Global Brands, News

Fragrance Distributor Inter Parfums Posts Record High Net Sales of $1.32 Billion in 2023

Inter Parfums, the fragrance distributor, has released its sales figures for the fourth quarter and full year of 2023. In the fourth quarter, net sales increased by 6% year-on-year to $329 million, while the full-year net sales for 2023 saw a remarkable 21% year-on-year surge, reaching $1.318 billion, marking a historic high. Similar to Coty, the distributor of Coach, Jimmy Choo, and Montblanc fragrances, Inter Parfums has demonstrated impressive performance in recent years, even in the face of challenging economic conditions. What factors contribute to the rapid growth of perfume distributors like Inter Parfums?

Net sales surged by 21% to $1.318 billion, reaching a historic high

On January 23, Inter Parfums released its performance for the fourth quarter and full year of 2023. For the three months and the entire year ending on December 31, 2023, net sales increased by 6% to $3.29 billion and 21% to $13.2 billion compared to the same period in 2022, setting a historic record.

By region, sales in Europe grew by 2% in 2023 fourth quarter, primarily driven by a 17% increase in Coach brand sales, according to Inter Parfums. Net sales for Jimmy Choo and Montblanc in the fourth quarter of 2023 slightly decreased after experiencing growth of 78% and 50%, respectively, in the last quarter of 2022.

For the full year of 2023, European sales increased by 16%, with Coach, Jimmy Choo, and Montblanc brands seeing growth rates of 25%, 19%, and 15%, respectively.

In the United States, fourth-quarter sales increased by 13%, mainly propelled by Donna Karan/DKNY, which saw a 21% sales growth during the same period. Inter Parfums added that Guess and Ferragamo also achieved mid-single-digit growth in sales for this quarter, considering the high base from the same period last year. The full-year sales for the United States in 2023 increased by 33%, with significant contributions from Donna Karan/DKNY, GUESS, and Ferragamo, experiencing growth rates of 205%, 23%, and 21%, respectively. It’s worth mentioning that Donna Karan/DKNY became part of Inter Parfums’ portfolio in July 2022, contributing to the remarkable year-over-year performance.

Since being impacted by the pandemic in 2020, Inter Parfums has witnessed significant increases in both sales and net profit. Over the four years leading to 2023, sales skyrocketed from $539 million in 2020 to $1.318 billion in 2023, marking an impressive surge of 145%. Net income, on the other hand, multiplied more than threefold, rising from $50 million in 2020 to $151 million in 2022.

Jean Madar, Chairman & Chief Executive Officer of Inter Parfums, stated, “With ongoing strength in the overall fragrance market and our successful distribution execution, we grew sales by 6% during the quarter. The better-than-expected performance in the final quarter culminated in 21% sales growth for the year, surpassing our guidance of $1.3 billion. Of note, the quarterly growth rate in comparison to the full year reflects the elevated sales baseline from the preceding year. Furthermore, compared to 2019, our sales were up 85% for both the fourth quarter and full year 2023.”

“Our stimulating pipeline of innovative products across our portfolio of brands, now inclusive of Lacoste and Roberto Cavalli, a fully operational Italian affiliate in Florence, Italy, and our dynamic positioning within the industry, strengthen our confidence in gaining further market share in the years ahead and deliver another record year in 2024.” Jean Madar added.

The guidance for the Inter Parfums’ full-year 2024 will be discussed simultaneously with the release of the consolidated earnings results for the fourth quarter and the entire year of 2023.

The distributor is beginning to launch its brand

In early September 2023, Richemont Group announced the establishment of Laboratoire de Haute Parfumerie et Beauté to elevate the standards of its beauty business. The Swiss luxury giant stated that the platform aims to expand the scale of perfume brands in its product portfolio.

This move is also seen as Richemont Group taking steps to regain control of the operations of some brands. The stock price of its main perfume licensing partner, Inter Parfums, dropped by 9.4% on the same day.

Perfume brands under the Richemont Group include Cartier, Van Cleef & Arpels, Chloé, Dunhill, Alaïa, and Montblanc. The licensing partners for these brands include Inter Parfums and Coty.

Less than a week after Richemont Group expressed its commitment to its perfume business, Philippe Benacin, Chairman and CEO of Inter Parfums, delivered a speech at the auditorium of Inter Parfums’ Left Bank headquarters in Paris. He discussed the company’s strong performance over the past six months, the addition of the Lacoste perfume license to its product portfolio, and the upcoming launch of its brand.

Among them, Montblanc is the largest perfume brand under Inter Parfums. In the first half of 2023, Inter Parfums’ total sales reached 396.1 million euros, with Montblanc’s sales amounting to 107.4 million euros, accounting for 27.11% of the entire group’s sales. Van Cleef is the seventh-largest brand in the group, with sales of 12.4 million euros, while Boucheron ranks ninth with sales of 9 million euros. However, the sales of these licensed brands contribute significantly to Inter Parfums.

In the latest financial data for 2023, Inter Parfums did not disclose the specific performance of individual brands. The authorized brands such as Coach, Jimmy Choo, and Montblanc saw growth rates of 25%, 19%, and 15%, respectively, indicating a substantial impact on overall performance.

Benacin stated that having a fourth high-selling brand is crucial, mentioning Montblanc, Jimmy Choo, and Coach. The licenses for Coach, Kate Spade, and Jimmy Choo are not expected to expire soon.

In addition to licenses, Benacin mentioned that, over the past nine months, Inter Parfums has been dedicated to developing its own brands. Benacin anticipates the release of Inter Parfums’ own private label in January 2025, although he did not reveal many details about it.

Additionally, another perfume distributor of Richemont Group, Coty, is also introducing its own fragrance brand.

