Fragrance market globally accounts for roughly worth USD 71 billion in the year 2018. This segment of the chemical industry is anticipated to witness a compound annual growth rate of 3.7% during the 2018-2025 period. The increasing importance of grooming and personal hygiene is one of the key driving factors. Personal care is expected to witness the fastest CAGR of 3.9% from 2019 to 2025. Along with perfumes, deodorants are also gaining popularity due to the ease of use and the long-lasting effect of the products. Deodorants can either be alcohol or water-based or completely dry. There has been substantial awareness regarding physical fitness among adults over the years. This has increased the number of gym-goers which in turn promotes the demand for body odor controller products like deodorants. Furthermore, an increasing number of working women and growing awareness regarding cosmetic products encourages the demand for personal grooming products.
Perfumes and deodorants have become a part of an essential day-to-day personal care product range. Urbanization coupled with the improving living standards among middle-class income groups is anticipated to expand the scope of growth. Additionally, the rising demand for floral scents from the younger population is expected to remain a favorable factor for the fragrance industry. This trend has encouraged consumer spending on both masses as well as premium products. The primary attribution for this is the growing presence of these commodities in developing markets like China, India, and Brazil. The multifunctional fragrance and flavors products are quite popular in developed countries. The sales for these products are likely to increase in the developing countries as well, owing to the improved purchasing power.
Market dynamics
The North American fragrance market was valued at nearly USD 7.1 billion in the year 2018. This sector is projected to reach a value of USD 8.5 billion by 2024, registering a CAGR of more than 3% during 2019-2024. Perfume is expected to remain the fastest-growing product segment, expanding at a CAGR of 3.9% from 2019 to 2025. The North American fragrance market is being driven by several factors. The market growth can primarily be attributed to an increase in consumer spending on beauty and personal care products in the region. Also, one of the major trends in North America is the increasing preference for a variety of fragrances as compared to a single signature scent. Moreover, the rising demand for on-the-go, value-added, and natural products contribute to market growth.
The growing momentum of the naturals trend in the U.S is challenging fragrance and perfume brands to renew their positioning. The natural fragrances claim to be vegan and have nearly 80% naturally derived ingredients. This trend also involves recycled materials in primary and secondary packaging and being recyclable once consumers remove the pump. Functional fragrances are positioned to alter consumer’s energy states and provide specific benefits. These fragrances help to enhance sleep and boosting energy along with providing pleasant aromas. Functional fragrances are manufactured by incorporating essential oils rather than synthetic chemicals.
Increased spending on attractive packaging, promotional activity, and advertisement has increased the market visibility of fragrance products. Application growth of fragrance products includes candles, incense sticks, sprays, and gels in the household industry also act as a key market driver. Additionally, shifting consumer preference towards aromatherapy is expected to expand the fragrance market size. Furthermore, shifting preferences towards natural personal care products with better quality has augmented the sales. Manufacturers are launching new products to gain a larger market share. For instance, in December 2017, Unilever signed an agreement to acquire Schmidt’s Naturals to capture the organic personal care market. Schmidt’s Naturals was a U.S.-based beauty and personal care company popular for its natural deodorants based on lavender, rose, vanilla, charcoal, magnesium, and sage.
Key players in the fragrance industry
North America constituted the largest market for fragrances with a market share of nearly 34% in the year 2018. International Flavors & Fragrances is one of the world’s leading fragrance and flavors companies. The company has manufacturing facilities in more than 35 countries. International Flavors & Fragrances generated revenue worth USD 296 million at the end of 2017. The company is a key player in innovation, strategic collaborations along with research and development in the global fragrance market. In May 2018, International Flavors & Fragrances acquired Frutarom for USD 7.1 billion. Previously known as Universal Foods Corporation, Sensient Technologies is a multidisciplinary producer of fragrances, flavors, and colors. Sensient is among the largest fragrances and flavors companies in the world. The company is positioned as a specialty chemicals company that concentrates on core technologies in the fragrance and flavors domain. Sensient has a strong foothold in the fragrance industry by acquiring nearly 20 specialist companies.
The Beauty and Personal Care (BPC) industry has witnessed a decline due to the COVID-19 pandemic. However, the impact on the fragrance industry is not as severe as seen in other industries. The BPC market has witnessed a consumer behavioral shift towards safe and reliable products. Products that have a lower risk of contamination owing to automation and longer shelf lives helping the rationing of consumer supplies are expected to stand out in the future. Brands are also focussing on improving their supply lines in terms of strengthening their e-commerce channel along with offering at-home wellness products.