Fragrance sector poised for more expansion

The fragrance market in China is poised for growth to meet demand of the nation's increasingly sophisticated beauty consumers, and online sales are expected to become more important, industry insiders said.

In the next five years, the fragrance market in China is expected to grow at a compound annual growth rate of 17 percent, hitting sales revenues of 15.4 billion yuan ($2.4 billion) in 2025, according to market research firm Mintel.

Last year, fragrance sales in the nation grew by 1 percent annually as a result of the COVID-19 pandemic－far lower than the 11 percent annual growth recorded in 2019, according to Mintel.

International retailers such as LVMH, Chanel, Coty, L'Oreal, and Estee Lauder continue to dominate the China market, together accounting for a 59.9 percent share of fragrances sold this year, said Mintel. LVMH has the largest market share among international companies.

China has some 20 million consumers who have the habit of using perfume regularly, according to a report by market consultancy iResearch.

Despite difficulties posed by the pandemic, major retailers have maintained good momentum from new fragrance launches last year. They also have sought new business opportunities through e-commerce. L'Oreal and Estee Lauder have been notable for their strong growth online.

Of 3,000 surveyed consumers nationwide, 36 percent said Chanel was their favorite perfume brand and 21 percent picked Dior, Mintel said. No other brand was mentioned by more than 5 percent of respondents.

"The fragrance category is projected to quickly recover and even accelerate in the post-pandemic era. Chinese consumers pay lots of attention to discretionary categories such as fragrances, which are positioned to offer more emotional benefits and help express their individuality," said Alice Li, beauty and personal care associate director of Mintel.

"The majority of users have started wearing fragrances as part of their routine. Encouraging more frequent use may be a challenge. Therefore, brands should focus on driving ownership of multiple fragrances and encouraging consumers to switch scents or layer different scents in order to increase usage," Li said.

Perfume and aromatherapy form a subcategory of consumer goods with top sales on Tmall, an e-commerce platform of Alibaba Group. This year, aromatherapy products such as candles or decorations for the home, aromatherapy items for cars and salon fragrances made by smaller studios or salons have seen growth rates of more than 100 percent year-on-year, according to Tmall.

New product launches of unisex fragrances have been growing quickly in China, fueled by gender neutrality as a beauty trend. Botanical and herbal fragrances have become the top sellers in that category.

Women's frequency of using fragrances has remained somewhat flat, but more men have become occasional users. Buying fragrances for personal use has declined with the pandemic, but giving fragrances as gifts has increased, Mintel said.

While leading international companies account for a bigger market share, they have been facing increasing competition from niche fragrance brands that have entered the China market in the past few years as well as the emergence of local players.

Chinese fragrance brands usually have different competitive strategies as they target younger consumers. Some top domestic fragrance brands include Scent Library, Uttori, Reclassified and Young Beast.

This year, State-owned CITIC Capital invested in Reclassified, a Shanghai-based brand that makes salon fragrances. To Summer, a niche Chinese aromatherapy brand, has received two rounds of financing since 2019, with backers including IDG Capital, Sequoia China and ZhenFund.

Scent Library, a brand founded in Beijing in 2009, is one of the earliest local brands to enter the fray. In September, it received its latest round of financing, with exclusive investment from Spanish fashion and fragrance brand Puig.

The company said it plans to use the funding for the research and development of original fragrances. It also wants to blend online and offline experiences for consumers and strengthen its international supply chains.

In 2009, the company opened its first store in the fashionable Sanlitun area of Beijing, drawing attention of many people who worked in fashion, design and advertising.

Scent Library now has nearly 80 stores nationwide, and about half are located in first-tier cities. It plans more brick-and-mortar stores in other cities. Its fragrance products include body lotions, hand creams, shower gels and fragrances for cars.

The retailer says it usually introduces new products monthly in its biggest category－perfumes－in order to constantly attract consumers to new scents and flavors.

"We would like to do business based on different kinds of scents, and focus not only on perfume. We hope to create more scents that cater to the preferences of Chinese consumers, help scents become part of their lifestyle, and thus leverage the olfactory economy," said Huo Xuefei, senior manager of branding at Scent Library.

"We launch perfumes in different scents to tell stories, and we are quite happy that many consumers understand the stories behind our products. For instance, a consumer said after he smelled one type of scents, he could sense the smell of camphor and think of his grandparents and old times," Huo said. Camphor has been traditionally used for its medicinal qualities.

Scent Library has agreements with a few major global essence-making companies, including Firmenich, International Flavors and Fragrances Inc, Symrise Ltd and flavor and fragrance manufacturer Mane.

Scent Library said it often provides some abstract concepts to international suppliers in such categories as rain, snow, different colors and food. The company acknowledged that it is sometimes somewhat difficult to turn abstract concepts into specific products.

Still, in 2017, the company launched a perfume named LBK water, which is short for Liang Bai Kai, meaning cooled boiled water, and the product became one of its bestsellers. In 2018, its monthly sales volume reached 400,000 bottles. The perfume contains the smell of a water blend and freesia blossoms with aldehyde intensifiers. Scent Library said the perfume conjures a water-moistening feeling and a pleasant scent.

Li of Mintel said domestic perfume brands boast significant growth potential, given that Chinese consumers consider natural elements, scent durability and the type of scent as priorities when choosing perfumes. High-end brand images have become a secondary consideration. Domestic perfume brands can utilize consumer preference for Chinese style and traditional culture to tell their own brand stories.

"In the past year, an increasing number of traditional Chinese-style scents, such as tea and osmanthus, have become more popular. Also, more consumers have shifted their habits to buying perfume online, and domestic brands, especially startup companies, can leverage their strengths in social media marketing and attract more consumers online, given that sales are not limited to an offline shopping experience anymore," Li said.

"Still, the high-end domestic market for perfume is dominated by foreign brands, and most domestic brands are competing with each other in a lower price range targeting younger consumers. That group pays less attention to brand histories and pursues more emotional resonance with the brands," she said.