Better Days for Global Fragrances

The position of fragrances as a discretionary category meant that it was hit during the economic downturn: global growth in value sales of fragrances slipped one percentage point to 3% in 2009, according to Euromonitor International. However, the fragrances category appears to have significantly bettered its performance in 2010, posting value growth of 6% during the year, a performance that is on course to continue by the end of 2011.

Western Europe remains biggest value region

Western Europe may be the most valuable region for fragrances, with sales worth US$13 billion in 2010, but a stagnant performance in the region pulled down overall global growth in 2009. Consumer apathy about the fragrances category in general, in addition to reduced consumer budgets, were the key factors behind stagnant growth in the region in 2009, although growth crept back up to 2% in 2010.

Latin America drives global growth

Latin America was the shining star in fragrances in 2010, propping up global growth in fragrances and recording 15% value growth over 2009. Mass men’s fragrances saw the highest growth in 2010, driven by the entrance of more young men into the workforce in the region and a strong economic climate.

Eastern Europe bounces back

Eastern Europe saw growth return to form in 2010, recording 8% value growth, after just a 3% gain in the previous year. Although the category was far from being at saturation point before the recession, many consumers had accumulated enough perfume through previous purchases and were able to delay their next purchase. There was evidence in the region of trading down from premium to mass scents and also to smaller bottles.

The return of the standalone brand

While extensions still remain a popular way for manufacturers to introduce new fragrances with less risk and marketing spend than launching a totally new brand, there has been more of a marked shift towards launching completely new brands in 2011. In January 2011, for example, fragrance producer Coty brought out a new scent called Happy Game under its mass-priced umbrella brand adidas, while, in February 2011, Procter & Gamble launched Eau de Lacoste L.12.12, a trio of premium scents for men.

There have been suggestions from within the fragrances industry that the vast number of new fragrance launches and increasingly crowded marketplace are actually damaging the industry. The saturated scent market has arguably contributed to consumer confusion and apathy, making it very difficult to make a brand stand out. The return to launching some standalone fragrances as opposed to flanker launches should help to regenerate consumer interest.

Despite its problems, fragrances will remain one of the largest beauty and personal care categories globally, and, by 2015, an extra US$7 billion is set to be added to its global value size. Latin America on its own will account for 58% of this growth. Premium fragrances will continue to be more adversely impacted beyond 2010 than mass scents, driven mainly by the preference for mass scents in emerging regions and an ongoing reduction in spending on fragrances in the West.