Global Fragrances: Maintaining Momentum in an Uncertain Market

Strategy Briefing

About This Report

Dec 2014

The average 3% CAGR forecast for fragrances over 2013-2018 is shaped by two distinct trends. Firstly is the move beyond traditional perfumery, stretching into alternative product forms to remedy spending cuts and tap into aspiring consumers in emerging markets. Secondly is a perceived mundane product offer that may lead sales to level off in affluent markets, raising questions about the quality of scent novelty. This report delves into these issues and examines how the future market may evolve.

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Global Fragrances: Maintaining Momentum in an Uncertain Market

Global fragrances value grow at 5% in 2013

Other discretionary categories, chiefly colour cosmetics and skin care, have grown at a similar pace over 2008-2013 suggesting comparable market dynamics, in terms of overall macroeconomics and consumer trends. At 10%, fragrances held a static share of the total BPC value sales over 2013-2018.

The Middle East and Africa to lead premium fragrances growth

The region will account for 40% of the global premium fragrances absolute value growth over 2013-2018, raising its share of the global market from 13% to 16%. Saudi Arabia and South Africa will top the league. Cultural influences and a growing retail penetration are among the key drivers.

Premium perfume is a more widely accessible luxury

While fashion brands have made perfume an accessible luxury beyond higher-priced ticket items, premium players have further extended product variety with low-cost options, cross-category variations and celebrity brands to fill growth gaps and enter markets, not otherwise attainable with traditional perfume.

Market stagnation indicates a need to rethink launch frequency and activity

A proliferation of launches in fragrances has led to a perceived sameness among consumers, resulting in a tepid industry performance. This points to a need to invest time and resources in captivating scents, even if they command higher prices, but stimulate genuine consumer interest.

Niche segments breathe air into the market but their rise can be its own worst enemy

The rise of niche segments seeks to combat the perceived market sameness, by tapping into the desires of discerning consumers. However, a growing niche segment can be detrimental if competition leads to creativity fatigue.

Value share of non-traditional channels rising

While channels such as pharmacies and internet retailing have gained share, department stores compete by creating novel in-store experiences.

Introduction

Scope
Objectives
Key findings

Global Fragrances Market Snapshot

Global fragrances value and volume growth broadly in alignment
Global fragrances worth over US$45 billion in 2013
Women’s fragrances dominate…with exceptions
Men’s fragrances set to receive a boost in some markets
Developing markets overtake the developed in value size

Opportunities in Key Geographies

Latin America to generate the lion’s share of growth in fragrances
Retail development evolving in emerging markets
Volume growth projections augur well for second-tier markets
Cultural use of scent a point of resilience to fragrances
Brazil to lead fragrances market growth
Companies seek to make premium accessible to Latin Americans
Saudi Arabia’s forecast premium front an opening for niche
Israel, the market of “21 million consumers”
South Africa spearheads fragrances growth in Sub-Saharan Africa
India’s fragrances market small, but confidence may provide boost

Accessible Luxury: Fragrance Within and Beyond Perfumery

Perfumery is a luxury for all
Fashion brands permit access to luxury with fragrances
Premium brands increasingly offering low-cost alternatives
Premium deodorants a transitory substitute to premium fragrances
Cross-category variations may fill growth gaps
Younger audiences targeted with celebrity fragrances
Celebrity fragrances a better fit in emerging markets

Prevailing Issues in the Scent Arena

Homogeneity stifling fragrances market in developed regions
Market stagnation stresses the need for disruptive innovation
What will drive fragrances in the years to come?
Distinct fragrance shoppers seek to defy market monotony
Fragrance ingredients becoming more diversified
Mass players play their part in diversifying ingredients usage
Niche perfumeries’ rise in prevalence can pose challenges
Niche manifesting itself in packaging and channel distribution
Fragrances retailing evolving in favour of non-traditional channels
Retail innovation seeks to enrich consumer shopping experiences
Curation: The future of fragrance retailing?
Technology supports innovation in fragrance product development
Legislative restrictions put fragrance players to test
IP protection would overcome “sameness” in mainstream market

Future Prospects

Developed regions marked by weak projections
Emerging markets to drive growth but tailored choices required
Average projections will prompt industry to step up innovation

Report Definitions

Definitions