Domestic Perfume Brands Attracting Investment, But Focus on Long-Term Growth Needed (AI Translation)
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文｜财新周刊 冯奕铭
By Caixin Weekly's Feng Yiming
在北京商业地标三里屯太古里，国产香氛品牌观夏（to summer）4月13日推出的两款夏季限定香水首批已经售罄；隔壁另一家国产香氛品牌野兽派（The Beast）正在推广季节限定香水“花神夏梦”；而同一商圈密布的十余家国际大牌香水中，仅有雅诗兰黛集团旗下的英国高端香水品牌祖·玛珑（Jo Malone）推出了季节限量商品。
In Beijing's commercial landmark, Sanlitun Taikoo Li, the domestic fragrance brand Guan Xia (to summer) launched two summer limited-edition perfumes on April 13, which sold out in their first batch. Next door, another domestic fragrance brand, The Beast, is promoting a seasonal limited perfume "Flower God Summer Dream." In the same shopping district, densely packed with over ten international big-name perfume brands, only Jo Malone, a high-end British perfume brand under the Estée Lauder Companies, has released a seasonal limited-edition product.
观夏和野兽派是近年国产香氛崛起的代表，它们正用国际品牌一些惯用的营销方式入场竞争。香氛主要包括香水、香薰等产品，属于典型的情绪价值高于物用价值的精神属性品类，虽是小众赛道，却是上一轮消费升级浪潮中的弄潮儿。而在近年消费升级转降级的周期趋势中，这一赛道相对坚挺，在疫中替代“口红经济”、疫后则成“悦己经济”的代表，被冠以“香水效应”。
Guàn Xià and Yěshòu Pài have emerged as representatives of the rise in domestic fragrance brands in recent years, adopting marketing strategies commonly used by international brands to enter the competitive arena. Fragrances, primarily including perfumes and scented products, belong to a niche category where emotional value surpasses practical utility, making them trendsetters in the last wave of consumer upgrades. Despite the recent trend of trading down in consumer spending, this sector has remained relatively resilient. During the pandemic, it replaced the "lipstick economy" and post-pandemic has been dubbed the "self-pleasure economy," earning it the moniker "perfume effect."
香氛投资一度爆火，“中式美学”“国潮”等概念迭出，大量国产品牌借助互联网内容平台流量而鹊起。“2021年参加国际香精公司举办的活动，一屋子好多人，觉得这么小的行业竞争如此激烈。”国产香水品牌馥生六记创始人赵圆圆对财新回忆称，但市场在两年内快速退潮：“2023年再去时人少了一大半，资本不再关注这个赛道，很多现金流没有回正的品牌就放弃了，留下的要么拿到了钱，要么有自我造血能力。”
Investment in fragrances once surged, with concepts like "Chinese aesthetics" and "national trend" emerging rapidly. Numerous Chinese brands rose to prominence through the traffic of internet content platforms. "In 2021, I attended an event hosted by an international fragrance company, and the room was packed. It felt like such a small industry had incredibly fierce competition," Zhao Yuanyuan, founder of the domestic perfume brand Fusheng Liuji, recalled to Caixin. However, the market quickly receded within two years: "By 2023, attendance had dropped by more than half. Capital no longer focused on this track, and many brands with negative cash flow gave up. Those that remained either secured funding or had the ability to generate their own cash."
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- Chinese fragrance brands like 观夏 (to summer) and 野兽派 (The Beast) are gaining popularity in Beijing's Sanlitun area, using marketing strategies similar to international brands. Despite the economic downturn, the fragrance market remains resilient, with domestic brands experiencing growth and receiving investments from major groups like L'ORÉAL and Estee Lauder.
- The fragrance industry is characterized by high emotional value over practical use, with products including perfumes and scented oils. Recent trends show a shift from "lipstick economy" during the pandemic to a "self-pleasure economy" post-pandemic, with increased consumer interest in fragrances as a form of personal enjoyment.
- Despite challenges such as intense competition and high marketing costs that eat into profits, Chinese fragrance brands are innovating by focusing on unique scents and cultural storytelling. The market sees potential for growth with increasing consumer acceptance of local brands and ongoing investment from both private equity and industry capital.
In Beijing's Sanlitun Taikoo Li, domestic fragrance brands like Guan Xia and The Beast are making waves with their limited-edition summer perfumes, competing alongside international giants such as Jo Malone. Guan Xia's recent success includes selling out its first batch of new perfumes on launch day [para. 1].
Domestic brands like Guan Xia and Yěshòu Pài have adopted marketing strategies similar to those of international brands, capitalizing on the emotional appeal of fragrances. Despite a general downturn in consumer spending, the fragrance sector has shown resilience, earning it the nickname "perfume effect" during the pandemic [para. 2].
