Are there future growth opportunities for the fragrances industry in Asia?

Carrie Lennard, Industry Analyst - Beauty and Personal Care, Euromonitor International As the traditional stalwart regions of Western Europe and North America are set to register only marginal growth in fragrances or even post a decline over 2009-2014 (with respective CAGRs of 1% and -2%), Euromonitor International takes a look at the performance of the industry in Asia to see whether key markets there may offer the industry any hope.

Strong decline in Japanese fragrance sales
The Japanese fragrances market continues to suffer, posting a 6% decline in value sales in 2009. Consumers simply cut back on their discretionary spending on scents during the recession as unemployment and job insecurity rose. The structure of the Japanese market also continued to be the biggest obstacle to a better performance. Grey imports continue to be a major problem for the industry, with much of the over-production in the US and Europe finding its way into the Japanese market through a myriad of importers, which has led to average unit price, particularly in premium fragrances, declining year on year over the review period.

The outlook is not good either - a decline of US$113 million in the size of the fragrances industry is predicted over 2009-2014.

Fragrances remain niche in China
Despite strong value growth of 9% in 2009, fragrances in China still accounted for just 3% of the country’s total beauty and personal care sales that year. In turn, China accounts for just 1% of total global fragrance sales, with per capita spend at under US$0.50 per year (compared with US$6.00 per person on skin care products). Consumer attitudes towards fragrances are primarily to blame; unlike skin care, fragrances are not seen by many as must-have purchases. Attitudes are changing, however, with more consumers purchasing scents for themselves as opposed to as a gift, which should help to drive growth over the long term.

There was a marked difference in the performance of fragrance sales in major cities in China, and in secondary cities. The global credit crunch had a much greater impact on fragrance sales in first-tier cities like Shanghai, where sales in high-end department stores declined in 2009. However, sales in second-tier cities like Xi’An were less impacted by the downturn. Women remain the key consumers of fragrances, meaning that premium women’s fragrances continued to account for the majority of overall premium fragrance sales in 2009.

Up and coming India shows promise
Fragrances grew by 17% in 2009 in India. Premium women's scents was the best performing category in 2009, registering growth of 20% as a result of the increased visibility of international brands in department stores and beauty specialist stores, as well as the rising disposable incomes of young working professionals. As average disposable incomes increase in the country, more consumers are expected to upgrade from deodorants to fragrances. Future growth is expected to continue to be robust, with US$100 million set to be added by 2014, equating to a fifth of total absolute fragrance growth in Asia. This marks India as one of the most attractive new markets for fragrance companies which are having to contend with falling sales elsewhere in the world.

 Euromonitor International will be giving a presentation on Global Beauty Trends at the show's Marketing Trends