Investment deals big and small have been occurring across the fragrance landscape. With the exception of Manzanita Capital, with the purchase of Diptyque in 2005 for an undisclosed amount, there was little M&A activity happening in the space—until recently.
A $5 million dollar value appears to be the threshold for niche businesses appearing on investment radars, but blockbuster acquisitions like Advent International’s $700 million majority stake in the Sprecher Berrier Group of Companies and French niche fragrance brands Parfums de Marly and Initio Parfums Privés or Puig’s €1 billion ($1.1 billion) majority stake in Byredo prove that sales figures can go much higher. In June 2023, Kering Beauté acquired Creed in an all-cash €3.5 billion ($3.8 billion) transaction—a sale price at a 14x valuation of revenue and a landmark deal.
“Recently we've seen some of those larger transactions, but there's definitely more early-stage activity now. That's a consequence of brands being able to get to that $10 million, $15 million mark where you find investors really interested. The kind of category tailwinds and a few blockbuster transactions do energize the space,” Harry Richards, Investment Director at Manzanita Capital, stated on the “Making Sense of Fragrance’s Future” panel at BeautyMatter’s FUTURE50 event.
What makes this specific genre so enticing? An agile nature, consumer excitement, and great potential to scale, to start with. “Across beauty categories, strategics are looking to acquire indie brands as a means of growth. Indies continue to demonstrate a prowess in innovation and reacting quickly to capitalize on shifting consumer preferences and trends,” Rich Gersten, co-founder and Managing Partner at True Beauty Ventures (which has invested in The 7 Virtues and The Maker) tells BeautyMatter. “This holds true in the fragrance category as we’ve seen the rise of many niche fragrance brands with unique branding and innovative approaches to fragrance. Strategics are looking at this segment of the market and seeking out the brands who have built strong consumer loyalty, often through a hero product and innovative, immersive marketing tactics. These brands will attract the greatest strategic attention not only for their innovative know-how but also strong brand fundamentals that have the greatest potential to scale with a strategic partner.”
Gersten notes that this increase in activity shows no signs of waning, which in turn is driving further action in the category. “With the fragrance industry booming, the increased attention from strategics and investors in the M&A market is no surprise. Since the Covid pandemic, the fragrance category has sustained impressive momentum as the fastest-growing category within prestige beauty so far this year, +12% versus last year in the first half of 2024, coming off of consecutive years of double-digit growth. This growth has fueled additional investor interest in the category,” he proclaims.
A massive transformation in the category that has unblocked new, attractive pockets of growth is a move away from the domination of the category by legacy and celebrity brands to those of the niche and clean fragrance variety. Consumer behavior shifts like building out a fragrance wardrobe across emerging brands, price points, and different emotional states; wellness-focused products; the growth of other product format categories like body mists and detergents; and FragranceTok allowing niche brands to achieve cult-like status, are further contributors to this growth, Gersten adds.
Ariel Ohana, Managing Partner at Ohana & Co.—which has sold Diptyque, Annick Goutal, Juliette Has A Gun, Rochas, John Galliano, Van Cleef & Arpels, to name a few—also sees the interest in niche brands as the aftermath of a shift away from the designer and celebrity sector. “Fragrance is a distinct category in beauty from at least one perspective, which is that it's the only category where you can't really show or demonstrate your product. That might be one of the reasons why, historically, fragrance brands were associated with designer brands or celebrities. But the market has clearly been evolving in the last 10 years, with the consumer trading up and looking for brands that are actual fragrance brands. Right now we still call them niche brands, I think we're probably going to have to rethink the terminology because some of them are no longer niche at all. I'd probably call them perfume houses,” he adds. Where the consumer goes, the strategic buyers will follow, but the shift away from licensed brands towards independent names is another noteworthy consideration for strategics. “There’s a double benefit for them. One benefit is that they're placing their portfolio assets in line with where the market is going. But it also allows these companies to have assets that they actually own,” he says.
Ilya Seglin, Managing Director at Cascadia Capital, describes the recent investor interest as reactionary, as a result of the boom in the fragrance category coming out of Covid, which also came with the introduction of a younger male consumer to the premium fragrance category. But while there has been a surge in interest and investments, navigating the path to a blockbuster buyout is still not without its challenges. “While people love it as a business—it’s a great category with a great gross margin, even at $10 million, you can have a profitable business if you wanted to—the challenge still is with strategic exits,” he says.
Given the vast potential of landmark deals that could lie ahead, what does it take to become the next monumental fragrance acquisition in the industry? Here are the trademarks of the indie darlings that made it big.
