NEW YORK — Fragrance companies are thanking their lucky stars that “up” actually means “up” this year in terms of sales growth.
After years of proclaiming that flat sales really meant growth in the beleaguered sector, fragrance firms might be able to regain some lost ground this fall, thanks to an onslaught of introductions of celebrity and designer scents by everyone from Sarah Jessica Parker and Paris Hilton to Ralph Lauren and Calvin Klein. Even an iconic fashion brand like Guess, which has been away from the beauty market for a decade, is returning with a new luxurious women’s scent, pictured here.
“It looks like this could be an upswing,” noted Karen Grant, industry analyst for NPD Beauty, a consumer sales tracking firm. According to NPD projections, the U.S. department store fragrance business will generate a 5 percent increase in dollars on total volume of $3 billion at retail for the year, the first time that percentage has been achieved since before 9/11. Last year’s gain was 2 percent.
Grant said that a critical difference this year is the proliferation of newness borne by a tidal wave of fragrance launches. NPD sees this year as the high water mark of fragrance launches, with more scents introduced in the first half of 2005 than in “the entire year of 2000.” There were three times as many in this year’s first half as in the spring of 2000. Newness as a share of total fragrance sales has risen from 9 percent in 2001 to 14 percent last year.
The predominance of the celebrity-endorsed scent has become one of the major drivers, along with flankers, of this new vitality. They are coming sooner and showing less staying power. Grant noted that a celebrity will now issue a fragrance one year, then follow with another 12 months later.
Long term, the market has not grown. In 1997, retail sales of men’s and women’s fragrances in department and specialty stores totaled $2.8 billion, with unit sales of 71 million pieces. Seven years later, the combined total stood at the same $2.8 billion for 2004 — but the unit volume had withered to 58 million pieces.
The shriveling of the pie is made all the more painful by the fact that the slices are smaller, as noted by Jack Wiswall, president of the Designer Fragrances Division of L’Oréal USA. As manufacturers have ramped up their launch schedules in order to gain market share and offset dollar erosion of their portfolios, the number of launches has jumped from 40 in 1997 to 117 in 2004.
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Timra Carlson, the former president of NPD Beauty, pointed out earlier this year that the life span of new fragrances has been dramatically shortened and the growth potential of each introduction has shrunk as the number of launches multiplied. There are fewer $100 million brands on the market today, Carlson said. To rank in the top 10 of women’s fragrances in U.S. department stores today, a brand needs to reach $30 million at retail, she said. Only six or seven years ago, the gateway was $50 million.
Wiswall sees two routes out of the malaise. One is for fragrance brands to diversify into cosmetics, thereby gaining permanent counter space complete with its own beauty advisers. He also maintains the industry needs to grab a bigger share of the gift-giving business, specifically at Valentine’s Day, Mother’s Day and Father’s Day. As an example of what can be done, he pointed to the launch of Ralph Lauren Romance eight years ago. Previously, about 3.7 percent to 3.8 percent of the business was done in February. Romance got the share up to nearly 7 percent and L’Oréal has kept the momentum going ever since.
Fabrice Weber, president of Aramis and the Designer Fragrance Division of The Estée Lauder Cos., sees the industry going in the wrong direction on investment, with the bulk of the money going into producing newness. The bulk of volume, however, comes from existing core brands. He noted that only one women’s launch and one men’s introduction from last year now rank in this year’s top 20 of men’s and women’s fragrances. His solution: Generate excitement at point of sale. “Let’s do some theater,” he said, adding that vendors and retailers need to create more enticing destinations.
And the department stores, along with drugstores to a lesser extent, have lost share to specialty chains, according to a new study by Klein & Co. In 1999, department stores had 54.8 percent of all U.S. fragrances sales and drugstores claimed 7.2 percent. For 2004, the department store share had shrunk to 50.9 percent and drugstores had 6.6 percent. Meanwhile, the share for specialty chains jumped from 11.99 percent in 1999 to 17.7 percent in 2004.
But for now, the consumer is back at the fragrance bar and she is buying. As one major department store retailer said: “We’re not dead yet.”
Macy’s East had “a very solid spring,” and Micheline Jordaan, vice president and divisional merchandise manager of fragrances, said she is optimistic about fall and holiday, predicting “a modest increase,” following last year’s “decent increase.”
Jordaan said a pivotal development was the dramatic improvement in the existing men’s and women’s business, which is showing only “a small decrease” after years of percentage declines in the teens. New flanker introductions energize the core brands while new celebrity scents inject excitement and draw new customers to their category. Jordaan pointed to the decisive impact of Miami Glow on the Jennifer Lopez business and the turnaround effect of the Calvin Klein flankers. She echoed others in predicting Klein’s upcoming Euphoria women’s launch “should be great.”
