Fragrance is having a big moment. In fact, some may even say that 2023 is the year of fragrance.
LVMH’s fragrance and cosmetics division, which includes Christian Dior and Stella McCartney, grew by 13% year-over-year during the first half of the year. Meanwhile, L’Oréal’s Luxe division reported double-digit fragrance growth across all regions thanks to sales of YSL, Prada and Valentino scents. In July, Kering, which is owned by Gucci, acquired Creed in an all-cash $3.83 billion deal, which came just after L’Oréal acquired fragrance and body care company Aesop for $2.5 billion.
Fragrance has also been a bright spot during disappointing quarters. Earlier this month, Estée Lauder Companies reported that fragrance sales had increased across all of the conglomerate’s brands, including Le Labo and Tom Ford, despite an overall 10% decrease in net sales for the first quarter of its fiscal 2024.
Overall, the U.S. fragrance market is projected to generate a revenue of $8.72 billion this year, according to Statista Market Insights. Fragrance will continue to grow in new ways over the next decade, the group reports, including a continued bifurcation between luxury and mass and new consumer interest in niche scents. By 2028, fragrance could generate $9.48 billion for the U.S. economy.
But this growth is driven by more than just smelling good, and there are hidden opportunities to capture a changing fragrance customer.
“It used to be all about your signature scent — that one scent you wear every single day,” said Chriselle Lim, owner and creative director of fragrance brand Phlur. “For this generation, their [choice] scent is all about their moods, fashion and outfits,” Lim said about Gen Z during a panel at Glossy’s beauty and wellness summit this month. “They will go to their fragrance wardrobe and choose what they are feeling.”
Whereas previous generations were also tight-lipped about their signature scent — and it was often considered rude to ask what scent someone is wearing — Gen Z discusses fragrance at length on TikTok: The platform has counted more than 5.3 billion views about fragrance through its #PerfumeTok hashtag.
It seems as if nothing could stop this high-speed fragrance train, but behind the scenes, there are murmurs about skeletons soon coming to light that could disrupt the status quo. At the end of the year, the Modernization of Cosmetics Regulation Act of 2022, or MoCRA, will give American regulators at the FDA an unprecedented look at ingredient labels that, in some cases, have never seen the light of day stateside.
Considered America’s first big move to regulate the beauty industry in more than 80 years, MoCRA will require brands to register their manufacturing facilities, abide by good manufacturing processes, report adverse reactions to products and share ingredient lists with the FDA. MoCRA also provides new authority to the FDA to issue mandatory product recalls and alert consumers to common allergens, which now must be printed on product packaging.
“We’re expecting to see a big picture change,” said Vinita Jayant, director of product development at Henry Rose fine fragrance. “We’re going to see a lot more transparency in the entire supply chain along with increased safety substantiation. … As you know, fragrance has always been the catch-all term for thousands of unregulated and potentially harmful ingredients.”
Jayant is referring to what’s called “the fragrance loophole,” which allows any brand using fragrance to hide ingredients from consumers in the name of brand protection. “Fragrance can be listed as a single ingredient despite being 3,000-plus ingredients,” said Jayant.
Since a scent cannot be trademarked, the Food and Drug Administration categorizes fragrance as intellectual property, and thus, allows brands to simply add the word “fragrance” or “perfume” to the end of an ingredient label instead of the actual ingredients that make up the scent. This is true for perfume and fragranced beauty and personal care products, as well as cleaning supplies and anything else with a scent.
Critics question whether or not extra ingredients unrelated to fragrance end up being hidden in the word fragrance, which leads many consumers to question the safety of any fragranced product at all.
“[Fragrance is a top skin allergen] because there are many ingredients hiding in it,” Jayant said. “Transparency is so, so important so that customers know what they’re putting on their skin. And in case they have any sort of reaction, they’ll know what to look for and what to avoid.”
Fragrance can include natural and synthetic ingredients including parabens, formaldehyde and essential oils. They can also include animal-derived ingredients like ambergris, from whales, and civet musk, from the small cat-like African mammal named the civet.
When MoCRA goes into effect next month, the FDA will require access to these ingredient lists, which the top fragrance houses don’t commonly share with the brands that create and sell the scents.
Since perfumers, who are called “noses,” commonly work for the same fragrance houses that oversee the manufacturing of the scents — like Givaudian, Inter Parfums and International Fragrances and Flavors, or IFF — product ownership normally falls with the fragrance house, not the brand printed on the bottle.
“I think it’s a big black box, right?” Jayant said about whether or not brands even know what’s in the products they sell. “That’s especially because [some of the top fragrance houses] have so many products that have existed for years. It’s going to be a bigger change for some of those brands [to comply with MoCRA].”
This is why MoCRA’s upcoming changes have been an ongoing conversation in fragrance this year, despite the boom in sales. Experts say that fragrance houses will likely submit their ingredient lists directly to the FDA when required. So even next year, brands could be clueless as to ingredients.
