Estee Lauder sees luxury, men key to re-igniting fragrance sales

Wed Dec 5, 2012 6:27pm EST
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By Phil Wahba

NEW YORK (Reuters) - Estee Lauder Cos Inc is counting on a new fragrance from luxury Italian fashion house Ermenegildo Zegna to help it tap into the industry's most promising markets - the very high-end and men.

Sales at Estee Lauder's fragrance business - about one-eighth of overall revenue - are still below pre-recession levels and were flat in the quarter ended September 30 excluding the impact of currency. That compares with growth of 7 percent and 6 percent for skin care products and makeup, its two biggest divisions, over the same period.

So the company is looking to win market share in the so-called "prestige" market for fragrances - such as those made by French luxury group LVMH and L'Oreal - that are sold at department and specialty stores instead of drug stores and discount chains.

"Having a strong foothold in the most stable category is for us essential," Veronique Gabai-Pinksy, a global brand president at Estee Lauder who oversees designer fragrances, told Reuters on Tuesday.

Designer fragrances account for two-thirds of industry sales and sell more reliably than those tied to celebrities. And the very high end fragrances make up only about 7 percent of industry sales, but Gabai-Pinsky called them "a pocket of high growth."

The Zegna fragrance, "Essenze," retails for $195 for a 4.2 fluid-ounce bottle and follows an agreement last year with designer Tory Burch for a fragrance being introduced in 2013. Estee Lauder's new women's fragrance, for Italy's Marni, will be introduced in the spring of 2013.

It is also a coup for Lauder, which replaces market leader L'Oreal as Zegna's fragrance partner with this deal.

Estee Lauder, which only makes "prestige" fragrances, produces some of the best selling fragrances and its partners include Coach Inc, Michael Kors Holdings Ltd and Tom Ford.   Continued...