‘People like these little luxuries,’ Coty CEO says on fragrance boom

Yes, good morning. Thank you so much for giving me the opportunity to say a few words about this. Indeed, 11th quarter of results that are ahead of expectation. In this case, the company is growing 15%, our Prestige division is growing 16%, but also our Consumer Beauty division is growing double digits. And indeed, when it comes to the Prestige business, this is clearly driven by our fragrance business, because it's one of the key leaders in this business. You showed a few seconds ago some of our key brands, and this fragrance index, as I love to call it now since a few quarters, is fully at play. So what is the fragrance index? In fact, people, and mainly I would say Gen Zs, men, Hispanic community in the US, are rediscovering this category since now two and a half years, through social media. So this category is booming in the US, it's 60% above the pre-pandemic levels, and now this fragrance index is globalizing. You can see it happening now in Europe and also in China. So this phenomenon behind fragrances is globalizing. Why is it globalizing? Why are people suddenly fond of fragrances? Fragrances are items that are mood boosters, feel-good products, and escapism products. These are the three things we hear from consumers, but also from the Gen Zs of this world. They all tell us that fragrances, the ones they use and the ones they talk about on social media, say things about who they are. So it's also becoming a self-expression tool. In this world of a very visual economy on social media, you have eyewear, belts, sneakers, and fragrances that are part of this panoply for younger consumers.

No, in fact, it's exactly the opposite that's happening. What we are seeing is that consumers are indeed shopping higher end, shopping eau de parfum versus eau de toilette. Eau de parfum is the more concentrated version of eau de toilette. Recently, one of our latest launches, Burberry Hero, the eau de parfum has been bigger than eau de toilette. Traditionally, pre-pandemic, eau de toilette was the big chunk of the business and eau de parfum was the small complement. In this case, it's exactly the opposite that's happening. And what consumers are doing, they're spraying more, especially Gen Z, who use fragrances not on their skin, they use fragrances on their clothes and outfits, so they spray much more, and it's shortening the lifespan of the use of the product. So that's what explains this boom both in volume and in value behind this market.

I think you just summarized it very well. People like these little luxuries at the end of the day, even in an environment where people are constrained. But what's happening is that this kind of little luxury is something people are not ready to give up on. So that's super important. And I believe that this category, and moreover the beauty category, is clearly one of the most resilient. It's not just me who says this. Our retailers, be it in Prestige or in Consumer Beauty, tell us exactly that beauty is the bright spot in this moment across the different price tiers. And you can understand easily why. If there is one category that makes you look better and feel better, it's the beauty category.

So in fact, the fragrance category is one of the categories that is both still on TV advertising. Fragrance on TV still stays one of the most powerful ways to tell our story and to tell people that this is the fragrance they need to buy. And at the same time, you also have millions of people online, mainly on TikTok. If you look at hashtag Perfume TikTok, it's billions and billions of views. And there, it's either consumers or influencers who get our products in their hands and they tell the story their way. And it's really these two sides of communication that are lifting and holding this fragrance index globally, not just in the US, now in Europe, and it's also the same thing we are seeing in China. So both are necessary, both do different jobs, and both are sustaining the growth of this fragrance category.

I think for the younger generation, they love to hear about the fragrance, either if they go into a store or on social media. But what's most important and what's happening on social media is that they hear others talking about the fragrance. And what's happening today on social media that's driving the growth of this category is that there is a kind of skinification, if I may say. Let me explain. Skincare has been booming for many years because of all the facialists and dermatologists that educate people around ingredients: retinol, hyaluronic acid, etc. We are seeing something equivalent happening behind fragrances. You hear influencers telling, if you love vanilla, buy this fragrance. If you love to look like this character from this Netflix latest show, you should buy this fragrance. If you love woody scents, if you love dark scents, these are the kind of scents that you can try. So in a way, it's really education through ingredients that's happening. The second element is about long-lastingness, and you were referring to this in one of your previous questions. This is becoming the name of the game. Especially the young generation, they're obsessed with fragrances that last longer. And this says that this category, that used to be seen as an artistic category only, is becoming a performance category. And one of the reasons of our success at Coty is that we are one of the only companies at this level and at this size who owns patents to make a fragrance more long-lasting.

I do believe that vanilla is the next big thing. Vanilla is clearly the ingredient that is trending. Anything that's sweet is trending, which says a lot about what people are looking for. They are looking to self-indulge, to get into yummy, delicious scents. And vanilla is probably going to be the phenomenon of the summer and of the fall.