Scents Of Change

By Jennie James/London

Stopped by the perfume counter lately? Better set aside more than your lunch hour if you do. Led by the great French houses--Guerlain, Chanel, Christian Dior and Lancome--the perfume industry has become a hothouse of innovation, churning out literally hundreds of new fragrances, some of them designed to blossom and fade in the marketplace in about the same time span as the flowers that provide their essence. Fragrance, says perfume expert Michael Edwards, has become a "fashion accessory. Companies are mining and reinventing their heritage."

Take Philtre d'Amour, for example. Touted by Guerlain as a limited-edition scent for the first year of the millennium, it will be gone at the end of 2000. Like its limited-edition forerunners, Guerlinade, Belle Epoque and Guet-Apens--all released by Guerlain in the past two years--it is unlikely to have a profound effect on the company's bottom line, neither demanding excessive advertising nor generating vast sales.

"We don't do [limited editions] to achieve numbers," says Patrick J. Choel, head of the perfumes and cosmetics division of LVMH, the giant French luxury conglomerate whose brands include Guerlain, Christian Dior and Givenchy. "It's related to the history of the house. It gives a special edge to our business."

Finding a special edge is crucial in the increasingly flooded and fragmented fragrance marketplace. In 1979 Edwards, who produces the annual guide Fragrances of the World, classified 37 new scents, a number that grew to 58 in 1989. By last year, with everybody from clothing designers to celebrities to established houses piling on, the figure had rocketed to 264. Unfortunately, sales in the $7.4 billion European fragrance market have not kept pace. Indeed, over the past five years they have stagnated.

In this hypercompetitive environment, loyalty is no longer taken for granted, the signature scent is considered passe, and consumers are constantly on the lookout for novelty and exclusivity. Large houses battle for market share not only with their traditional competitors but also with niche brands. A place in the consumer's line of vision is paramount, and big houses are using various strategies to stay there. In the old days, the main vehicle was an extravagant launch of a single new scent. But increasingly the weapons of choice are limited-edition perfumes, male versions of female scents and bath-and-body line extensions. "You need to keep fresh, but you cannot constantly do megalaunches," says Karyn Khoury, senior vice president of fragrance development worldwide at Estee Lauder, which produces the Estee Lauder, Clinique and Bobbi Brown brands and holds global fragrance-licensing rights for designers Tommy Hilfiger and Donna Karan. An entirely new fragrance with a full marketing campaign, says Khoury, can take one to five years to develop, requiring significant investment.

Leveraging established products is easier. Lauder has just released its second limited-edition scent, Honeysuckle Splash, in a bottle that has the same shape as the company's 1953 Youth Dew. Lauder's first limited-edition fragrance release was A Garden of Pleasures--three scents that highlighted different notes from the perfume Pleasures, launched in 1995. Says Khoury: "We saw double-digit increases in sales of the core Pleasures fragrance while A Garden of Pleasures was on counter." Dior positioned Lily, its 1999 limited-edition release, as a modern interpretation of the 1956 classic Diorissimo. Chanel, Yves Saint Laurent and Lancome have all put limited-edition scents into the marketplace. Escada has launched its eighth annual limited-edition scent, called Lily Chic.

Despite the increased competition, the heady saturation has its pluses. Fragrance houses have found that pitching to a more aware marketplace means they can push such concepts as "fragrance layering," which means marketing scented body lotions, perfumed hair gels and other bath-line products as well as perfumes. At LVMH, such products now account for about 15% of all fragrance-line sales. But a more discriminating customer may also demand more unusual products. "We're attracting people who are fed up with buying just because they've been told to buy," says Anne Schneider, managing director in Britain of French niche house L'Artisan Parfumeur, whose scents include Mure et Musc and Mimosa pour Moi.

Even in a growing bouquet of scents, the direct impact of a successful fragrance on a house's bottom line can be significant. LVMH reports that in the last quarter of 1999 alone, J'Adore, a Dior perfume released in September, generated $53 million in European sales. The larger houses, which frequently sell cosmetics and skin-care lines as well as perfumes, especially value fragrances for their ability to entice shoppers to other products in the franchise. "When you can bring a customer to the counter because of a scent," says Lauder's Khoury, "she's much more open to considering treatment or makeup products." All the more reason for the perfume counter to grow even more crowded.