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"smell is the only memory that never fades."

from the incense in the palace to the sachets of literati, fragrance has always been the carrier of taste and emotion. in "a dream of red mansions", cao xueqin uses fragrance to describe and symbolize different characters. as consumers increasingly pursue personalization and high-quality life, the ancient concept of "knowing people by smelling their fragrance" is taking on new life in modern cities. perfume is becoming an important way for chinese consumers to express themselves and show their personal taste.

results for the first half of 2023 show that the international beauty giant's perfume business outperformed the beauty market, becoming a highlight in the financial report and being mentioned many times, and even becoming a "sharp weapon" for the company's performance to stop falling. among them, the chinese market contributed a lot to the increase.

iimedia research data shows that compared with the industry penetration rates of 50% and 42% in the us and european markets, the penetration rate of china's perfume market is only 5%. the scale of china's perfume market has reached 20.7 billion yuan in 2023, and is expected to reach 51.5 billion yuan in 2029. it is still in the blue ocean stage and will become the main growth point of the global perfume market in the future.

coty, l'oréal, and estee lauder, which have long been experienced in the global perfume market, have also accelerated their deployment in the chinese market and consolidated their market positions by introducing new brands and expanding retail networks. with the rise of national trend culture, chinese local brands such as guanxia, ​​melt season, wenxian, etc. have risen rapidly and have received investment and support from international giants.

faced with the strong increase of international brands, the market is concentrating towards the top, and the market share of local brands is constantly being squeezed. tang xiaotang, a senior fashion industry analyst, bluntly said that for chinese consumers, the habit of using perfume has yet to be developed. "it is difficult for china's fragrance industry to create a new independent domestic brand."

"smell the fragrance and stop the decline" international giants increase their investment in the perfume track

in the global perfume market, china is obviously a market with low penetration and high growth potential, and has also become a "must-have" for brands. currently, international brands have considerable say in the chinese perfume market.

according to the 2023 tmall "double 11" perfume brand sales list quoted by iimedia consulting report, the top ten are all international brands, and the top three are jo malone london and tom ford. ) and saint laurent (ysl).

in recent years, international giants have accelerated the introduction, store expansion and adjustment of perfume brands in china. for example, after coty’s high-end perfume brand marc jacobs closed its tmall flagship store in june this year, it entered into a new exclusive retail strategic cooperation with sephora china. on the other hand, atelier cologne paris, a subsidiary of l'oreal, announced in march this year that it would restart the chinese market and will open more than 10 boutiques/counters in china in 2024. another brand of l'oreal, mugler, opened in june. the first fashion and perfume store in china.

looking at the global market, perfumes have catered to the changes in consumer attitudes after the covid-19 epidemic by virtue of their "pleasant" experience, and have "money-attracting power" that exceeds the average level of beauty products.

among the international giants that specialize in perfumes, coty achieved net income of us$6.118 billion in fiscal year 2024, a year-on-year increase of 10%, outperforming the beauty market. the revenue growth rates of puig and yite perfume in the first half of the year were 9.6% and 6.7% respectively, which are also higher than most international beauty companies.

among comprehensive beauty companies, the perfume category is still a category with strong resilience. for example, l'oréal, whose growth rate fell to single digits in the first half of the year, said: "perfume has once again become the most dynamic category in the high-end cosmetics department"; and for estee lauder, whose sales fell by 2% in fiscal 2024, perfume will be its 2024 fiscal year. the only category that grew among the four major product lines in 2018 (growth rate 2%). the organic sales of luxury goods giant lvmh group's perfume and cosmetics business unit increased by 6% in the first half of the year, higher than the 2% growth rate of the entire group. among them, dior, guerlain, and givenchy perfumes performed outstandingly.

coty executives analyzed the reasons for the popularity of perfumes at the august financial report: "perfume was a low-single-digit growth category before the global (new crown) epidemic, but it was put on the back burner during the global (new crown) epidemic. in front of the younger generation of consumers, they are all young men and women from different backgrounds, races, and cultures. perfume has reshaped the product itself with higher quality, more creativity, technological updates, and multi-level changes. , so that it is no longer a discretionary non-necessity, nor a non-periodic purchase, it becomes a part of your life.”

local brands aim at high-end pricing to surpass international brands

while international giants are increasing their presence in the perfume market, local brands are also gradually emerging.

iimedia data report shows that since 2018, the number of registrations of fragrance companies has accelerated significantly. as of 2023, the number of registered fragrance companies in china has exceeded 200 for five consecutive years, and the number of players entering the industry has continued to increase, further promoting the prosperity of the fragrance market.

more and more local fragrance brands, such as guanxia, ​​wenxian, melt season, and mobius, have entered consumers' horizons and have successively received investment from international giants.

it orange data shows that as early as 2021, spanish perfume group puig, which owns more than ten perfume brands such as bai ruiduo, artixianzhi, and penhaligon, exclusively participated in the series b financing of the chinese fragrance trendy brand smell library. wenxian and guanxia received tens of millions of dollars in financing from l'oreal in 2022 and 2024 respectively. when investing in guanxia this year, l'oreal said it would help guanxia enter the global market. melt season, which is positioned as a high-end salon fragrance, also received financing from estee lauder in 2023. this is the group's first investment in a chinese fragrance brand.