For Coty, which predominantly deals with licensed brands in the high-end beauty business, Sue Y. Nabi mentioned that any license owned by Coty would not expire within the next five years. However, some brands that were previously sold to Coty are now considering repurchasing their brands.

Amidst the robust growth in high-end perfumes, the owners of these brands may contemplate reclaiming the operational rights of these brands. In recent years, struggling in performance, Estée Lauder invested $2.25 billion to reclaim the beauty business rights of Tom Ford to reverse the declining trend. Coty’s revenue from high-end beauty businesses accounts for nearly 65% of the total company revenue, and the repurchase of operational rights for these brands is expected to impact Coty’s performance.

Considering the potential adverse effects of future repurchases of brand operational rights, Coty has taken steps to launch its fragrance brand and expand its skincare business in anticipation.

In May 2023, Coty launched the Infiniment Coty Paris Fragrance project, featuring formulas and packaging that are currently undergoing patent applications, marking Coty’s first-ever such initiative. The collection will ultimately include fourteen different fragrances, representing a diverse range. It is anticipated to have a global launch in 2024, representing Coty’s most ambitious fragrance project to date, as stated by Sue Y. Nabi. She mentioned, “Infiniment Coty Paris, our most ambitious fragrance project to date, aims to usher in a new era for fragrances and perfumery, representing to fragrance what Orveda is to skincare.”

On September 21, 2022, during an investor day in Monaco, Coty unveiled a comprehensive strategy for the skincare category. This strategic focus is one of Coty’s six growth initiatives, emphasizing high-end skincare brands within the group. Lancaster and Orveda are highlighted as the key brands for Coty’s push into the high-end skincare category in the Asia-Pacific market. Additionally, during the sixth China International Import Expo (CIIE), Coty announced that the ultra-premium skincare brand Orveda is expected to enter the Chinese market in 2023.

For perfume distributors, their licensed brands are the primary driving force behind performance growth. However, considering the potential repurchase of these licenses by the brand owners, there is an inevitable impact on their performance. Creating proprietary brands is a critical focus for finding a second growth curve in such scenarios.

Why has the performance grown rapidly?

In recent years, the global beauty industry has faced challenges due to the pandemic. However, perfume distributors have quickly recovered, outpacing the growth of most beauty companies. Coty turned a net loss of $1 billion into a profit of $523.2 million within four years, while Inter Parfums nearly doubled both its net profit and sales within three years. Why have perfume distributors excelled in performance post-pandemic?

Firstly, there is a robust demand for perfumes. The global perfume market is vast and continuously expanding. According to Mordor Intelligence, the Fragrance & Perfume Market size is estimated at USD 61.79 billion in 2023. It is projected to reach USD 84.02 billion by 2028, registering a CAGR of 6.34% during the forecast period. Fragrances are not just limited to personal care products but have expanded to include various industries such as home care, automotive, and even healthcare. The diverse applications of fragrances provide ample opportunities for a distributor to tap into different sectors and diversify their product offerings.

Not only on the consumer front but also in the capital markets, the fragrance industry garnered significant attention in the just-concluded year of 2023. In the M&A transactions within the beauty industry last year, fragrance remained one of the most attractive categories for investors.

On June 26th, Kering acquired the entire stake in the fragrance brand Creed. Creed’s revenue exceeded 250 million euros in 2022, and industry insiders estimate the transaction amount to be around 3.8 billion US dollars.

On June 22nd, the U.S. private equity fund Advent International announced the acquisition of the majority stakes in two French niche fragrance brands, Parfums de Marly and Initio Parfums Privés. The specific financial details of the transaction were not disclosed, but according to WWD reports, industry estimates suggest the acquisition amount to exceed 700 million US dollars.

In addition to these, in its four transactions last year, Estée Lauder had three related to fragrances. Apart from Tom Ford, there were acquisitions of a British fragrance brand Vyrao, and the Chinese fragrance brand Melt Season. Brazilian beauty giant Natura also increased its investment in the British fragrance brand Perfumer H through its fund Fable Investments this year. Unilever, for the first time this year, invested in the fragrance brand The 7 Virtues.

Another key aspect that makes fragrance distribution appealing is the potential for exclusivity. Many fragrance brands produce limited editions or exclusive collections, and distributors often have the opportunity to secure exclusive rights to distribute these unique products. This exclusivity can enhance the distributor’s market position and attract a dedicated customer base seeking distinctive and hard-to-find fragrances.

Furthermore, the global nature of the fragrance industry opens up possibilities for international trade. A fragrance distributor can collaborate with international brands and expand their market reach beyond domestic boundaries. This not only increases revenue potential but also exposes the distributor to a broader range of products and cultural influences, fostering a dynamic and enriching business environment.

In the digital age, e-commerce has become a significant channel for fragrance sales. A fragrance distribution business can leverage online platforms to reach a wider audience, enhance brand visibility, and facilitate convenient purchasing experiences for consumers. The ability to adapt to the changing landscape of retail, including e-commerce trends, positions a fragrance distributor for sustained success.

In conclusion, the fragrance distribution business offers a combination of market stability, growth potential, and creative opportunities. The global demand for fragrances, coupled with the industry’s adaptability to changing trends, makes it an attractive venture for entrepreneurs. Whether it’s through exclusivity, international collaborations, or online presence, a well-managed fragrance distribution business can carve a niche in this dynamic and aromatic market.

However, for Coty and Inter Parfums, excessive reliance on licensed brands can render their own performance unsustainable. These fragrance distributors aspire to launch proprietary fragrance brands leveraging their strengths in the fragrance business, seeking more sustainable growth drivers.