Givaudan announced that it would increase its price to fully compensate for the increase in input costs it is experiencing this year. According to market research firm NPD, the average retail price of perfume in the U.S. market increased by 15% year-on-year in 2021, while it is found on Chinese social sharing platform Xiaohongshu that the perfume of first-line top brands experienced different degrees of price increases.
Recently, Givaudan, the world’s leading fragrances and flavors enterprise, said that it will continue to implement price increases in collaboration with its customers to fully compensate for the increase in input costs it is experiencing this year.
Previously, on April 12, 2022, Givaudan released its financial report for the first quarter. In the first three months of 2022, Givaudan recorded sales of $1.874 billion, an increase of 4.6% on a like-for-like basis and 6.4% in Swiss francs.
In this report, Givaudan stated that it started the year with good business momentum whilst maintaining its operations and global supply chain at a high level, despite the challenging external environment affecting many parts of the business.
Sales grew 4.6 percent on a like-for-like basis as compared to the prior year period. Fragrance and Beauty sales hit $852.8 million, up 2.7% YOY on a like-for-like basis. Fine Fragrance sales soared 17.4 percent and Active Beauty put on 8.2 percent, while the Consumer Products unit dipped 2.3 percent.
This continues the growth momentum of Givaudan in 2021. Givaudan’s revenue grew by 7.1% year-on-year to $7.05 billion, with a 7.4% increase in the Asia Pacific and a strong double-digit growth in China.
In fact, the growth of the perfume and fragrance category in China has been reflected in the earnings reports of many top beauty groups.
The Puig Group, which owns niche high-end fragrance brands such as Penhaligon’s and L’Artisan Parfumeur, said in its 2021 earnings report that the Chinese market has become Puig’s most rapidly growing market with a 212% increase in sales.
Meanwhile, another top beauty groups such as L’Oréal, Estée Lauder and Coty all pointed to the fragrance and scent category as the driver of their China growth in their latest earnings reports. Coty Group also said that China is expected to develop into the world’s second largest fragrance market in the future.
However, it is worth noting that both of Givaudan’s earnings releases stated that price increases will be implemented for partner companies to cope with the cost increase due to the increase in input costs. And Givaudan’s price increase measures may continue to be transmitted to the perfume retail market.
The global fragrance market is currently very concentrated. According to Statista, a statistical agency, in 2021, the four companies, Givaudan, International Flavors and Fragrances IFF, Symrise, and Firmenich, occupy a 55% share of the global flavor and fragrance market.
And along with the news of rising raw materials, perfumes have also responded to the price hike. According to market research firm NPD, the average retail price of perfume in the U.S. market increased by 15% year-on-year in 2021, while the increase in the two years before that was still 5%. Among them, the market share of high-end perfumes has grown greatly, with sales of perfumes priced at more than $175 doubling.
It is found on the Chinese social sharing platform Xiaohongshu that the perfume of first-line top brands experienced different degrees of price increases. The price increase of luxury brands of perfume basically reached a hundred yuan(about $15.5). For example, the price of CELINE PARADE perfume 100ml rose from $271.5 to $325.9, Louis Vuitton Le Jour se Leve 100ml priced up from $325.8 to $356.9 and Chanel Edimbourg 50ml priced up from $121 to $141.2.
Perfume or fragrance is just one of the manifestations of the entire beauty market. Since 2022, price increases in the beauty group has been disclosed many times. The price of raw materials for the cosmetics industry has been climbing due to the pandemic. The spike in prices of related raw materials was even more pronounced on the day the situation in the Russia-Ukraine war broke out.
In early 2022, Estee Lauder, Procter & Gamble and other head international companies have also said that they will increase the prices of their products due to the continued rise in commodity prices and supply chain costs. However, many industry insiders said that since cosmetic raw materials account for no more than 10% of total costs, price increases are still largely due to increased marketing costs.