The investment landscape for fragrances has seen fluctuations. Initially buoyed by themes like "Chinese aesthetics," many Chinese brands gained prominence quickly but faced a market contraction by 2023. However, established brands like DOCUMENTS and Guan Xia continued to attract investments from major cosmetics groups such as L'ORÉAL Paris and Estée Lauder [para. 3][para. 4].
China's perfume market is expanding, with sales projected to reach RMB 26 billion by 2028. Domestic brands have leveraged prime retail locations and unique marketing strategies to distinguish themselves from international competitors in high-traffic areas like Sanlitun [para. 5].
Despite its growth potential, the perfume industry faces challenges such as a low ceiling for brand growth and the dominance of established luxury groups or chemical giants over independent brands. For instance, Creed, once a leading independent perfume brand, was acquired by Kering in 2023 after reaching sales of €250 million [para. 6].
The rise of domestic fragrance brands has been supported by China's robust online platforms which reduce costs for new entrants. Brands differ in their backgrounds; some founders come from supply chain sectors while others have expertise in media or advertising, contributing to diverse approaches in brand building [para. 7].
E-commerce platforms have recognized the growing importance of fragrances as a category. Tmall, for example, reported a significant increase in sales of fragrance products in 2021 compared to the previous year [para. 8].
However, establishing a successful fragrance brand is not straightforward due to high marketing costs and intense competition. Many new entrants struggle to achieve profitability even with substantial sales volumes [para. 9].
The global essence market crucial for perfume manufacturing remains dominated by Western companies which control key ingredients. This makes it challenging for Chinese brands to innovate independently at the raw material level without substantial scale or unique collaborations with essence providers [para. 10].
Overall, while there is enthusiasm around domestic fragrances driven by cultural resonance and innovative marketing, significant challenges remain including fierce competition both locally and globally, high entry costs in terms of branding and materials procurement, and navigating an industry still largely controlled by Western giants [para. 11].
- to summer
观夏 - To Summer (观夏) is a domestic fragrance brand in China that launched two summer limited-edition perfumes on April 13, which sold out quickly at their store in Sanlitun Taikoo Li, Beijing. In February 2024, L'ORÉAL invested in approximately 10% of To Summer's shares. The brand started from a WeChat public account and has expanded into physical stores and e-commerce platforms like Tmall.
- The Beast
野兽派 - The Beast, a domestic fragrance brand in China, is actively promoting its seasonal limited-edition perfume "Flower God Summer Dream." The brand was founded by Xiang Haiqi, who previously worked at Oriental TV and has a background in advertising and media, skills that are beneficial for brand marketing. The Beast started with customized flower services and has evolved into a comprehensive e-commerce and content platform operator.
- Jo Malone
祖·玛珑 - Jo Malone, a high-end British fragrance brand under the Estée Lauder Group, is one of the few international brands in Beijing's Sanlitun area to launch a seasonal limited-edition product. This move highlights Jo Malone's strategic approach to leveraging exclusivity and seasonal appeal in a competitive market dominated by numerous fragrance brands.
- DOCUMENTS
闻献 - DOCUMENTS is one of the three domestic fragrance brands mentioned in the article that received new investments since 2022. Positioned in the mid-to-high-end market, DOCUMENTS attracted industrial capital even as venture capital withdrew from the fragrance sector. This investment came from major global cosmetic groups like L'ORÉAL Paris and Estee Lauder, highlighting a strategic interest in local Chinese fragrance brands to complement their product lines and localize their strategies.
- L'ORÉAL Paris
欧莱雅 - L'ORÉAL Paris, a global cosmetics giant, has been actively investing in Chinese fragrance brands as part of its localization strategy. In February 2024, L'ORÉAL invested in the Chinese fragrance brand "to summer" (观夏), acquiring approximately 10% of its shares. This move is seen as a way to supplement L'ORÉAL's product line and strengthen its position in the competitive market against rivals like Estée Lauder.
- BLACK PAW
黑爪 - BLACK PAW, founded by Huang Jing who previously worked in the perfume export business, is a domestic fragrance brand in China. It started as an online-only business and initially sold imitation fragrances of major brands on Tmall, which quickly sold out. The brand later faced challenges in developing original scents due to difficulties in obtaining specific raw materials from fragrance companies.
- OARTO
安妥 - OARTO is a home brand established in early 2021, initially focusing on bedding, homewear, and fragrances. By 2022, fragrances became its main sales driver, leading to a concentrated marketing effort in this category. The brand's founder Chris mentioned that they collaborated with a British perfumer to develop a fragrance series inspired by Chinese landscapes, incorporating moss scents to capture the essence of misty mountains.
- MINISO
名创优品 - MINISO, a budget retail store targeting young female consumers, focuses on offering high-value products like fragrances to enhance brand perception. In 2023, fragrance sales matched the company's overall growth, achieving around a 40% increase. MINISO operates under a cost-effective strategy and has over 6400 stores globally, with fragrance products being its top sellers in China.
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