The companies behind fashion’s biggest perfumes

The fragrance business is booming.

In the US, the category is still growing steadily, following the spike during the pandemic. Already in 2023, sales will increase by 19 percent year-over-year, according to NPD, driven by the changing behavior of Gen-Z consumers and increasing demand in the Chinese market.

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

When independent labels carve out a niche for themselves in the market – and get the attention and interest to do so, as with Puig’s 2022 acquisition of Byredo, they still dominate the market from designer fragrances like Dior and Gucci.

But typically, it’s not these brands or their parent companies that reap most of the benefits of their fragrances’ success. Most luxury label perfumes and colognes are produced and sold by a few beauty companies that have long licensing agreements with the brands. For example, L’Oréal has held fragrance and beauty licenses for Ralph Lauren and Giorgio Armani since the 80s. A number of companies have staked their entire careers on perfume, including Interparfums and Parlux, licensing work for companies including Abercrombie, Coach and Guess (Interparfums) and Tommy Bahama and Jason Wu (Parlux).

These licenses are big business, and can bring hundreds of millions of dollars in revenue to their operators, especially in the luxury segment, with higher profit margins. L’Oréal Saint Laurent’s license includes makeup, perfume and skin care and is said to generate more than $1 billion in annual sales. For Coty, which has held Gucci’s license since 2016, fragrance will account for 60 percent of annual revenue by 2022.

As the sector continues to grow, the vast web of perfume licensing is changing. Notably, on February 3, Kering laid the groundwork for Kering Beauty to launch its own in-house beauty arm. Dolce & Gabbana, who previously licensed Shiseido, took the beauty in-house earlier this year. Estee Lauder bought the company in November 2022 to retain Tom Ford’s beauty business (including Oud Wood cologne).

According to Coty’s December sale, Lacoste’s license back to the brand, which then signed a deal with Interparfums, the latest news, Estee Lauder’s DKNY takeover to Interparfums in 2022. In the year The sale of the license to give Tommy Hilfiger beauty and Michael Kors to Euro Italia in 2022 and 2021, analysts said again.

“The industry is so hot that there’s a lot of activity happening there,” Jensen said.

As it goes from strength to strength, read BoF’s statement on the companies that are dominating the perfume space at the back end.

Who is behind most of the world’s perfumes?

For license operators beauty is a revenue driver, while for luxury brands it is a marketing tool. According to Mario Ortelli, managing partner at luxury strategy consulting firm Ortelli & Co., perfume is the first point of entry for consumers to become familiar with a brand. Because of this, the companies that own the license put huge marketing budgets behind the fragrances and use celebrities for campaigns.

Licensing allows brands to tap into that market machine without having to navigate perfume’s uniquely complex development processes, supply chains and wholesalers on their own. The downside is often giving up less control over how the brand is perceived and who reaps the brand equity.

“[Beauty conglomerates] They have manufacturing, science, technology, distribution, communication,” said Corinne Wolfmeyer, senior equity research analyst at Pepper Sandler. “It’s too easy for them.”

Licensors buy a limited amount of brands’ perfumes, then handle manufacturing, marketing and wholesale. Competition for top labels is fierce, as deals often last more than a decade.

Still, the two biggest players – Chanel and LVMH’s Dior – keep their perfume business in-house, which means they keep the profits and have complete control over the image.

Going it alone doesn’t work for everyone. For example, Burberry tried to take the scent in-house in 2013, and finally in 2017 chose to meet Coty.

“It’s a risk if you don’t have the critical mass to attract the right talent within your organization, or to successfully partner with distributors or manufacturers,” Ortelli said.

Amid the movement in the space, companies are shaping their unique strategies for how to approach the business, Wolfmeyer said. L’Oréal and Coty are doubling down on prestige: L’Oréal has acquired the licenses for Valentino and Prada in 2018 and 2019, while Coty is selling Lacoste and pushing Gucci, Marc Jacobs, Burberry and Chloé instead. Estee Lauder is focusing on Jo Malone and recently acquired Tom Ford, while Pugh appears to be shifting his focus from licenses to proprietary brands, which include Dries Van Noten and Nina Ricci.

According to Interparfums CEO Jean Madard, the number of brands approaching the company about potential partnerships has increased in recent years. The company’s revenue also jumped from $714 million in 2019 to $1.09 billion in 2022. Because of the growth, he said, some brands are reevaluating their partnerships, while others are looking to enter the space for the first time.

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