Sweet smell of success: Foreign fragrances dominate China’s perfume market

Chaotic recent history accounts for the dearth of Chinese perfume suppliers, allowing leading western fragrance brands to rule the mainland market

PUBLISHED : Friday, 01 July, 2016, 1:27pm
UPDATED : Friday, 01 July, 2016, 10:45pm

It is a sad reflection on the abysmal quality of my life that most of my non-food shopping seems to be done in airport duty free malls. But at least as one wanders through the predictable branded tedium of the Duty Free Stores, there is normally ample time for people-watching, and random musing.

When I was last in Heathrow’s eerily empty Terminal 5 a particular scene – of a flock of fashionable mainland Chinese women scenting their way through the Jo Malone part of the fragrance section – set me thinking: why, given the emergence of so many fascinating new Chinese consumer brands, from Huawei to Haier, can’t I think of a single China-made perfume? Whatever the progress of Chinese companies in global manufacturing, it seems the leading western fragrance brands rule the China market unchallenged.

This is particularly puzzling because the cynic in me says that when push comes to shove, the fragrance industry is but a snobbish corner of the global chemicals industry – and China’s chemicals industry is among the world’s best and most creative – just look at how imaginatively they used melamine in baby milk formula.

It seems the first, and perhaps most important reason for China’s laggardliness is the country’s recent chaotic history. During the Cultural Revolution years, the use of perfume was literally illegal. Whoever used scents or perfumes before 1967 either suffered torture and humiliation as a poisonous weed, or quickly got rid of any evidence.

By the time the country began to emerge after the overthrow of the Gang of Four, Chinese people had lost the habit. And anyway, during a period of such widespread poverty, perfume was a luxury most were happy to ignore. Whatever perfume industry existed before 1967 evaporated into thin air.

That does not mean China never had a perfume industry. In fact, the country has had thousands of years history of using scents – but most of these were scents burned in incense burners to perfume a room, rather than an individual body. Only the Egyptians seem to have got the perfume habit earlier: as long as 3,500 years ago, the courts of the Pharoahs used perfumes – thought of as the sweat of the sun god Ra.

Chinese elites and their courtesans also had a habit of carrying bags of scented petals and leaves among their clothes. The most cherished (and expensive) scents seemed to be chenxiang (in English, Agarwood) and floral water (used as much as an insect repellant as a perfume). About 120 years ago, a Shanghai company called Liushen began making a soon-famous scent called Shuang Mei, or Two Sisters, which eventually became popular in the 1930s as far afield as Paris with the brand name Vive. But in the chaos of the 1930s and 1940s Liushen was absorbed by Shanghai Jahwa, the country’s biggest chemicals company, and Shuang Mei disappeared.

Another distinct difference in China’s perfume market was that Chinese people don’t sweat and smell awful, like so many of us do in the west. So first of all there was not the compelling need for Chinese people to use perfume to hide otherwise noxious odours, and second the fragrances that did emerge were as important for cleanliness and purification or medicinal purposes as for their scent.

The absence of pungent bodies that needed perfumes to hide strong odour meant that the perfumes that did catch on tended to be light and floral rather than musky or heavy like so many western scents.

Today, China’s perfume market seems as much to do with prestige and status as with any personal preference to smell nice over the day. Surveys suggest that just 1 per cent of Chinese today use perfume – compared with around 60 per cent in the US or the UK.

Most sales are in a dozen or so first tier cities like Beijing, Shanghai or Chengdu, and over 70 per cent of perfumes are bought as gifts, and 30 per cent of the year’s business is concentrated on Valentines Day. Because they are bought as gifts, brands and brand status are paramount – which is why two thirds of sales in the country are of foreign brands. The market leader by far is Chanel, whose Chance, Coco Madamoiselle and Chanel No 5 help to give the French group a 14 per cent market share (similar to their dominant market share in Japan). Christian Dior captures 2 per cent of the market and close behind are Lancome, and Calvin Klein.

Numbers like these – and annual sales growth averaging between 7-10 per cent over the past decade – suggest that there is only one way this perfume market is going to trend. China has 20 per cent of the world’s population, but consumes just 1 per cent of the US$38.8 billion of perfume consumed worldwide each year.

According to the research group Mintel, per capita consumption of fragrances is 20 times bigger in the United States and 60 times bigger in the UK. And because in Chinese language the word perfume has a strong feminine connotation, the market for men’s perfume has hardly emerged from the Neanderthal era.

For your average Chinese male, so often swathed in cigarette smoke, you are gay or a wimp if you use perfume. Attitudes are being “adjusted” over time, but again the prognosis is clear: China’s fragrance market is set for significant growth – strong enough surely to attract significant players from within China to join the fray.

One fact suggesting strong local potential – apart from a strong domestic chemicals industry – is global dominance in production of a number of key perfume ingredients. An estimated 90 per cent of the world’s eucalyptus oil, and half the world’s geranium oil, come from Yunnan in China’s south west.

It is unquestionable that France’s dominance in the world’s perfume industry is in part due to Grasse, arguably the world’s “perfume city” on the French Riviera with its thousands of hectares of flower fields. But the fact that Grasse has been at the heart of the world’s perfume industry for centuries suggests China’s perfumiers will take time to emerge.

Meanwhile, those eager young Chinese sophisticates sniffing their way through Jo Malone perfumes in Heathrow are going to give handsome business to the world’s western perfume hegemons perhaps for decades to come.

David Dodwell is Executive Director of the Hong Kong-APEC Trade Policy Group