Perfume

MMR, June 28, 2004

Although the traditional fragrance business continues to struggle in both prestige and mass market retail venues, there are signs that the category may be destined for better days.

For starters, consumer research suggests that women are headed back to the fragrance counter. A study by the marketing and advertising firm Vertis, "Customer Focus 2003: Fragrance," indicates that 65% of women surveyed said they had bought perfume in 2003. That represents a big step up from the 55% who responded positively In 2002 and an advance from the 60% who purchased in 2001.

Breaking the responses down by age group, 75% of Generation Y women bought perfume in 2003 compared with 62% the year before, while Generation X purchasers increased from 60% in 2002 to 71% last year. Meanwhile, 67% of baby boomers made a perfume purchase, up from 55% in 2002.

Not surprisingly, the overwhelming determiner in the purchase decision is the scent. Some industry observers have attributed the category's recent malaise in part to the prevalence of scents that were too light to stimulate repeated purchase. But according to the Fragrance Foundation, the days of "watery florals" are ending, and richer, more complex fragrances are on the way.

In the last couple of years the number of fragrance introductions--including the debut of "flanker brands" that share an established name but offer a new scent--has more than doubled.

As a result, there has been an influx of prestige brands into the mass market.

But according to John Galantic, president of Coty Beauty U.S., the proliferation has failed to spark sales growth for a couple of reasons. First, he says, third-party diverters are channeling obscure prestige brands that have failed to take off in department stores and are repeating that performance in the mass market. In addition, many prestige labels are being discounted, either on promotions or on everyday pricing. That tactic in turn is forcing the pure mass brands to lower their price points,

"The best-performing brands are prestige brands priced at true prestige levels, like Celine Dion and Tommy Hilfiger," he says, adding that Coty's Stetson and Jovan, both mass market mainstays, are "holding up quite well" despite the wave of discounted prestige labels.

The class-to-mass migration has definitely accelerated, with designer brands leading the charge, observes Jeff Arnold, senior vice president of mass sales for Elizabeth Arden Inc. "If we look at food, drug and mass back in 2000 the classic mass fragrances were doing about 61% of the business," he says. "At the end of last year--for the first time--designer fragrances were at 51% and mass down to 49%. That's a huge shift. Sales of designer labels are growing at a double-digit rate, and we expect them to continue to do so."

Both executives agree that the self-service environment in the mass market is a major hurdle to selling fragrances. While department stores get the newest brands and have departments staffed with knowledgeable salespeople, traditional fragrances often languish in locked cases behind unstaffed counters in mass market outlets.

Arnold points out that Elizabeth Arden has aggressively pushed open-sell merchandising, which gives shoppers more access to the products. Galantic favors staffing the department with a beauty adviser and bringing fragrances out from behind the glass cases, but he sees an open-sell environment as the next-best solution.

Adidas Moves Fresh for Him, Her

This summer Coty Inc. has built on its popular Adidas franchise by launching seasonal, limited edition items called Adidas Moves Fresh for Him and Adidas Moves Fresh for Her. Inspired by the fun and freedom of a summer day at the beach, the products are available until early September.

Fresh for Her includes eau de toilette spray in three sizes and body lotion, while the men's line includes the same selection of eau de toilette sizes plus an aftershave splash and an after-shave sun protection lotion.

Scent Part of Hispanic Culture

Perfumes and colognes have been important product categories among Hispanic consumers both here and abroad for many years. The use of fragrances is closely intertwined not only with Hispanic culture but with the climate and environment of much of Latin America.

In fact, in the Caribbean and Latin America children are often sprinkled with floral scents after their nightly bath, so the use of fragrances begins at a very young age. Indeed, children's fragrances are an important segment. According to Frank Trullenque, vice president of sales and marketing for the Mag Beauty unit of Puig Personal Care and Fragrance Division, NA, one of the most popular infant lines is Para Mi Bebe (For My Baby), which is centered on the fragrance of splash colognes.

"In almost all Caribbean and South and Central American countries there is a high consumption of splash colognes, primarily motivated by the climate," he says. "Warmer and more humid climates generally have higher usage rates."

One of Mag Beauty's two flagship brands is Heno de Pravia, a classic splash cologne. Developed in 1904, it is now sold in over 30 countries on five continents.