Fragrance Special Report: What's behind the thriving market?

Fragrance Special Report: What's behind the thriving market?

Buoyed by a surprisingly dynamic market, the fine fragrance industry is preparing for the challenges that lie ahead. The greatest of these is environmental, as pressure grows to come up with more natural formulations and packaging. A new kind of niche brand is paving the way by seeking to understand the tastes and aspirations of younger consumers—the key to a thriving market. Read our exclusive report from Formes de Luxe's Fall 2022 issue.

The fragrance market is doing well—very well. Considered mature in recent decades, the market hasn’t been this energetic for quite some time. The Covid-19 pandemic and successive lockdowns in 2020 brought things to a screeching halt; but all that seems forgotten now. It’s almost as if the forced downtime made fragrance all the more appealing to consumers.

This new growth is visible in emerging fragrance markets like China, but also in the industry’s historical strongholds, where it seemed impossible for fragrance to develop as much as it has. This is particularly apparent in the US, where sales have far exceeded pre-pandemic levels. According to statistics cited by the NPD Group, fragrance sales in the selective market in the country rose 38% between 2019 and 2021, reaching $6.3bn. This increase continued in the first semester of 2022 with market growth of 55% compared with the same period in 2019. The French market may not be breaking any records yet, but sales in the country have returned to their pre-pandemic levels. According to NPD Group, the selective fragrance market in France was worth €2.1bn in the 12 months ending June 2022. It grew 17% compared with the previous reference period. In the first half of 2022 alone, market value grew 3% compared to the first half 2019.

The same upward trend is spreading across Europe. France, Italy, Spain, the UK, and Germany together recorded year-on-year fragrance sales of €7.5bn at the end of June 2022, up 18% from the previous year. In the first half of 2022, the market grew 9% compared with the first half of 2019, thanks to dynamic markets in Italy (+16%) and Spain (+29%).

This growth is accompanied by several trends, the first being premiumization—in other words, consumers want quality. They are interested in more concentrated fragrances with lasting power, which explains the boom in more expensive eaux de parfums and even perfume extracts. The ultra-premium segment (those priced at more than $175, or €150) grew sharply, which had a ripple effect on the entire market, despite accounting for just a fraction of total sales.

Niche on the rise again

While niche fragrances are also making a resurgence, a phenomenon likely driven by consumer demand for originality and authenticity, the landscape has changed since the early 2000s, when atypical brands took a standardized market beholden to retail by storm. Today, it’s harder to define what is “niche.” Many independent brands have merged with international groups and have fallen in line with a more corporate positioning, while big brands like Chanel, Dior, Guerlain, and Givenchy have launched their own “alter-native” fragrance collections.

Finally, retails channels have diversified, and now include boutiques specialized in rare perfumes, concept stores, department stores, and some chain stores. “This diversification is both a strength and a weakness: there are as many points of sale as there are points of view,” says David Froissart, Founder of Différentes Latitudes, a French consultancy that supports existing brands, assists in the creation of new brands and distribution strategies. The company is currently seeking to set up flagship versions of its fragrance bar, Liquides, established in Paris and Seoul (in partnership with Hyundai group), at department stores, which would enable it to showcase a selection of brands and reap the cost benefits of economies of scale.

E-com gives a boost

The digital economy encourages the creation of small brands, and there are now so many that it’s easy to lose track—each must be bold and creative to stand out. Abstraction, launched in 2022 and based on the concept of perfumes vintages, has done just that. “Unlike fragrances designed to smell the same all the time, I age these in a cellar, like a good wine. Part of the production is sold right away, and the rest is aged up to 10 years. Customers can choose both the year of production and the year of maturation,” explains Founder and Perfumer Sébastien Plan. The youngest fragrances, priced at €200, will increase in value over time to more than €10,000. The concentrate and alcohol base are combined just before purchase, in Abstraction’s boutique in Paris’s Montmartre neighborhood. Customers can choose the color of their bottles (made by Waltersperger from one of the glassmaker’s vintage molds) and look on as the fragrances are packaged, and the label and wax seal applied by hand.