through branding, domestic fragrances have gradually gotten rid of the stereotype of "cheap" white brands, and have been labeled as "stylized and individual" based on the concept of "oriental fragrance".

from a price point of view, domestic brands no longer focus on affordability as their core competitiveness, and their prices actually surpass those of many international brands. for example, 100ml of guanxia's "one ounce of time" is priced at 1,598 yuan, a 100ml perfume from the melt season high-end series is priced at 1,480 yuan, and a 90ml concentrated perfume from the customized brand wenxian is priced as high as 1,750 yuan, with an average price of 19.4 yuan per ml. it even exceeds the price of international brands such as jo malone and chanel.

senior fashion industry analyst tang xiaotang said that the growth of chinese fragrance brands must be in the high-end market. "the competitiveness of chinese fragrance brands lies in cultural expression and brand building. the more high-end consumers want the expression of personality, the more receptive they are to brand premiums." this is why "oriental fragrances" with chinese elements can the key to breakout.

the "2024 china perfume and fragrance industry white paper" (hereinafter referred to as the "white paper") released by yingtong group, china's largest perfume brand management company, in early september shows that from january to may 2024, taojing douyin (taobao, jd.com, douyin) according to the data, the market share of the top20 brands reached 53%, an increase of 16 percentage points from the previous year. the "white paper" also corresponds consumers to the basic stage, advanced stage and senior stage according to low, medium and high perfume purchase frequency. through statistics over the past year, it is found that the proportion of consumers in the advanced and senior stages has increased significantly, from 17.5% to 17.5%. it has increased to 23.7%. compared with a year ago, more and more consumers are purchasing fragrance more frequently, which shows that consumers’ habits are being developed.

iimedia consulting ceo zhang yi said that the rapid growth of domestic aromatherapy brands is due to the rapid rise of the middle class, consumers' emphasis on personal image and the development of online sales channels. "only high-end users will first generate demand. other middle-income groups will gradually try and popularize it."

luxury goods group engages in "direct sales" of perfumes. is there still a chance for new brands?

although chinese fragrance brands are developing rapidly, local brands have not yet formed sufficient competitiveness in terms of market share.

the "white paper" shows that compared with the data from january to may 2023, among the top brands, the share of international commercial brands has continued to increase, accounting for 82%, and another 15% are international salon brands and domestic brands. further squeezed by leading international brands. although the overall growth rate of e-commerce has declined, there are still 9 international brands among the top 20 brands that are bucking the trend and leading the industry.

another phenomenon worthy of attention is that most international perfume brands are held by luxury goods groups. however, because they focused on leather goods and fashion with higher unit prices in the early stage, they often awarded the development and sales rights of beauty and perfume categories to professionals. beauty companies, such as kering, have licensed ysl’s beauty and fragrances to l’oreal group, and gucci’s beauty and fragrances to coty; richemont has licensed chloé’s perfume line to coty, and van cleef & arpels. , montblanc authorizes yite perfume.

however, with the popularity of the perfume industry and the fact that this category has better price accessibility and wider audience coverage than other luxury goods, luxury goods giants now choose to "end" direct sales of perfumes. after kering group acquired british salon fragrance brand creed for 3.5 billion euros last year, it identified the fragrance business as a strategic focus. richemont group officially established its high-end perfume and beauty department in september last year. up to now, three global luxury goods giants, lvmh, kering and richemont, have established independent beauty and perfume departments, and have publicly expressed their willingness to consider withdrawing some perfume authorizations.

this also means that the international perfume landscape is about to change. tang xiaotang analyzed to the reporter of "daily economic news": "luxury giants attach great importance to perfume because the growth of high-priced leather goods business has entered a slowdown stage. they must use an entry-level product to boost sales. forming an increase." zhou ting, president of the yaoke research institute and an expert in high-end consumer goods research, said: "it is an inevitable trend for luxury brands to withdraw some category authorizations. this is related to the brand development strategy. direct sales can better maintain the brand image and more get closer to customers and provide them with better services.”

international brands are betting on the chinese perfume market, which puts chinese fragrance brands facing severe tests. how should they respond?

"the main core competitiveness of perfume is brand power, and there is not much product differentiation at present." zhou ting said. to build brand power, it is inseparable from offline layout, publicity exposure and storytelling capabilities, which requires the support of more funds and resources. under such circumstances, it is obviously difficult for the newly growing domestic fragrance brands to compete with the century-old international beauty group. tang xiaotang said: "for l'oreal, which has strong cash flow, investing hundreds of millions of yuan in perfume will not have any impact, but for many domestic independent brands, they can only open stores one by one if they want to expand offline. once the cash flow is cut off, if you lose it, you risk going bankrupt.”

tang xiaotang finally reminded that for chinese consumers, the habit of using perfume has yet to be developed. different from mature foreign markets, "chinese consumers still regard perfume consumption as a grand occasion, such as a formal date, rather than a daily use habit. therefore, to a large extent, the 'ceiling' of the chinese perfume market is very low. in comparison, "the future of home fragrance in china is much broader than that of perfume."

"it has become difficult for the industry to create a new domestic perfume brand." tang xiaotang said, "the existing first-tier city markets are enough to support several current leading brands."

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