.5 per cent in 2000, compared to 4.5 percent in 1999. “And herewith,” proclaimed Werner Harriegel, the association’s director, “the times of overproportional growth [in women’s fragrances] are over.”
After 5 percent growth in 1999, total German perfumerie sales were up only 2.5 percent in 2000 to reach about $2.4 billion. All dollar figures are calculated from the German mark at current exchange.
This was a disappointing performance, considering that sales in the first half of the year were ahead 4.5 percent. However, problems beyond industry control, such as escalating oil and gasoline prices, political wrangling over tax and pension reform, and the collapse of new technology stocks did much to dampen consumer spending in the second half, Harriegel said. And while prestige beauty sales may not have been as strong as hoped, German perfumeries outpaced the German retail industry as a whole, he pointed out.
The skin care sector, especially premium brands, did well in 2000, with sales up 4.5 percent. “High-priced ranges that were niche brands two to three years ago are now coming out of the niche,” said Harriegel. Indeed, he noted a German trend toward smaller perfumeries specializing in luxury treatment products with a high level of personal service on one hand, and larger, open-sell units focusing on fragrance on the other.
Wellness products are more popular than ever, and contributed to a 3 percent sales rise in body care products, whereas makeup sales inched ahead 1.5 percent, mostly to the benefit of high-priced ranges.
For the year ahead, the perfumery association is predicting “an unspectacular continuation of current business conditions. We’ll be happy with the same results as in 2000,” Harriegel said, “and we’ll be really happy if the figures are better.”
Not so Gunther Thoss, manager of the fragrance division of Lancaster Germany, who, in his position as president of the Cosmetic Manufacturers Association (VKE) is forecasting German prestige beauty market growth of 3 to 4 percent “based on the success potential of the new launches from many of the firms, as well as the development of the market in general.”
More bullish still were the manufacturers themselves, with almost all key prestige brands now showing in the Forum of Excellence at Beauty World, which closed its four-day run on Jan. 30. Moreover, those brands were showing in a bigger, bolder and more confident way than ever before in Frankfurt, as impressive megastands became the new rule of the day.
The Forum of Excellence has been moved to new spacious quarters in hall 1.2, which with about 97,000 square feet of exhibition space is 50 percent larger than last year. This year, 62 selective distribution firms exhibited in the Forum of Excellence, whereas Beauty World, billed as the trade fair for perfumery, cosmetics, drug stores and hairdressers, featured a total of 583 participants from 31 countries. A total of 16,000 visitors, compared to 16,500 last year, attended the event, which runs parallel to Paperworld, Christmas World and Licensingworld at the Frankfurt fairgrounds.
Estee Lauder took advantage of the roomier conditions with its first joint-stand presentation, with each of its brands occupying a visibly different part of the 2,700-square-foot expanse. “It was an experiment for us, but the reaction has been very positive,” Klaus Sorensen, general manager of Estee Lauder Germany, told WWD.
Sorensen said the company expects to be on plan for the fiscal year, which ends July 2001. And while he wouldn’t disclose figures, “we’re not satisfied if we don’t grow 10 percent. And as long as our market share is not over 15 percent, it’s obviously doable.”
Sorensen was particularly pleased with the performance of Lauder’s new fragrance, Intuition, the first product to emerge from the company’s European development center established about 18 months ago. Pure Color nail polish and lipstick followed, and he said the positive acceptance of these products shows “it’s been very worthwhile to create a separate (European) development center.”
The company, however, is putting most of its focus on skin care, he said, though group sales are currently split equally between fragrance, skin care and makeup. “We’re obviously seeing that very high price skin care products are flying. Renutriv is doing extremely well, and La Mer is an unbelievable success.” Idealist also sold way above expectations, he said.
As for the German market in general, Sorensen noted a shift from what traditionally has been a very sell-in market to “focusing more on sell-through and having enough stock, not too much. [Retailers] aren’t buying six-months’ supply anymore, and it’s healthy. There’s no need to load the stores. If there’s too much stock, it only blocks your own opportunities,” he said.
He said it seemed Germany’s private perfumeries are no longer struggling. “It seems they’ve turned the corner. There’s a real variety of distribution in Germany. You have department stores, open-sell perfumeries, the true private, traditional perfumerie and [chains like] Sephora and Douglas who are doing megastores. And at this point,” he said, “they all seem to be doing well, which is too good to be true.”
“The German market is clearly the most price-driven market in Europe,” remarked Andreas Brauch, managing director of Unilever Cosmetics International — which includes beauty brands Calvin Klein, Cerruti, Valentino, Chloe and Lagerfeld — in Germany, Austria, Switzerland and Holland. “One reason is that the consolidation of the German market has only started. There’s overcapacity at the moment, and it leads to a strategy of price, price, price.”
He said newly launched products are sometimes discounted shortly after their appearance, but he added, “I think the worst is over, though I don’t know what will happen with the end of the Rabattgesetz [law prohibiting discounts],” scheduled to be retired this summer. “But we’re prepared for it.”
UCI’s Calvin Klein Cosmetics division is projecting a “clear plus this year, with Calvin Klein Truth the main provider. But even with existing brands, we’ll top last year’s figures,” Brauch said. Klein’s German sales slid 15 percent in 2000, primarily due to a severe out-of-stock situation and slowing demand for Contradiction for Men compared to 1999, its launch year. Moreover, 2000 was the first year “since the beginning of Calvin Klein that we didn’t launch a new fragrance. We had calculated a minus,” Brauch noted, “for it’s difficult in our market to grow business without new product.”
To be sure, while everyone complains about the inordinate number of launches per year, they remain the motor of growth, especially in fragrance, manufacturers say. Parfums Givenchy, which includes the distribution for Kenzo in Germany, expects to double its Kenzo sales here due to the recent launch of Kenzo Flower and the continued success of Kenzo Pour Homme. With Givenchy, on the other hand, the company “plans no or very modest growth, because we’re bringing out no new products,” Otmar Wilbert, Givenchy sales director for Germany, said. In total, a 12 to 13 percent plus in German sales is planned.
Although Wilbert acknowledges “there are too many new launches each year, the industry makes 20 percent of its turnover with launches. But with 100 new men’s and women’s scents coming out each year, it’s difficult to choose [which new scent to stock]. That’s why it’s important, when you have a new product, to invest heavily,” he said. For Kenzo Flower, the company is planning a massive print campaign in April, May and June and again in fall and for Christmas, plus TV spots in spring and at Christmas.
Similarly, Dior is upping its ad budget “more than 22 percent. We’re forcing sell-out with our media plan,” said Clemens Pflanz, sales director for Christian Dior in Germany. The company plans to spend about $8.5 million in advertising in Germany this year, plus another $7 million at point of sale.
Delivery problems capped Dior’s sales growth in Germany at 2 percent in 2000, whereas sell-through rose 5 percent, Pflanz remarked. For 2001, the company is expecting an increase in sales of more than 20 percent, via two major launches: the NoAge anti-aging skin care line, due out here at the end of June, and a new men’s fragrance in the fall.
As for the fair, he said, “There’s been no special result after four days, which is frustrating for a salesman, but [the fair’s] an interface between our customers and a forum to communicate with our colleagues. It’s a signal.”
The next Beauty World in Frankfurt will be held Jan. 26-29, 2002.