Meanwhile in the men’s category, Giorgio Armani’s Black Code was “the most compelling launch of the spring season, the biggest launch ever,” she said. Looking into fall, Jordaan appeared enthusiastic about the new Britney Spears Fantasy; Sarah Jessica Parker’s Lovely; Kimora Lee Simmons’ Baby Phat Goddess; Island Michael Kors, and Live Jennifer Lopez. The retailer was also extremely upbeat about Ralph Lauren’s Polo Black men’s fragrance.
Jordaan described the recent launch of the new men’s version of Givenchy’s Very Irresistible as “great.” She said the launch of Tommy Hilfiger’s True Star Men was “good.” The men’s side of Liz Claiborne’s Soul by Curve masterbrand sold “very strongly” while the women’s half was “a little slower.”
The retailer said her philosophy is to “focus not only on newness but also in driving the classics.” She pointed out new entries generate only 20 to 25 percent of sales, meaning that the remaining 75 percent must come from existing brands. In this, flankers provide valuable fuel for the core brands.
At Bloomingdale’s, Howard Kreitzman, vice president of fragrances and cosmetics, said, “Fall is off to a good start. I feel good about the third quarter.” He also seemed optimistic about Christmas, since there is an extra selling day. Also Chanukah lands the day after, which Kreitzman said is preferable to last year’s early date. So far this year, Bloomingdale’s did well this summer with Kors launching strongly on the women’s side. On the men’s side, Lauren’s Polo Black “has done extremely well,” Kreitzman said. He also is looking forward to the launch of Lauren’s new women’s fragrance, Pure Turquoise, as well as the new Valentino fragrance, Calvin Klein’s Euphoria later in the third quarter, the new eau de parfum from Narciso Rodriguez and Thierry Mugler’s new Alien, now bowing in select doors. Another men’s launch at Bloomingdale’s was Corduroy, Est. by Zirh Intl., as an exclusive that Kreitzman described as doing “very, very well.”
Sephora has enjoyed four years of growth and this year the fragrance business has continued with gains in the teens, according to Rod McFadden, vice president of merchandising for fragrances and the Sephora brand. Over the summer, Sephora scored big with Kors, Paris Hilton and Christian Dior Addict 2.
Upcoming fall launches are led by the celebrity scents — Baby Phat Goddess, Britney Spears Fantasy and Lopez’s scent. McFadden singled out Euphoria, along with Burberry’s Brit Gold and the Escada fashion fragrance, Pacific Paradise.
“We’re very optimistic but we’re also a little cautious because last year’s launch season was one of the strongest we have had in recent years,” said Elizabeth Morello, senior vice president and general merchandise manager of cosmetics and fragrances for Macy’s West. “So far, Sarah Jessica Parker’s scent and Britney Spears’ fragrance have just arrived.” Other early launches include Baby Phat Goddess, Soul, Dior Addict 2 and Cacharel’s Promesse. On the men’s side, there’s True Star Men, Enrique Iglesias’ scent, as well as Kenneth Cole Signature and Very Irresistible Givenchy for Men.
“So far, so good,” said Morello. “We’re very pleased with most of the new launch activity. The brands that have launched so far each have their own personality and don’t fall into the same category.” Macy’s West will introduce between 13 and 17 scents this season and Morello is looking forward to Lauren’s Pure Turquoise, Euphoria, Kors, Lauren’s Polo Black and Azzaro Onyx.
The celebrity scents are holding up “very well,” at Macy’s West, Morello said, and “newness is something they have to have in that category.” However, celebrity marketers “can’t just launch something and walk away.”
Gary Borofsky, senior vice president of cosmetics and fragrance for Rich’s-Macy’s, said the early launches have been “very exciting.” He added, “Newness is representing almost 30 [percent of the business].”
So far, the retailer has launched Lovely, Dior Addict 2 and Soul. Each fragrance was number one for the week it was launched, Borofsky pointed out.
For the rest of the season, “I think we’ve still got some megalaunches to go and we’re up against megalaunches [from last fall]. The early read is optimistic.” When it comes to existing brands, however, “are there [new introductions] to shore up brands for top-line growth?”
Rich’s-Macy’s is taking on a total of 18 scents this fall, six of which are men’s fragrances. And there are scents Borofsky is looking forward to, namely Baby Phat. “That could be the sleeper,” he said. Borofsky is also looking forward to launching Lauren’s Pure Turquoise, Euphoria, Live and Britney Spears.