MoCRA also requires safety testing and consumer visibility into common fragrance allergens found in a product, which now must be printed on ingredient labels. “FDA also expects companies to report ‘serious adverse events [of ingredients] to the FDA no later than 15 days after the date of learning of the incident,” said Kelly Bonner, Esq., an associate at Duane Morris Law Firm LLP in Philadelphia. That includes an infection or “significant disfigurement including serious and persistent rashes, second- or third-degree burns, significant hair loss, or persistent or significant alteration of appearance.”
Still, most advocates are still calling for stricter rules. “MoCRA is a good start, but not all fragrance allergens are regulated for disclosure and there are health concerns that go beyond sensitization,” said Homer Swei, Ph.D., svp of Healthy Living Science at the Environmental Working Group. “Outside of fragrance allergens, undisclosed fragrances will continue to be allowed as generic fragrances on the label. … Concerned shoppers still need to navigate a patchwork of voluntary fragrance disclosures set by individual brands.”
But creating a fine fragrance independent of one of the big international fragrance houses is not without its challenges. Founded by actress Michelle Pfeiffer in 2019, Henry Rose was launched in response to the fragrance loophole. So instead of selecting a palette of more than 3,000 ingredients, which is common for a fine fragrance, Pfeiffer insisted on a palette of only 300 better-studied ingredients. Eventually, she created the line with top fragrance house IFF and two of its perfumers, Pascal Gaurin and Yves Cassar. Accessing a top nose rarely comes without a top fragrance house.
This is where many insiders think consumer demand will take over. Today, Henry Rose is just one brand disclosing every ingredient used. L’Oréal began the task of unpacking its fragrance ingredients across brands back in 2021, and BeautyCounter, Skylar, One Seed and By/Rosie Jane already do so on their sites.
“Customers want transparency more than anything,” said Rosie Johnston, founder and CEO of By/Rosie Jane. “Customers are more educated about ingredients than ever before…”
A new fragrance brand called State of Change, which won Allure’s 2023 Best of Fragrance award, is also totally transparent, but its creation was part of a larger move by founder Ashlee Firsten Posner. After 15 years in the indie fragrance industry, she launched Lucent Labs earlier this year. An indie fragrance house out of New Jersey, Lucent Labs offers transparent, validated formulas for brands eager to build safer formulations more resistant to future regulation.
“It’s a David and Goliath situation,” Posner said. “One of the big fragrance houses might not think we’re going to be able to build a formula that’s just as good without the full palette [of scent notes]. … So I laughed when we won the Allure Best of Beauty award this year, because we didn’t win it in the clean category.”
Lucent Labs acts as a one-stop shop for scent creation that provides all testing, safety data and exact ingredient lists. What Posner found is that new brands today want a fragrance expert with aligned values, not just a nice scent.
“If something [negative or dangerous] comes out about an ingredient, [brands] want to be able to make a validated statement that it’s not in their product,” Posner said. “As things change [with more regulation], and as the next 50 allergens get lifted [by the FDA for labeling, they want to ensure] there are no questions [about safety]. … It minimizes the work for the brand by owning that piece.”
The top brand categories reaching out to work with Lucent Labs, Posner said, are wellness, hair care, laundry, cleaning, and other household and personal care sectors. The brands either need a new fragrance or must replace their fragrance due to the inability to pass government regulation, gain important third-party certifications or comply with a retailer’s revamped clean standards.
Anecdotally, Posner shared that some brands are currently scrambling to reformulate. “It took two years for [one brand I am working with to get their fragrance ingredient list from the manufacturer] to even start having a conversation about what needs to be changed, in order for them to be certified,” she said. “The punchline was they could have made a new fragrance [in that time].”
Posner said that, outside of regulations and certifications, showing an ingredient list to consumers comes with a certain amount of allure. “If you are willing to put it out there, it means that you’ve vetted something,” Posner said. “So, bar none, you are willing to show up. … With the number of people on the internet ripping everything apart, you are now saying, ‘I implore all of you [to look into my ingredients].’”
Posner is passionate about clean fragrance, but she’s also preparing for a future where transparency could be table stakes, whether through government regulation or simply consumer demand.
Turning clean fragrance into a fresh business opportunity through partnerships and private labeling is also on the table for Henry Rose. “We’ve definitely discussed the potential of having brand collaborations and working with other non-fragrance brands to work on fragrance with them,” said Jayant. “It’s not something we have done yet, but we will look into it in the future, for sure.”
Other founders already think of clean and transparent fragrances as table stakes — and necessary for dynamic brand growth today.
When Lim purchased the Phlur clean fragrance line with business partner Ben Bennett and beauty incubator The Center in 2021, the team decided to let clean be an attribute, not the entire identity of the brand. “[The previous owners of Phlur] built up a very strong, niche audience that we respected, but the challenge that we faced was that it was only targeted and marketed to the people who loved clean beauty. We really wanted to go beyond that,” Lim said. “We are still transparent with all our ingredients, and we are a clean brand, but we don’t market it as that anymore.”
Instead, ingredient transparency acts as a catalyst to complete the sale after first falling for the scent or the story behind the scent. For teens and young adults, it can also be an attribute that parents are looking for when shopping for gifts.
“It was very important for us to rebrand [Phlur] so that it’s younger, sexier and speaks to the masses,” Lim said. “But at the end of the day, they’re still getting a very prestige product.”