Every holiday season, the fragrance industry gets nervous. With more than 50 percent of annual sales taking place in the weeks before Christmas -- most in the last two days -- fragrance companies are like children wondering how bountiful their holiday will be.
With more than 800 fragrances on the United States market and a notoriously fickle public, the companies seldom experience the blissful state their products are meant to induce.
The industry always seems hyperactive, introducing an average of 60 new products a year. And in the past 18 months, many industry giants have found themselves with new owners or altered fortunes.
This holiday season is the first in more than 25 years that Avon Products Inc., the perennial leader in women's fragrances, has not been No. 1.
Marketing is the key. Industry executives say that in a $25, 4-ounce bottle of scent, the fluid and bottle cost the maker about $3.75. Add on marketing and some profit, and it goes to the retailer as about $15,where another marketing/profit chunk is added.
The new ruler of both the men's and women's fragrance markets is Unilever NV-PLC, an Anglo-Dutch consumer-products and chemicals conglomerate.
Unilever built its lead the 1980s way: by taking over other companies. It stormed into the fragrance business in 1987 and in 1989 alone spent more than $2 billion to acquire companies including Faberge Inc., Elizabeth Arden Inc. and Calvin Klein Cosmetics, the maker of Obsession and Eternity perfumes.
Analysts expect more acquisitions to come, as Unilever seeks to preserve or extend its lead.
In the still-fragmented $1.83 billion-a-year women's fragrance market, Unilever, with a 12.6 percent market share, now seems secure. But its closest competitors, Avon and Revlon, are not far behind.
At Avon, some investors have been making a stink about the stock's fall from $41 a share in mid-1989 to about $27 recently.
On Dec. 3, Chartwell Associates, an alliance of dissatisfied Avon shareholders, urged the company to repurchase $500 million of its common or preferred shares. Chartwell,which holds 26.2 percent of Avon's outstanding common stock and 19.8 percent of the voting shares, has hired Shearson Lehman Brothers Inc. for advice.
Avon's chairman, James E. Preston, said he would not respond until his committee on ways to enhance shareholder value releases its report in January.
Third-place Revlon, meanwhile, introduced a major new fragrance this year. It's Unforgettable, considered Revlon's most ambitious start-up since Charlie, launched 16 years ago. It comes in a skinny bottle that looks like an Art Deco skyscraper and, at a price of $23 for a 1.6-ounce bottle, is higher than most other Revlon fragrances.
Revlon officials said the product was launched to capitalize on the company's "Unforgettable Women" advertising campaign, which has featured actresses Melanie Griffith and Susan Lucci, and Barbara Sinatra with her well-known husband.
The company -- led by Ronald Perelman, the master of leveraged buyouts -- has come under criticism for its stodginess, its reliance on low-priced fragrances and the steep discounting of its "junk" bonds.