WITH perfume sales in much of the rest of the world slowing or declining, the industry, primarily based in Paris and New York, hopes for significant growth in China.
The market here remains small, although sales are rising exponentially. Nobody knows the exact growth rate, but Patrick de Lambilly, the vice president for Asia for Coty, says, “You can see 20, 30, and 40 percent a year.”
Alexandre de Chaudenay, Asia-Pacific managing director of the perfume licensee Beauté Prestige International, said, “I’d say 20 to 40 percent seems correct, but the figures are extremely difficult, and people tell you anything.”
Still, even if the Chinese market is potentially hugely lucrative, doing business here is far from easy. The regulatory system is uncertain. The department stores are of varying quality, and because Chinese tastes are changing rapidly, a store that attracts crowds one day can be deserted the next.
To add to the uncertainty, many in the business say the concept of perfume is so new that a lot of Chinese consumers are, in fact, not buying a perfume but rather the brand to which a bottle of perfume happens to be attached.
The importance of brand raises the question of the market’s future stability. Although many in the industry talk about the strength of the luxury brands in China, “Are those brands’ perfumes selling well?” De Chaudenay asked. “I think so. Are the consumers coming back? We don’t know.”
For that reason, De Lambilly says his perfume company and others are tempering their enthusiasm for the Chinese market with realism. “We’re learning as we go,” he said. “Particularly in fragrances. All of us here are doing the same thing: getting data from the marketing sources, comparing it to other sources, trying to figure it out.”
Hans Wohmann, head of Procter & Gamble’s Asian operations for scent, said sales in China of what are known as “prestige fragrances” — perfumes made by designers and luxury houses like Chanel, Estée Lauder and Dior — were around US$120 million versus the US$9 billion European market or the US$4 billion American market. Even the Japanese market, the largest in Asia, was US$500 million in 2006.
As Wohmann put it, 20 percent of the world’s population had only 1 percent of the global fine fragrance market.
Perfume is a relatively recent phenomenon in China. De Lambilly said the Chinese started using scented shower products only in the early 20th century. But they were light and simple, he said. “They were for freshening the body and also to avoid mosquitoes.”
Western-type perfumes have been produced in China only since the mid-1980s, said Bill Jin, manager at the PearlChem Corporation in Parsippany, N.J., an importer and distributor of perfume raw materials.
Jin says there are just a few local perfume brands. Pearlscent, the sister company of Jin’s company, based in Guangzhou, is one of them. “The fragrance concentrates are mainly created by our customers in the United States or France and imported from the United States or Europe.” They are then mixed with alcohol, bottled and sold in China.
Jin said that there was virtually universal agreement that Chinese brands would not pose serious competition to Western brands until well into the future. “High-end brands like Dior and Chanel will be for the prestige consumers, which is completely different from the local brand market,” he said. “One bottle of Chanel perfume will cost almost two weeks pay for a fresh-out-of-college student.”
Inefficiencies, bureaucratic complexities and the major capital investment needed for setting up a subsidiary have made partnerships with Chinese distributors the norm.
(SD-Agencies)
