Bulgari Global Managing Director of the Fragrances Business Unit Jonathan Brinbaum tells BW Confidential about how he sees the fragrance market, travel retail, pricing trends and China
Almost three years on from the crisis, how is your business performing?
Bulgari Parfums has been elevating the brand since 2019. We are driving our brand to be more exclusive and are reducing our distribution. Last year, we were still in about 15,000 doors, and we will close this year at 10,000 doors, with the ambition to be in 7,000 by the end of next year. Despite reducing our distribution by 25%, we still managed to grow the business this year versus 2021 in high single digits. So we are growing the high-end of our portfolio disproportionately. We are also benefiting from the appetite for high-end niche fragrances, which today is driving value and the category. We are providing our clients with an elevated experience at a time when more are asking for it
So basically, value sales are compensating for a loss of volume?
Exactly. The role of the fragrance division is to be the entry point to the world of Bulgari. It’s an opportunity for younger generations to have access to Bulgari, and as we sell around five million pieces every year, we have five million occasions to target clients.
E-commerce was around 25% of business last year. How has this changed with the re-balancing towards brick-and-mortar?
There has been some rebalancing, and the e-commerce boom seen during the Covid period has gone down, with clients going back to stores. This year, e-commerce will be around 20% of our sales, and the ambition is for it to account for 25% at the end of next year. We are developing online with our retail partners, with our own site, and also, interestingly with pure players. These pure players, when they are qualitative, can be a source of recruitment for the younger generation, who perhaps will buy a fragrance on the same site where they buy fashion. There are a number of pure players that are now beginning to play in beauty, which we are assessing, as we want to be where our clients are.
Is the move towards pure players a shift in strategy for you?
No, it is not a shift, it is more about a diversification of the occasions to shop. It’s just offering another mode of consumption. For discovery, the store will continue to play its role, and travel retail is important for this. Within brick-and-mortar, travel retail is an occasion for clients who don’t know the brand to test it, as it’s a shopping environment where they sometimes have more time; travel retail attracts clients that normally we don’t have.
By how much have you increased prices and are more price increases likely for 2023?
Most of the value chain has seen very strong increases in prices, whether it is in glass, fragrance ingredients or cartons. We estimate that this will continue and even accelerate in 2023. We need to monitor that, and of course apply price increases in some regions. It’s very different from one market to the other. Price increases are always a discussion between the value of our cost of goods, the partnership we have with our retailers and what they want to do as a retailer in terms of pricing, and if they are offering something that is consistent with the environment we are playing in. There have always been price increases, and there will be price increases also in 2023 given the context.
Do you think price increases could put a brake on consumer spend in the category?
We are lucky to be in a category where pricing is always an equation of the of the value and the image you offer. How we have elevated the brand is also for us a way to offer more quality to clients and so create an understanding of the price. Our Allegra fragrance sells at around €200, but when you see the ingredients and the work of master perfumer Jacques Cavallier, the equation is not simply the price increase we’re applying, but the general equation, and of course the more we’re offering premium and high-end experiences, the more we are able to increase prices. It is much more difficult to do this in the the entry-level price segment. In travel retail, there are two client two profiles that are coming out of this crisis: The convenience value seekers who are looking for the right experience at the right price, and clients who are there for the experience. As a luxury brand, we definitely want to cater to the second group. There is an appetite for strong innovation and nice products, despite the context of price increases.
The growth that fragrance has seen in 2022 is unique. I think that 2023 will be slightly more re-balanced and growth will not be as high as what we have seen this year. However, the trend towards premiumization will continue. We have been expecting the fragrance category to become more premium for years, and to offer extraordinary scents at the right price. Skincare moved more premium 20 years ago, while make-up did so throughout the 2010s. So I think this premiumization of fragrance will continue.
There have been some shifts – for example, the business travelers have not come back in the same way, and there has been some growth in value seekers. However, we have greatly increased our spend-per-passenger for Bulgari, which shows us that there are still clients looking for a premium experience in travel retail. Also, given that there are still some extra measures when it comes to travel, people are spending more time in airports, so this is an opportunity to offer something for consumers who want to discover the brand.
The lockdowns and situation in China have affected all brands, and we are no exception. In the domestic market we see a rebound, and I think Chinese clients are willing to shop and to go back to normal life. However, the growth that we’re experiencing has slightly slowed. In the case of Hainan, it’s the same. Hainan remains a sizeable business for us, but has decreased a lot versus what it was before, although we hope the level of business will come back. We see Hong Kong now starting to release the pressure, and business there going quickly back to normal. In terms of the Chinese coming back to Europe, I don’t have a crystal ball, but I would love them to be back in 2023.