The companies behind the biggest fashion fragrances

The fragrance business is booming.

In the US, the category continues to grow steadily, after the jump from the pandemic era. In 2023, sales are up 19% year-over-year, according to NPD, driven by behavioral changes in Gen Z consumers and an increased interest in the Chinese market.

“It defies logic of how strong it continues to be,” Larissa Jensen, NPD vice president and beauty industry consultant, said of the industry.

While independent labels have carved out a space for themselves in the market – and received attention and interest for doing so, such as Puig’s acquisition of Byredo in 2022, it is still designer fragrances like Dior and Gucci that dominate the market.

But typically, it’s not these brands or their parent companies that are reaping the benefits of their perfumes’ success. Most luxury brand perfumes and colognes are made and sold by a handful of beauty companies that have entered into lengthy licensing deals with brands. L’Oréal, for example, has held the fragrance and beauty licenses of Ralph Lauren and Giorgio Armani, respectively, since the 1980s. Several companies, including Interparfums and Parlux, focus their entire business on fragrances, operating licenses for companies Abercrombie, Coach and Guess (Interparfums) and Tommy Bahama and Jason Wu (Parlux).

These licenses are big business and can generate hundreds of millions of dollars in revenue for their operators, especially in the prestige segment where margins are higher. L’Oréal’s Saint Laurent license, which spans makeup, fragrance and skin care, is said to generate more than $1 billion in annual sales. For Coty, which has held the Gucci license since 2016, the fragrance accounted for 60% of its 2022 annual revenue.

As the industry grows, the broad network of fragrance licenses is changing. Most notably, on Feb. 3, Kering laid the groundwork to eventually take its beauty business in-house with the formation of its own beauty arm, Kering Beauté. Dolce & Gabbana, which previously licensed to Shiseido, took the beauty home earlier this year. Estée Lauder, in an attempt to retain Tom Ford’s beauty business (including his Oud Wood cologne), purchased the company in November 2022.

More recent news such as Coty’s December sale of the Lacoste license to the brand, which then struck a deal with Interparfums; transfer of DKNY from Estée Lauder to Interparfums in 2022; Tommy Hilfiger’s license sales to Give Back Beauty and Michael Kors to EuroItalia, in 2022 and 2021, have returned to analysts’ talk.

“There’s a lot of activity going on there because the industry is so hot,” said Jensen.

Read BoF’s roundup of the companies dominating the fragrance space behind the scenes as it goes from strength to strength.

Who is behind most of the world’s perfumes?

For licensed operators, beauty is a revenue generator, but for luxury brands, it’s a marketing tool. Fragrance is an entry point for consumers to experience a brand for the first time, said Mario Ortelli, managing partner at luxury strategy consultancy Ortelli&Co. For this reason, the companies that own the licenses often put large marketing budgets on fragrances and hire celebrities for campaigns.

Licensing allows brands to access this marketing machine without having to navigate complicated fragrance development processes, supply chains and wholesale procedures on their own. The downside is that it often means giving up some control over how the brand appears and who reaps the benefits of brand equity.

“(Beauty conglomerates) have the manufacturing, the science, the technology, they have the distribution, the relationships,” said Korine Wolfmeyer, senior equity research analyst at Piper Sandler. “It is much simpler for them.”

Those who license the brand’s fragrances buy them for set prices and then handle manufacturing, marketing and wholesale. Competition for major labels is fierce, as deals often last for more than ten years.

Still, the two biggest players – LVMH’s Chanel and Dior – keep their fragrance businesses in-house, which means they retain the profits and full control over the image.

Going it alone doesn’t work for everyone. Burberry, for example, tried to bring its scent home in 2013, choosing to partner with Coty in 2017.

“The risk with insourcing is if you don’t have the critical mass to attract the right talent into your organization, or the critical mass to successfully partner with distributors or producers,” said Ortelli.

Amid activity in space, companies are shaping their specific strategies on how to approach the business, Wolfmeyer said. L’Oréal and Coty are doubling down on prestige: L’Oréal acquired licenses to Valentino and Prada in 2018 and 2019, while Coty sold Lacoste and has instead been pushing Gucci, Marc Jacobs, Burberry and Chloé. Estée Lauder is focusing on Jo Malone and its recent acquisition Tom Ford, while Puig appears to be turning its attention from licensing to its own brands, which include Dries Van Noten and Nina Ricci.

Interparfums Chief Executive Jean Madar said the number of brands approaching the company about possible partnerships had increased in recent years. The company’s revenue has also jumped, from $714 million in 2019 to $1.09 billion in 2022. Due to the growth, some brands are re-evaluating their partnerships and others are looking to enter the space for the first time, he said.

“When brands see the fragrance business growing at a very fast pace, some of them say, are we the right partner?” Madar said. “And the fashion houses who were always told they had time before entering this category now think it’s a good time for them – and we see them knocking on the door.”

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