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Can One Ad Change Everything for the Fragrance Industry?

Despite the sensual images and emotional reactions associated with fragrance, the chances are when you think about Valentine's Day gifts this year, you'll think about flowers, chocolates, or a dinner at your favorite restaurant, before you consider a bottle of perfume.

Source: NeimanMarcus.com

That's not a huge surprise given the downward trends in fragrance sales. Except for a brief pick-up beginning in 2006 — when a number of celebrities began selling their own fragrances, generating new interest in the category — fragrance sales have languished since the economic downturn that followed the 9/11 terrorist attacks.

As consumers clamped down on discretionary spending in the latest recession, sales dropped precipitously.

"The recession just kind of put the last nail in the coffin, to put it bluntly," said Rochelle Bloom, president of the industry's trade group, The Fragrance Foundation.

According to market researcher NPD, sales of so-called prestige fragrances — typically the high-end, designer scents sold by department stores — fell 10 percent in 2009 from the prior year. This was a sharp acceleration of the 6 percent decline from 2007 to 2008, and a 1 percent decline from 2006 to 2007.

With a bad situation turning worse, the fragrance manufacturers — who are often secretive, and most certainly fiercely competitive — are banding together to do a national campaign to encourage men and women who use perfumes and other scented products, to do so more often.

Although the organization was founded in 1949, Bloom said she believes this is the first national, multi-media campaign the industry has done through the trade organization.

According to Bloom, the slowdown in consumer spending certainly dealt a body blow to the industry, but there were other things that were going on that were hurting business as well.

"Fragrance gets a bum rap," Bloom said, explaining that many people starting believing it was unacceptable to wear fragrance in the workplace. It began to get a perception that it was bad for the environment or that it triggered people's allergies.

Plus, in an attempt to spark consumer interest fragrance companies began churning out tons of new products each year, hoping that at least some of them would resonate with shoppers and energize the category.

Bloom thinks the opposite happened. Consumers became confused, she said.

Source: The Fragrance Foundation

"They were outdating the fragrance they launched the year before," Bloom said. "Consumers didn't know what's in, and what's out. It was overwhelming."

Also, with the large number of new product rollouts some of the mystique behind the fragrance was getting lost.

Karen Grant, a senior global industry analyst at NPD, notes that some consumers have also been looking for products that convey a slightly edgier and more playful image rather than the more overt "I'm a sensual woman"-type messages that are very common in the category.

According to Grant, some of the more successful product launches last year fell into this category, including Juicy Couture's Couture Couture.

It is likely that the industry is taking the right tact by targeting consumers who are already in the category from time to time, rather than attempting to create a new habit.

Four out of five women, and 7 out of 10 men, wear fragrance at least occasionally, according to NPD's research. The "One Mighty Drop" campaign is striving to remind people that it can be "part of the emotional heartbeat," Bloom said.

Indeed, scents can trigger powerful emotions and help people recall certain memories. It is that emotion that the industry is hoping to tap into with its tagline "One Drop Changes Everything."

The campaign will be a multi-media effort, with print advertisements, a Web site, digital signs in shopping malls, and a stint on the Time Square jumbotron in New York City in February and March. The industry also plans test a link to from its Web site to Nordstrom's Web siteto see if the effort is successfully coaxing people to buy fragrance.

But whether this campaign will pack the same consumer-changing wallop that other trade-wide efforts such as the "Got Milk?" campaign has remains to be seen.

Certainly, the industry continues to produce numerous new products, but there are already signs that may slow.

For example, Procter & Gamblehas been going through its fragrance portfolio and is looking to eliminate brands that have not been selling as well as others.

According to Grant, other beauty companies also will be making tough decisions, especially those that sell other types of cosmetic products.

"Some players may pull out of the category," Grant said. "It's going to shake out a lot of players."

Still, even in the midst of all of this gloomy news, there are some flashes of hope. Teens are showing increased interest in fragrance, possibly helping to fuel the growth of novelty products such as scents in roll-on bottles or perfumes in smaller packages.

Love & Money - A CNBC Special Report
Love & Money - A CNBC Special Report

Also, pricey gift sets, sometimes costing well above $100, are selling well. This means holidays such as Valentine's Day, Mother's Day and Christmas, are particularly important times for the industry.

"Holidays are very important," Grant said. "Sales during the week can change the direction of the month."

Also, coming out of the Christmas holiday, there were some encouraging signs, particularly with smaller-sized women's fragrances.

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