It’s All in the Juice

(L-R): Cosimo Policastro, executive vice president Fine Fragrance North America, Givaudan Fragrances Corporation; Ann Gottlieb, president of Ann Gottlieb Associates, Inc.; Rochelle Bloom, president, The Fragrance Foundation; Judy Galloway, managing partner of G-Group Market Research; Camille MacDonald, president, brand development & merchandising, Bath & Body Works; and Joe Magnacca, senior vice president and chief merchandising officer, Duane Reade, at Fragrance Foundation Trends Forecast 2010.

The Fragrance Foundation’s Trends Breakfast served up a panel of industry leaders brainstorming on how to squeeze the most out of the prestige fragrance market.

By Jamie Matusow, Editor

More than 200 industry executives gathered at The Time/Life Building at 51st Street and 6th Avenue in Manhattan on March 23, for a light breakfast and an inspiring presentation by leaders in the beauty industry. The subject: How to re-energize the fragrance industry—particularly the prestige market.

Coincidentally, the Fragrance Trends Breakfast took place on the same day that The NPD Group had announced an across-the–board plunge in Prestige Beauty, the overall industry decline driven primarily by fragrance. Total sales of fragrance reached $2.48 billion in 2009, down 10% in both men’s and women’s, according to NPD.

The challenges at hand prompted a change in the morning’s focus. Rochelle Bloom, president of The Fragrance Foundation, introduced the expert panel, saying what started out to be a discussion of upcoming fragrance notes had evolved into addressing “where we are and what will take us out of this malaise.” The Fragrance Foundation recently premiered its “One Drop Changes Everything” multimedia campaign with this recovery goal in mind.

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Bloom turned the podium over to fragrance authority Ann Gottlieb, the brains behind many successful perfume launches, and moderator of the morning’s panel, which included fellow fragrance industry mover and shakers Camille McDonald of Bath & Body Works, Cosimo Policastro of Givaudan and co-chairman of The Fragrance Foundation, market researcher and trend forecaster Judy Galloway and senior vice president and chief merchandising officer of Duane Reade, Joe Magnacca.

Success or Failure?

While the fragrance market has taken a downward turn, seven fragrances have remained as unchanged successes, classics, for at least the past five years: Beautiful by Estée Lauder, Chanel No. 5, Donna Karan Cashmere Mist, Pleasures by Estée Lauder, Thierry Mugler Angel, Trésor by Lancôme and J’Adore by Christian Dior.

What qualities do these consumer favorites possess that so many others fail to achieve?

Gottlieb started out with a simple question posed to McDonald: What caused this current implosion in the fragrance industry to begin with?

McDonald noted several causes, including the changing trend of consumers to purchase mass and prestige brands at the same time, often relying on the Internet for ease. She referred to the current state of affairs as Ground Zero, saying the plunge had started about 10 years ago, when brands relied on pure “newness” to launch, leading to consumer boredom and driving customers back to the classics. “If we do fewer launches,” she suggested, “we can do them more creatively.”

Going forward, McDonald suggested fragrance brands should diversify. “Instead of relying on celebrity or fashion endorsements, make the ingredients the focus—let the customer participate,” she said. “What it smells like is most important,” she emphasized.

Policastro of course concurred that the aroma trumps all, and explored just what attributes add up to a classic—like the seven mentioned previously—that have sustained consumer interest through good times and bad.

What defines a classic? To answer this question, Policastro explored several questions in response. “How relevant is it to the consumer?” he asked. “Does she have an immediate and emotional connection?” He also addressed the notion of disruption: “Does my fragrance clearly distinguish itself from others?”

Age-appropriate

Can future fragrance success lie with a younger demographic? Very possible, said Galloway, who spends a lot of time studying millennials (15-28 year olds), partially through her position as adjunct professor of market research and consumer behavior at FIT. This group may be fickle in many ways, she explained, “but they all like fragrance—and they like it as a gift.”

Whereas the average consumer owns 5-6 fragrances, millennials collect on average 7-8.

“It’s all about the juice to them— how it smells and how it makes them feel,” explains Galloway. “It’s up to us to make them loyal.”

Of course, she advised, you can’t forget the baby boomers either. “There are 80 million baby boomers—and they use products more like their millennial daughters, than their mothers did.”

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Retail Advice

When Magnacca took over the Duane Reade chain last year, he had to find a way to attract millennials, after seeing that his own teenage daughter had shown little interest in the retailer’s offerings. He also had to conquer an “I Hate Duane Reade” website. Less than a year later, the chain was bought by Walgreen’s, which showed an appetite as much for Magnacca’s private food and beverage label, Dr. Delish, as for its revolutionary steps in revitalizing the store’s beauty inventory. Magnacca, who Gottlieb referred to as “The Houdini of Retail,” shared several of his secrets to success, based on his experience as a former retail executive in Canada, including the launch of targeted loyalty programs and Look Boutiques, store-within-a-store concepts that feature many prestige as well as mass-market brands.

“Loyalty points are often spent in beauty and fragrance,” said Magnacca. “I don’t think loyalty, in general, is understood here [in the U.S.].”

Listen and Learn

Summing up the engaging session, Gottlieb observed: “Almost every answer has to do with listening.”

Listen to the panelists, listen to your customers and give them what they want. It could lead to loyalty and the sweet smell of fragrance success.