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Attentive investors with keen business acumen have picked up on a trend: More and more people seem to be wearing perfume.
Once a humble corner of the beauty market, fragrance was the first category to thrive after pandemic-era lockdowns: It has seen double-digit growth since 2021, and now accounts for $64.4 billion in global retail sales, nearly 40% above 2019 levels, according to Barclays analysis.
This appears to be a global trend: Fragrance-filled Europe, which will account for 28% of the perfume market in 2023, according to Euromonitor, has seen double-digit sales growth every year since the pandemic. In the U.S., where perfume is less of a daily habit, penetration is double.
Even better, more expensive perfumes are outperforming their cheaper counterparts: in the US, luxury perfumes grew 12% in 2023, compared to 4% for the mass market (according to Circana data). For now, at least, the perfume market has achieved the trinity of increasing penetration and frequency of use, with a clear trend towards premiumization.
Something seems to be happening. But the components of this fragrance boom are hard to parse. At its core is a growing trend toward self-care that has reinvigorated the entire beauty market. Younger consumers are eschewing the notion of a “signature” scent in favor of owning and wearing several different fragrances. Barclays consumer analyst Ian Simpson points out that in the U.S., fragrance penetration among the youngest consumers, Generation Z, has increased fourfold, albeit from a very low base.
For companies, this matters. Luxury perfume’s “juice” and flashy glass bottles mean lower gross margins compared with, say, luxury skincare. Spain’s Puig, which focuses on luxury perfume, has a 75% margin, for example, while Aesop, the Australian luxury beauty brand acquired by L’Oreal, achieved an astounding 87.1% in 2022. But there are more expensive products. About two-thirds of perfume sales are luxury, compared with about one-third of beauty overall, according to Molly Wilenzek of Jefferies. That makes luxury an attractive market to enter.
For now, it shows no signs of slowing down. But as the recent cracks in the beauty sector show, the premiumization trend has its limits. Price-conscious consumers may soon wake up to sniff eau de toilette. Expensive glass containers and aspirational marketing campaigns don’t contribute to substance, after all.
camilla.palladino@ft.com