Other brands stand out for their minimalist approach. Olibanum, a perfume interpretation of the resin frankincense, is presented in a lightweight glass flacon (Coverpla/Bormioli Luigi) with a simple security clip to secure the spray pump, instead of a cap. The brand was launched by fragrance pioneer Gérald Ghislain, who founded Histoires de Parfum more than 20 years ago. “The lockdown in 2020 gave me time for reflection, and I decided to create a new brand, rather than a new line within Histoires de Parfums,” he explains. “I wanted a matter-of-fact fragrance, nothing lyrical.”

Companies seeking to overturn the image of an elite fragrance industry to reach a younger audience are focusing on simple aesthetics, environmental reasonability, and accessible price points. Obvious unites all three. Created in 2020 by Différentes Latitudes, the brand makes distinct fragrances presented in a sleek flacon topped with a cork cap made entirely from wine cork production scraps. Similarly, La Petite Madeleine’s collection of fragrances, made in France’s Champagne region, are presented in a distinctive bottle topped with a handmade cap created by Boutures d’Objets from upcycled cork and powdered seashells.

Eco-packaging meets “clean” formulas”

Partially recycled glass, pumps that can be unscrewed to facilitate recycling flacons, boxes free of cellophane: as environmental pressures increase, these practices, unimaginable in the fragrance industry just a few years ago, are becoming widespread. Home and in-store refills are also more common, often among larger brands that can afford the investment. Guerlain and Dior have whole-heartedly embraced the at-home refill system (Techniplast) for Aqua Allegoria and Sauvage, respectively. Chanel is in the process of installing a refill service in select stores for five of its perfumes. For quality reasons, the initial flacon can only be reused a certain number of times; refill dates will be recorded in a booklet.

Fragrance formulations are also getting cleaner. That said, 100%-organic is not yet the norm; synthetic molecules of petrochemical origin remain essential to creating olfactory formulas. Composition houses are working to develop green chemistry, but until they come up with innovative substitutes for synthetic molecules, the search for clean is setting the tone.

Niche brand PH Fragrances has a head start in the matter: launched in late 2018 after two years of R&D, the company produces household and body care products, as well as fragrances. “When I went to suppliers with my specifications and list of controversial ingredients to avoid, they looked at me like I was nuts—that approach didn’t exist yet,” recalls the Founder, Camille Le Feuvre. “Today, I know that it inspires numerous brands.” Biodegradable and free of UV filters, her brand’s fra-grance formulations contain up to 98% natural ingredients, which include Givaudan’s Orpurs, a collection of highend, natural raw materials for building fragrances.

Alternative models

Brands big and small are getting onboard. Guerlain’s new collection Aqua Allegoria Forte and the new, intense eau de parfum La Petite Robe Noire claim to be clean. The need for a natural approach can be expressed in other ways. This fall, for example, Dior is releasing its first alcohol-free perfume, J’Adore Parfum d’Eau. Designed to deliver an intense, long-lasting fragrance, the formula uses a nano-emulsion of water and oil meant to create a sensation of being enveloped in a velvety cloud when sprayed. Developing renewed formats and gestures is an ongoing task. The fragrance industry is forever trying to escape the spray pump’s predominance by exploring oils, creams, powders, and other options.

Currently, solid fragrance appears to be the most promising alternative to liquids. Newcomer Nolença has developed a creamy, 98%-natural solid perfume that shimmers on the skin. The packaging consists of a small glass jar (forgoing the need for nonrecyclable pump) that weighs 50g and holds 7g of product. According to the brand, its product lasts as long as 50ml of liquid perfume presented in a flacon that weighs about 200g. That translates to less glass produced, and reduced transport and storage volume.

Solid fragrances are ideal for layering, a gesture that allows customers to combine several fragrances to achieve a personalized perfume. New brands are making this a key positioning element. “Although it’s currently a trend in the West, the practice has existed since Antiquity in the Middle East,” says Gérald Ghislain. “What might seem sacrilegious to purists is quite natural for younger generations who appreciate playfulness.”

Gender-bending scents

Brands are listening to younger consumers on social issues and issues of gender. Niche fragrances have long contributed to removing gender from the industry, initially for monetary reasons: it’s simply less expensive to invest in a single glass flacon. Today, brands can take a more explicit approach to positioning. Initiated by brand creator Majda Bekkali, the recently launched French ready-to- wear brand Genderfluid now offers three fragrances, with evocative names like IEL, Lovely Queer, and Enby. Most would agree that scents are not masculine or feminine in and of themselves, and that an openminded fragrance industry is the industry of the future.

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