Sector Insight: Women's fragrances - Star scents flood market

Elizabeth Taylor was the first to capitalise on her stardom, with the
launch of White Diamonds in 1991, while Unilever-owned Coty kicked off
the recent surge with the launch of Jennifer Lopez's fragrance, Glow by
JLo, in 2002.

If picking over the details of their favourite celebrities' love lives
in the glossies, buying their clothes on the high street and watching
them on TV is not enough for ordinary women, they can now even smell
like them.

More than 30 celebrity scents have been launched in the UK this year,
with names as diverse as Jade Goody and Mariah Carey getting in on the
act.

No longer content with fighting it out for headlines in Heat, the stars
are now squaring up at the beauty counters. With perfume houses needing
to spend at least £1m on advertising a new brand if it is to have
an impact on the market, celebrity variants confer an immediate level of
awareness by virtue of the name.

While it will be big business for those that succeed, few are expected
to survive beyond the first year. There is only limited shelf space, and
as old brands have to be discarded to make way for new ones, products'
life cycles are inevitably short.

But celebrity-endorsed fragrances are popular with perfume houses
because they attract younger consumers. Almost one in five 16- to
24-year-olds owns a celebrity fragrance, according to TGI.

The launch of so many celebrity scents has buoyed the market, and value
sales, excluding duty-free, are predicted to reach £638m this
year. Annual growth in the market has been running at about 5% for the
past few years.

Despite the high-profile launches - Elizabeth Arden is putting £2m
into advertising Mariah Carey's M fragrance - the top spots are taken by
the longer-established brands. However, in a highly fragmented market,
even the bestselling Chanel No 5 accounts for only 5%.

Last year, 220 perfumes were launched. To minimise the risk associated
with launches, fragrance houses often opt for spin-offs of existing
brands or limited-edition versions.

Boutique fragrances are another emerging trend. Les Senteurs and Roja
Dove's Haute Parfumerie are two stores offering niche perfumes for women
who are seeking a more select scent.

Fashion houses such as Prada, Hermes and Dior are creating private
collections of perfumes with restricted availability, often for sale
just in their own boutiques.

The sector is dominated by a handful of firms. The biggest of these,
Coty, was boosted by the acquisition of brands such as Calvin Klein from
Unilever in 2005. It divides its range into three categories: designer,
celebrity and lifestyle.

L'Oreal's brands include Giorgio Armani and Ralph Lauren under its
Prestige & Collections banner; its most recent launch, Hypnose, was
under its Lancome cosmetics brand. L'Oreal also acquired a presence in
the mass market last year following its purchase of The Body Shop and
won the licence for Italian fashion brand Diesel, which should help it
attract younger customers.

While Chanel is not as big as Coty or L'Oreal, it can boast three of the
top five brands, thanks to its consistency and focus on classic
perfumes. While eschewing the celebrity-endorsed launches, Chanel does,
however, use big names in its advertising and invests heavily in TV, as
illustrated by Chanel No 5's Nicole Kidman ad campaign.

Manufacturers have tried to even out business over the year, but the two
months leading up to Christmas still account for nearly three-quarters
of retail sales, with almost one in two women receiving fragrance as a
gift.

The market has been boosted, however, by women's predilection for having
more than one fragrance on their dressing table. The increase in the
turnover of fragrances has also contributed to this trend by stimulating
interest in the market and making way for the introduction of brands.
The downside is that there are too many brand launches, which is
resulting in product life cycles becoming shorter.

Discount drivers

Consumers nowadays have a much wider selection of outlets from which to
buy perfumes, partly as a result of a rise in the number of discount
perfumeries such as The Perfume Shop and The Fragrance Shop. Their
arrival has had a negative impact on sales at department stores,
although Boots remains the biggest retailer in this sector.

The market is predicted to fare well in the coming years, outstripping
the growth enjoyed over the past five. By 2012, the sector should be
expanding at 5.6% a year, thanks to shoppers trading up to more
expensive scents and volume sales increasing as a result of the
availability of more mass-appeal products. As most women in the UK do
not wear fragrance every day, increasing the frequency of use will also
bost the sector.

WOMEN'S FRAGRANCE MANUFACTURERS BY SALES AND MARKET SHARE



2007 (est) 2005 05-07

pounds m % pounds m % % chng



1 Coty 89 14 69 12 29

2 L'Oreal 83 13 80 14 4

3 Chanel 77 12 69 12 12

4 Estee Lauder Cos 70 11 63 11 11

5 P&G Beaute 70 11 57 10 23

6 KGA 51 8 40 7 28

7 Dior 38 6 29 5 31

8 YSL 38 6 34 6 12

9 Avon 26 4 23 4 13

Others* 96 15 109 19 -12

Total 638 100 573 100 11



Source: Mintel

*clothing-store brands such as Gap, Next and Marks & Spencer





WOMEN'S FRAGRANCE BRANDS BY SALES AND MARKET SHARE



2007 2006 05-07

pounds m % pounds m % % chng



1 Chanel No 5 32 5 30 5 7

2 JPG Classique 26 4 24 4 8

3 Chanel Coco Mademoiselle 19 3 18 3 6

4 Chanel Chance 19 3 18 3 6

5 EL Beautiful 13 2 12 2 8

6 Dior J'Adore 13 2 12 2 8

7 Calvin Klein Euphoria 13 2 6 1 117

8 EL Pleasures 13 2 12 2 8

Others 491 77 473 78 4

Total* 638 100 607 100 5



Source: Mintel

*figures may not add up due to rounding





UK VALUE SALES OF WOMEN'S AND UNISEX FRAGRANCES (pounds m)



Women's Unisex Total*

fragrances



2002 504 15 519

2003 519 15 534

2004 549 15 564

2005 573 15 588

2006 607 16 623

2007 (est) 638 18 655



Source: Mintel

*figures may not add up due to rounding

ANALYST COMMENT - IAN BELL, UK RESEARCH MANAGER, EUROMONITOR
INTERNATIONAL

Compared with the Continent, the UK still has some way to go in terms of
per capita spend - in France and Belgium, the figure is twice as high.
This suggests that there is scope for the market to grow, at least
moderately, for the foreseeable future.

Manufacturers will, however, be required to fight harder to maintain
their share, and to invest heavily in marketing to get their brands
noticed through the 'fog' created by the hundreds of launches
annually.

But there is more than a subtle difference between 'marketing more' and
'marketing better'. The multitude of alliances that now exists between
celebrities and manufacturers is testament to a market that has been
able to reposition itself with a greater emphasis on 'masstige', which
has fast become the chief driver of sales.

Indeed, the huge popularity that celebrity fragrances enjoy has been put
forward as evidence that Britons are far more interested in the cult of
celebrity than fashion itself.

The demise of Jade Goody in the now infamous reality-TV race row, led to
the temporary withdrawal of her Shh ... fragrance, which could have been
viewed as a cautionary tale. However, public vilification is no
guarantee of a celebrity brand becoming a dead duck; her scent has now
been re-introduced and is selling well.

Others have achieved a degree of immunity to personal peccadillos and
public indiscretions. It could be argued, for example, that the rock 'n'
roll lifestyle of Kate Moss, who has endured as much negative press as
positive over the past few years, has found it has added edge and
credibility to her fragrance and, to some extent, boosted sales.