Estee Lauder's Niche Fragrances May Enter China Market

Abstract: Another niche perfume enters China's $30 billion fragrance market.

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According to sources, Estee Lauder Companies has started to officially file for its perfume brand Le Labo in China’s National Medical Products Administration, which means the brand will enter the Chinese market and carry out the omnichannel layout in China in the form of general trade (not cross-border e-commerce).

CHAILEEDO learned that Le Labo was founded in 2006 in New York by Edouard Roschi and Fabrice Penot from Paris, France. Its initial goal is to sell four bottles of perfume per day. But its Normcore style led the brand’s performance to the opposite trend. In its fourth year of existence, the brand's annual sales reached $4.5 million. It was later acquired by Estee Lauder Group in 2014, subsuming it into the group's high-end fragrance category.

Throughout Estee Lauder's financial report, CHAILEEDO found that since Estee Lauder acquired Le Labo in 2014, Le Labo was mentioned in the 2016 financial report and 2017 financial report as pulling perfume business growth. In fiscal 2019, net sales increased from Le Labo due to the success of existing products and targeted expanded consumer reach globally, which led to the strong growth of the brand in its freestanding store and department store channels.

In fiscal 2020 (during the pandemic), strong growth from Le Labo partially offset losses in Estée Lauder's fragrance business. And in fiscal 2021, Estee Lauder mentioned that the increase in fragrance net sales was led by higher net sales from Le Labo and another 2 fragrance brands, combined, of approximately $317 million. As seen in Estee Lauder's historical financial report, Le Labo has been growing since the acquisition, even when other brands were in the red in fiscal 2020 (during the epidemic).

According to Eternal Group, an omnichannel brand management operator in the Chinese beauty and eyewear industry, the Chinese fragrance market is expanding rapidly year by year with a CAGR of 14.9% from 2015 to 2020 and an expected CAGR of 22.5% from 2020 to 2025. The Chinese fragrance market is expected to reach $4.4 billion in retail sales in 2025. And the global market will grow at a CAGR of about 7% in the next 5 years and will reach $64 billion in 2025. From this data, the growth rate of the Chinese perfume market will be about three times that of the global market and will be the main driver of the global market in the future.

The core segment driving the Chinese perfume market is the high-end perfume segment, which has increased its share in the perfume market from 70% in 2015 to 91% in 2020. It will be the mainstream choice for consumers in the coming period.

In recent years, high-end niche perfume brands have been performing well in China. According to data released by Alibaba, imported perfumes grew 70% year-on-year in 2020 on Tmall Global. Niche fragrances rose the fastest showing 3-digit growth year on year. According to the list of niche perfumes during the Chinese 618 Shopping Festival on the Chinese e-commerce platform Tmall, the brands and niche perfumes ranked on the list are: CREED Aventus, Serge Lutens Perfume, SMN Fresia. Serge Lutens is from Shiseido. It has entered an overseas flagship store on the Chinese e-commerce platform Tmall Global. Its two series of fragrances, Collection Noire and Gratte-Ciel, have achieved high explosive growth in this year's Chinese 618 Shopping Festival. Moreover, it made its offline debut in mainland China at this year's China International Consumer Products Expo.

The huge market for fragrances in China has attracted major beauty groups to enter the market and the entry of Estee Lauder Group's Le Labo into the Chinese market may help the brand and the group achieve further sustainable growth trends.