The scent of money

Sunday, 23. September 2018 - 15:00

What is your favourite perfume, eau de toilette or after shave? As a wine professional who avoids distracting others by wearing scent at tastings, you may find this question harder to answer than many of the consumers who ultimately pay all of our wages.

But you probably still have one or two preferences. So, how many fragrance brands can you name? And how much do you know about where any of them are made? And their key ingredients? And, lastly, how big do you estimate the fragrance business is, compared to wine?

The simple answer to this final question is: larger than you might have imagined. Globally, people spend around $73bn every year on making themselves smell better, compared to $300bn on wine. In other words, we get roughly four out of every five dollars, and they get the other one. Which, when you consider the relative volumes involved, frequency of purchase and profit margins, is pretty impressive on their part.

At the very top end of both sectors, there are some clear similarities between the industries. as there is with the watch business. Small producers with sophisticated distribution systems sell their wares at apparently exhorbitant prices to highly-targeted, often very loyal and engaged customers. Scent buffs are just as derisive about popular scent brands as their wine counterparts are about Yellow Tail and Barefoot.

But in all three sectors, the top end represents a small fraction of the industry as a whole. For most of their sales, fragrance companies have to negotiate with big retailers in the same way as the wine business. But of course, they are far fewer in number. And their margins allow them to spend enough on marketing to build a lot more consumer demand and loyalty for each of their brands. They can also create new ones almost overnight, and dump or recalibrate older brands that are underperforming. So why am I talking about perfume?

Because, after spending a long day doing store visits to all of the biggest wine retailers in Los Angeles, and casting my eyes over literally thousands of bottles, the penny finally dropped. The biggest and most successful wine companies - alongside their most dymanic smaller competitors - all know that they now have to play by fragrance house rules. They have to have a label and a name and a style that strike the right chord with their target consumer – but which don’t necessarily have to fit traditional wine criteria of region, grape and vintage.

As in a perfume house like Guerlain or Jean-Paul Gaultier, style is what matters. And just as Gaultier used to be the bad boy of the perfume, with his corsets as outerwear, cone bras and men sporting kilts and codpieces, Dave Phinney now regularly breaks the old barriers of wine. First there was the Prisoner brand which he famously sold for more than $40m (and was subsequently bought by Constellation for $270m). Now he has Orin Swift, which was acquired by Gallo; and he offers brands such as Trigger Finger, Machete and Mannequin, whose label features nude female mannequin torsos. None of these wines are about region, soil or vintage, and I saw them in every store I visited. Along with wines like Treasury’s 19 Crimes, Walking Dead and the new female-focused brand, EmBRAZEN.

Smaller producers of whom I knew little, like Rabble Wine Co and Michael David also seem to be doing an effective job in distributing their eye-catching labels, all of which are the visual equivalent of an ear-worm: the tune you can’t get out of your head. Some of these wines proclaimed a region, such as Napa or Michael David’s Lodi (hardly a traditionally powerful cue for wine enthusiasts); many simply said ‘California’.

Then there was the wine from Spain that added Jumilla, almost as an afterthought, on the back label.

Crucially, in the case of these wines, the lack of a specific AVA no longer seems to be a handicap when it comes to price. The Prisoner and Meiomi proved that buyers are happy to pay a premium price for a multi-regional wine, and now there are plenty of bottles in the $20.00 to $45.00 bracket that fit into that category – or a little-known area in another country. How many of the people buying Hello Kitty Pinot Noir from Total Wine & More know that these $25.00 efforts come from somewhere in Lombardy in Italy? How many care? And what about the customers for Orin Swift’s $37.00 D66 IGP from Languedoc?

Of course, there are huge numbers of traditionally labelled and region-specific wines in these stores - wines like Marques de Riscal Reserva Rioja priced at just $11.89 in Costco, seven years after the harvest. Two dollars cheaper than that Jumilla red blend.

And there’s the difference: even the most spartan non scent-wearer probably knows that you don’t see classic perfumes like Chanel No 5 going cheap…
Robert Joseph