Sector Insight: Men's fragrances - Fragrant success

As being well-groomed shoots up the list of men's priorities, fragrance brands are reaping rewards.

THE BACKGROUND

British men are becoming far more concerned with their personal appearance. Traditionally, they bought fragrances simply to apply after shaving, but today's man is increasingly interested in sourcing the right smell for the right occasion. The steep growth curve for men's fragrances shows little sign of levelling off. But, for manufacturers, the seemingly endless need to develop and promote new products to maintain consumer interest is proving an expensive business.

The men's fragrance market was worth £305.7m in the UK last year, according to Euromonitor, a rise of 23% since 1997. And as men are buying scents in increasing numbers, companies are jumping on the bandwagon, with many launching several fragrances a year.

Style icons such as footballer David Beckham and actor Jude Law have made it cool for British men to care about personal grooming, a trend that has not gone unnoticed by fragrance monoliths such as Estee Lauder, L'Oreal and Unilever.

Each of these companies has expanded its men's products range over the past few months. This month Estee Lauder introduced its Beyond Paradise franchise into the men's market, a year after the launch of the successful women's version.

The decision was an exercise in 'brand loyalty', according to Peter Lichtenthal, senior vice-president of global marketing at Estee Lauder. 'We introduced the fragrance to target a younger crowd that is typically non-Lauder,' he says.

The men's fragrance market is dominated by two broad categories. Fine fragrances account for about 70% of the sector, with launches continuing unabated - Unilever, for example, introduced CerrutiSi and Vera Wang for Men this year. The category has seen retail value growth of 4.1% between 2002 and 2003.

Mass-market fragrances account for the remaining 30% of the sector. They tend to be less aspirational than premium brands, appealing to younger men, especially those with a link to deodorant brands such as Lynx. This sector has experienced a slight 2.3% drop in retail value between 2002 and 2003, according to Euromonitor.

The overall market remains buoyant, with average retail value growth sitting at 2.7%.

Personal growth

As men become more comfortable with fitting a personal grooming routine into their lives, so using a fragrance is increasingly regarded as a daily ritual. With this comes greater opportunities for market segmentation.

In March, Davidoff Cool Water, which launched 18 years ago, expanded its range to include a Cool Water Deep variant aimed at more mature consumers.

During the past decade, fragrances have become more widely available due to the emergence of retailers such as The Perfume Shop and Superdrug.

In addition, Boots, which accounted for 33% of UK retail sales of men's perfume in 2002, has broadened its offer to make fine fragrances more accessible to consumers. Duty-free shops are also a relatively new point of access.

Wider distribution has not always met with approval. Some perfume houses maintain selective distribution agreements and sell products only at dedicated counters in department stores.

The Christmas market has been crucial for sales of men's and women's fragrances, and continues to dominate the marketing calendar. According to Mintel, 32% of men usually receive fragrance as a gift, suggesting many rely on Christmas to replenish their stock.

But the research also shows there is a growing trend for men to purchase for themselves and to sample before doing so, suggesting they are becoming more discerning. Younger men buying mass-market fragrances tend to be more particular about what they use and will base part of their decision on brand image.

Analysts agree that new product development is the best way to maintain consumer interest. However, users of classic brands are likely to be ignored, with launches predominantly concentrated in the mass-market category.

There is also a risk that as perfume counters become more cluttered, they will confuse consumers and make them less willing to try something new.

Unilever Cosmetics International UK marketing director Hilary Taylor, who oversees brands including Calvin Klein and Cerruti, says: 'The expectation of a launch has become much bigger and the life cycle for brands has decreased.

'We expect the trend in the women's market for limited-edition brands to extend into the men's market, with pressure for increased adspend and promotion alongside aggressive price competition.'

This might seem alarmist, but in a market when there are, on average, 70 launches a year in the UK, the pressure is on for companies to create a brand that offers broad appeal and has longevity.

MEN'S MASS-MARKET FRAGRANCES BY BRAND SHARE

Brand Company 2003 (%)

1 Lynx Unilever 16.7

2 Old Spice Procter & Gamble 13.2

3 Brut Unilever 9.4

4 Adidas Coty 9.2

5 Gillette Aftershave Splash Gillette 6.7

6 Insignia Edenwest 4.4

7 Addiction Unilever 4.0

8 Legendary Harley-Davidson L'Oreal 0.3

9 Rapport Edenwest 0.2

10 Private-label n/a 6.2

11 Others n/a 29.7

Source: Euromonitor

MEN'S FINE FRAGRANCES BY BRAND SHARE

Brand Company 2003 (%)

1 Joop! Pour Homme Coty 3.8

2 Jean Paul Gaultier Le Male Shiseido 3.6

3 Eternity for Men Unilever 3.3

4= Boss Bottled Procter & Gamble 3.0

4= L'Eau d'Issey Pour Homme Shiseido 3.0

6 Davidoff Cool Water Coty 2.8

7 Boss in Motion Procter & Gamble 2.7

8 Hugo Procter & Gamble 2.6

9 Fahrenheit LVMH 2.1

10 Aramis Estee Lauder 2.0

11 Others n/a 71.1

Source: Euromonitor

UK RETAIL SALES OF MEN'S FRAGRANCES BY OUTLET

Brand 2002 2000 2000-2002

pounds m % pounds m % % change

1 Boots 98 33 87 32 12.6

2 Department stores 74 25 71 26 4.2

3 Drugstores/supermarkets 68 23 60 22 13.3

4 Other chemists 30 10 30 11 0.0

5 Other 27 9 24 9 12.5

6 Total 296 100 272 100 8.8

Source: Mintel

ANALYST COMMENT

Ian Bell Senior research analyst, Euromonitor

Sales at the premium end of the UK fragrances market show no sign of slowing in what has been a decade of solid growth.

Increasingly, fashion houses are putting their names to brands to offer consumers an affordable taste of the high life.

Indeed, price positioning is such that at little more than £20 for a standard bottle, almost every consumer is within touching distance of their own piece of high fashion. Paul Smith shoes costing £300 may be out of reach for many, but Paul Smith in a bottle is far more affordable at £24.

On the manufacturing side, high profit margins have encouraged what seems like an endless acceleration in launches. In 2003 more than 200 premium brands were added to the UK market. Of these, fewer than 20% are expected to last more than three years.

This 'inflation of newness' and the advertising frenzy around Christmas and Valentine's Day is evidence of the lengths to which brands have to go to establish themselves in a crowded market.

Predictably, manufacturers are upbeat about future growth for the segment, but fragmentation is likely to pose significant problems.

Constant line expansions and virtually unlimited availability are undermining brands' cachet.

Consumers seem confused with in-store offers and a brand's message can be lost or blurred by the wall of sound and vision produced.

Rationalisation in the sector is a spectre on the horizon, but this is unlikely without a significant cut in the level of consumer spending.

Low interest rates have helped push fragrances into the realm of impulse buys, but this could be tested by less favourable economic times.

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