COSMETICS Perfume sales decline

Perfume makers grapple with how to please a more fickle customer.
MARKETWATCH
LONDON -- They may be called Eternity, Addict and Obsession, but fragrances, and their makers, are struggling to captivate an increasingly fickle consumer.
Blame it on the unquenchable thirst for novelty and a shrinking attention span, but while consumers were once loyal to a scent for years, most now own half a dozen different fragrances, dabbing a drop of one or the other to suit a mood, an outfit or a season.
That's put cosmetic giants on the back foot, forcing them to innovate, repackage and promote many more scents each year than they marketed even a decade ago.
Recent earnings from some of the world's leading cosmetic companies show the shorter life cycle of fragrances is eroding the bottom line.
Paris-based L'Oreal, the world's No. 1 cosmetics group, known for its Lancome and Cacharel lines, said in October that lackluster third-quarter U.S. sales were partly due to a loss of sales momentum by fragrances.
At the same time, smaller French rival Clarins said perfume sales fell 11 percent in the period.
J.P. Morgan analysts noted then that, taken together, the L'Oreal and Clarins results suggested a "worrying" trend.
"The increasingly short life cycle of fragrances seems to be a source of increasing volatility for cosmetics companies," the broker said.
U.S. companies
The problem extends well beyond Europe, too.
U.S. company Elizabeth Arden, whose scents include Elizabeth Taylor's White Diamonds and Britney Spears' Curious, in November said it would rely on "significant promotional support" to new products and existing brands to drive sales in the second quarter.
Meanwhile, at department-store cosmetics counters, the gloves are off.
With limited editions, extravagant bottles and vials, and celebrity endorsements, the beauty giants are sparing no expense to set their latest liquids apart from their rivals.
As Estee Lauder, which owns more than 100 fragrances and uses actress Gwyneth Paltrow as its ambassador, said in its most recent annual report: "A scent is never just a scent. It's an image, an aspiration, a mood, a statement." Still, the market's ruthless, and a weak debut can spell a speedy exit from the shelves.
Shortened life cycle
"The life cycle of fragrances has shortened dramatically in recent years," said Karen Grant, a senior beauty industry analyst in the U.S. for market research firm NPD Group.
"A few years ago, it used to be that a fragrance would come out, slowly build up sales, and perhaps after three or five years you would start seeing some attrition. Now a fragrance comes out and often by the second year it's either off the shelves or posting double-digit declines in sales."
To make things worse, the perfume market is also suffering from slower growth than some other segments of the beauty industry. L'Oreal's fragrance division was its slowest-growing cosmetics' business segment in 2005.
Comparable perfume sales at the group rose 1.3 percent to 1.47 billion euros ( 1.93 billion) in 2005, compared with growth of 8.9 percent for skin care and 5.6 percent for hair care.