The World’s Biggest Fragrance Market is ……?
If one asks you to name the country with the biggest fragrance market in the world, you are almost certain to reply the US, China or France. All these are logical and plausible responses, however they are all…totally wrong, because in actual fact and to the surprise of most of us the world's number one fragrance market, recording proceeds of around $6 billion per year for the sale of perfumes and skin care products, is none other than Brazil! What is even more remarkable perhaps is that according to market research results, the residents of the largest country in South America use three times as much perfume as USA residents do in terms of consumption volume.
The ever growing consumption of fragrances in Brazil is fuelled by the country’s wealthiest segments of the population and it is anticipated to grow even further in the future, both with regard to women’s as well as men’s products, consolidating its position as the most valuable fragrance market in the world.
The number two spot on this list is taken by the US, which is the next most valuable market, but Brazil enjoys a comfortable lead because the per capita consumption of fragrances by Brazilians is far greater than that of Americans. It is therefore not surprising to find out that in this highly lucrative and valuable market the five of its major fragrance houses (these namely being Givaudan, IFF, Firmenich, Symrise and Takasago) have invested a total of around R$160 million in Brazil in recent years, thus rendering São Paulo one of the most important cities in the world in terms of development of fragrances, third only behind New York and Paris.All available market research data indicated that the Brazilian perfume and skin care products market is destined. This is attributed to the broad consumer base that exists in the country, the presence of a young and increasingly affluent population, as well as the experience-seeking behaviour of fragrance consumers. Indeed fragrance manufacturers in Brazils can enjoy numerous opportunities to equally target men and women buyers with both mass and premium products, due to the broad overall fragrance consumption in the country.
This is further supported by the fact that men consume more than 48% of the fragrances sold in Brazil, in terms of volume, meaning that they play a role in the market which is equally important as that of women consumers. The fact that both mass and premium fragrances are equally likely to succeed in the market, is attributed to the finding that consumers in the poorest 50% of households consume almost as many fragrances as those in the richest 50% of households, thus creating a level playing field. In terms of the motivation behind the purchase of a specific fragrance, market research conducted in Brazil reveals that Brazilians base their selection on the fact that they are seeking to either affirm particular visions of femininity or masculinity, including the use fragrances to deliberately break gender stereotypes. In fact this factor is responsible for 25,5% of total consumption in terms of value.
Other important factors driving the purchase of perfumes is the desire to treat oneself, as is the desire of both men and women to experience new or novel scents. Against this backdrop, it is certain that the market will continue to grow in the future and that many opportunities for launching new products will keep emerging as Brazilians will continue looking to indulge in new experiences. However, another characteristic of the Brazilian fragrance market is the very high import tax imposed on fragrances, which currently stands at more than 40%. This coupled with the increase in the disposable income that Brazilians spend on traveling, are leading consumers into buying premium fragrances while abroad during their travels rather than from their local shops in Brazil. It is telling that the average price for premium fragrances in Brazil is more than double that of the same products in the U.S., at over $100 per 50 mL. Having said that, the use of fragrances is so deeply embedded in the country, that Brazil is expected to not only have the highest volume of perfume consumption per capita in 2016, but also to be the third highest-spending country in per capita terms, behind only the Netherlands and Switzerland.
This prospect is translated into a good growth opportunity for premium fragrances, which are currently called to survive in a very challenging environment than other fragrance categories, due to the lack of cash in the pockets of consumers in developed markets, due to the financial crisis, coupled with the limited inclination for fragrances in the more affluent Asia-Pacific region. Having said getting a strong foothold in the lucrative Brazilian fragrance market will not be an easy ride for premium perfumes. In fact, those in the know maintain that retail distribution will be a key factor in determining where the balance will lie between premium and mass fragrances in Brazil by 2016. Another important factor to take into account in this complex equation will be the Internet, which has been expanding to new regions in Brazil that have few physical points-of-sale. This a great opportunity to achieve increased fragrance sales in the coming years, especially due to the lower operating costs involved in online sales and is expected to be highly beneficial for the sale of premium fragrances, because it will make it possible to offer lower unit prices can be offered rendering premium brands more accessible to consumers.
Last but not least, Brazilians could be more encouraged to buy premium fragrances from home, at their local shops, if the taxes on these are reduced or if the fragrances are produced locally and will thus not attract high import taxes.