According to Borofsky, the multitude of new launches is “good from the standpoint that you want to see different choices, and a lot of excitement at the counter. The flip side is that a lot of fragrances are not getting growth [because] customers aren’t responding to them the way they did a year ago. That’s a concern,” he said, “because the growth of the industry can’t be on newness alone, you have to develop core brands that go on year after year.”
Still, “I think [the activity] is good because fragrance is a fashion business. The customer likes to come in and see and try new things,” he said. Overall, “it’s the hottest category I’ve got,” he said. “Both the men’s and women’s bars are doing well. We’re seeing growth in newness and a nice pop in value sets in the core, existing brands.”
“It’s a fragrance year,” at Saks Fifth Avenue, said Deborah Walters, senior vice president and general merchandise manager for cosmetics, fragrance and intimate apparel. “It’s one of the best fragrance years in many years.”
She said the early launches are “fantastic.” Among the retailer’s new scents are names like Miss Dior Cherie, Narciso Rodriguez for her Her Eau de Parfum, Canali, Chanel’s Allure Sensuelle, Lauren’s Pure Turquoise and Lanvin’s Arpege Pour Homme. “We’re just in launch stages with Thierry Mugler’s Alien,” noted Walters.
“We’ll continue to gain momentum — we have powerful launches for the rest of the season, such as a collection of scents from Miller Harris. [And] we’re so excited about Tom Ford’s collaboration with Lauder. Then, we’re launching Sean John’s couture men’s fragrance, Unforgivable, in December exclusively. Bulgari Red Tea will also be exclusive to Saks.”
In total, Saks will launch between 10 and 15 new scents this season. “The launches for fall just strengthen the brands,” said Walters, pointing to Allure Sensuelle. Also, “Miss Dior Cherie strengthened the house of Dior,” she added. “So far we haven’t seen cannibalization, just more excitement.”
Other strengths, according to Walters, have been the Bond No. 9 brand, as well as Creed, Jo Malone, Chanel, Bulgari, Cartier and Hermès.
Holt Renfrew in Canada plans to launch a dozen scents for fall, and among them are numerous scents that will be carried on an exclusive basis, including Youth Dew Amber Nude by Tom Ford and Lauder, Prada, Canali, Armand Basi for women and men, Jo Malone Pomegranate Noir, Lalique Parfums, Donna Karan Essence and Matthew Williamson.
“Our ladies’ business is growing [at a rate of] 12 percent year-to-date and men’s is up 8 percent,” noted Shelley Rozenwald, senior vice president of cosmetics, skin care, fragrance and beauty services. “Our sales forecasts are very aggressive but we feel confident that we will achieve them,” she remarked. “Fragrance is our highest growth category year-to-date.
“I am really looking forward to Youth Dew Amber Nude,” she added. “Matthew Williamson’s scent will be very successful. I love what he did with the packaging. The scent is beautiful, very feminine.
“Celebrity fragrance is a hot trend very focused in the mass market,” said Rozenwald. “I think it’s great and will be successful — but the life span is not too long.”
While the trend looks good, problems remain. Don Loftus, president and chief executive officer of Procter & Gamble Prestige Products Inc., described today’s market as “showing signs of life after a decade of lackluster performance.” He attributed the sales improvement to the crush of celebrity scents and “some exceptional introductions by high-end designers.” He warned, however, that during the drought, retailers reassigned space, particularly in specialty stores. “Now, with the sales trend coming back, fragrances are sitting in small space on the back wall trying to get noticed,” he said.
He also questioned the wisdom of steering so much of the business into the hands of celebrities. The same thing happened in the Eighties and the craze didn’t last, he pointed out. Perhaps it’s best to use these icons as the face of advertising, like Chanel did with Nicole Kidman, he speculated.
Loftus also is alarmed by the loss of buying offices and consolidation of retailers. Beauty is a business based on selectivity. Creation of megachains might make this difficult. “Also, the stores have had a difficult time maintaining merchandising and even housekeeping standards as they moved from 20 door chains in one market area to 100 to 300 door chains across a number of states,” he added. “We are often negotiating space and location with people who have never been in the door we are discussing.”
In terms of consumer buying habits, Loftus did note one bright spot — teenagers. Instead of being satisfied with products intended only for them, he said, they are now buying the sophisticated fashion scents, like Dolce & Gabbana and Christian Dior, that always have been reserved for their mothers.