Heaven Scent

Would-be romantics could be forgiven for being overwhelmed by the tributes to Eros on offer at the fragrance counters in Selfridges department store in central London. Vivid Valentine's Day gift packaging and blood-red heart designs on the floor clamor for the attention of potential purchasers of perfume in one of the most important sales periods for fragrances all year. But amid this cacophony of chemical attractions, celebrated French perfumery house Guerlain presents a more demure salute to romance: the fragrance Philtre d'Amour.

Touted by Guerlain as a limited edition scent for the first year of the millennium, Philtre d'Amour was not designed to become a timeless classic like Chanel No. 5. Indeed, by definition it will not be produced beyond this year. Like its limited edition forerunners Guerlinade, Belle Epoque and Guet-Apens, all of which have been released by Guerlain in the last two years, it is also unlikely to have a profound effect on the company's bottom line, neither soaking up excessive amounts in advertising nor generating vast amounts in sales. "We don't do [limited editions] to achieve numbers," says Patrick J. Chol, head of the perfumes and cosmetics division of LVMH, the giant French 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, perfume expert Michael Edwards, who produces the annual guide Fragrances of the World, classified 37 new scents, a number which grew to 58 in 1989. By last year, with everybody from designers to celebrities to established houses piling in, the figure had rocketed to a whopping 264. Unfortunately, sales in the $7.4 billion European fragrance market have not kept pace: indeed, over the last five years they have stagnated.

In this environment, loyalty is no longer taken for granted, the signature scent is considered a thing of the past 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 increasingly popular 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 for gaining visibility was to splurge on extravagant launches for new scents. But increasingly the alchemists of amour have also turned to producing limited edition perfumes, male versions of female scents, and bath- and body-line extension products.

"You need to keep yourself fresh, but you cannot constantly do megalaunches," says Karyn Khoury, senior vice president of corporate fragrance development worldwide at the American conglomerate Estee Lauder. Last year the firm, which houses the Estee Lauder, Clinique and Bobbi Brown brands and holds the global fragrance licensing rights for designers Tommy Hilfiger and Donna Karan, reported a 6% increase in fragrance sales. An entirely new fragrance with a full marketing campaign, says Khoury, can take between one to five years to develop, and requires significant investment. Chol notes that, generally, to launch a fragrance on a global scale can require an advertising and marketing budget of up to $100 million.

Perfumer Franois Coty, often called the father of modern fragrance, is credited with revolutionizing the industry at the beginning of the last century, having a profound effect not only on the way perfumes were constructed, but on the way they were packaged and sold. Nowadays, the "concept" is paramount. "You have to have roots and a story to be successful in fragrance," says Chol. "The name [must] encapsulate the concept; the juice is very important; the packaging is key."

Despite massive efforts and spending by houses, loyalty can prove elusive. While a certain section of the market still opts for favorites and established names, says Angela Creasy, perfumery buyer at department store Liberty, "there's a growing demand for fragrance that not everybody else is wearing ... for something that no one else has ever heard of. The customer is so used to seeing and wanting something new--by bringing out limited editions, when customers ask what's new, the brands have an answer."

Estee Lauder has just released its second limited edition scent, called 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 of Pleasures, launched in 1995. Says Khoury: "We saw double-digit increases in sales of the core Pleasures fragrance during the time that A Garden of Pleasures was on counter." Industry observers note similar cross-referencing elsewhere. Christian Dior positioned Lily, its 1999 limited edition release, as a modern interpretation of the 1956 classic Diorissimo. Chanel, Yves Saint Laurent and Lancme have all put such limited edition scents into the marketplace. Sometimes the concept proves to have remarkable viability and staying power: Escada has just launched its eighth annual limited edition scent, called Lily Chic.

The limited edition fragrance market "exploded in the last half of the last decade," says Edwards. Prior to that, some houses had launched existing scents in a series of especially commissioned or numbered bottles, driving consumer interest and sparking off a thriving collector's market. But it was not until recently that scents also became a significant part of the limited edition category. "It turned fragrance into a fashion accessory," says Edwards. "Companies are mining and reinventing their heritage."

The current proliferation of fragrances--both limited edition and otherwise--say experts, has its roots in a number of recent and pivotal events. The 1973 release by Revlon of Charlie encouraged women to not only buy fragrance for themselves but to wear it every day. In 1981 Giorgio Beverly Hills launched the heady Giorgio, which made retailers realize the extent to which fragrances could bring in traffic. And industry experts credit the 1994 launch of Calvin Klein's now ubiquitous cK One with bringing younger consumers into the market.

Despite the increased competition, the growing saturation has had its pluses. Fragrance houses have found that pitching to a more aware, educated marketplace means they can push such concepts as fragrance layering, marketing scented body lotions, perfumed hair gels and other bath-line products to consumers. At LVMH, such products now account for about 15% of all fragrance-line sales.

But a savvier consumer may likely be one who not only demands unusual products but also turns to the niche houses to find new scents. "We're attracting people who have gone past the big brands--who are fed up with buying just because they've been told to buy," says Anne Schneider, U.K. managing director of French niche house L'Artisan Parfumeur, whose scents include Mre et Musc and Mimosa pour Moi. Smaller houses have also caught the nose of the big fragrance purveyors. Last October, Estee Lauder acquired innovative British niche fragrance and skincare house Jo Malone. "The smaller brands are on the rise," says Cedric Magnelia, a consumer goods analyst at Credit Suisse First Boston. "The larger houses consider them to be legitimate."

The direct impact of a successful fragrance on a house's bottom line can be significant. LVMH reports that in the last quarter of last year alone, J'adore, which Christian Dior released in September, generated $53 million in sales in Europe. But the larger houses, which frequently sell cosmetics and skincare lines as well as perfumes, also value fragrances for their ability to entice shoppers across into other products in the franchise. "When you can bring a customer to the counter because of a scent," says Khoury, "she's much more open to considering treatment or makeup products." Even more impetus, then, for companies to get their noses ahead of their aromatic competitors.