#1 Cultural Cachet
The biggest independent scent sensations aren’t just racking up sales, but also hearts and headlines. L’Artisan Parfumeur, acquired by Puig in January 2015 for an undisclosed amount, was heralded as one of the first independent fragrance houses when it launched in 1976. Featuring the work of master perfumers like Bertrand Duchaufour, Jean-Claude Ellena, and Anne Flipo, it became known for releasing scents that pushed creative boundaries, whether it was using blackberries (a then not widely used ingredient) in the 1978 release Mûre et Musc or the divisive but discontinued animalic creation Dzing! Fragrance for art’s sake not fragrance for the masses, one might say, was the brand’s manifesto.
Le Labo’s Santal 33 (created in 2011 by Frank Voelkl) is an aromatic leather blend with cedarwood, sandalwood, leather, cardamom, and violet that became the cultural marker of a creative cosmopolitan dweller. The fragrance brand was acquired by Estée Lauder in 2014 for a reported $60 million and in 2015, the scent’s allure was forever captured in a stand-alone article in The New York Times’ T Magazine titled “The Perfume You Smell Everywhere Is Santal 33” in 2015.
Olivia Fleming summarized its appeal: “Like an under-the-radar It bag prized for its unidentifiable features and nondescript branding, Santal 33 quickly became a sort of cult secret, whispered through wafts of sandalwood and cedar, only detected by those in the know. Fast forward four years, and what started out as a collective craving for a boutique signature scent—something no one else wore—has now become a predictable presence on the New York City subway, at bars in London, cafes in Paris, even on the beach in Los Angeles.”
In 2017, LVMH acquired Maison Francis Kurkdjian, which was celebrating ongoing success with Baccarat Rouge 540, a 2015 launch which can only be described as a fragrance eclipse. Originally launched as a limited-edition creation for the glassmaker’s 250th anniversary, the blend of ambroxan, jasmine, and saffron (coming in at roughly $335 for a 70ml bottle) is slightly spicy, a bit mineral, very sensual. As a unisex fragrance, its appeal was far-reaching, and the scent was coined a masterpiece of contemporary perfumery by media outlets. Perfumer Francis Kurkdjian had already built a successful empire of contemporary French perfumery, but some might call Baccarat Rouge 540 his magnum opus. The scent went TikTok viral, was the third most Google searched fragrance in 2022 with nearly 6 billion searches, and spawned many imitations (which is, after all, the sincerest form of flattery). Its ruby and gold glass bottle became the mark of the luxury fragrance connoisseur, its intoxicating throw leaving many a pedestrian in wonderment of what perfume just passed them by. Wearing Baccarat Rouge 540 didn’t just signal having a couple of hundred dollars to spare, but also being a perfume connoisseur of exquisite taste—scent as social currency.
Byredo’s cultural cachet began with the fact that its founder was not a born perfumer. Ben Gorham, formerly a professional basketball player with a fine art degree, became an industry rebel. Marking Byredo as a new take on modern luxury, the Swede came in with an outsider’s perspective, which, when interpreted through the lens of master perfumers Olivia Giacobetti and Jerome Epinette, became instant bestsellers. But it wasn’t the great scents of a Mojave Ghost or Bal d’Afrique that swept the globe alone.
Gorham also knew how to harness the power of cross-industry collaborations like no other: IKEA candles, a “Space Rage” collection with rapper Travis Scott, a stereo scent diffuser called Olfactive Stéréophonique designed by Devon Turnbull of artisanal speaker brand OJAS, a makeup collection in partnership with Isamaya Ffrench (that soon became a permanent fixture), a multipart art series with collaborators like photographer and filmmaker Gabriel Moses interpreting the brand’s scents. Rather than solely being focused on new releases every quarter, Byredo tapped into using the right cultural icons to tell its brand story across multiple mediums. Scents that weren’t just smelled, but seen and heard at the right time and in the right places.
For Ohana, creating these moments is ultimately the result of a standout product. “You cannot create a cultural cachet out of nowhere in fragrance. It's not that some hype was created and then it was self-sustaining. The juice came first. The cultural cachet came afterwards,” he adds. Just as Chanel No. 5 is seen as an icon of perfumery, so too have these brands hit the point of transcending perfumery itself. Rather than mere liquid in a bottle, they have become cultural touchpoints.
#2 A Hero Scent for the Ages
Every perfume brand has its hero scents, the most-talked about creation that draws in first-time customers and becomes the talk of the online fragrance community. Sustaining that momentum with a creation that is both contemporary and timeless (for sales on repeat) is the trick.
“Every successful niche fragrance brand that I've seen, there was always at least one star perfume that really put the brand on the map,” Ohana comments. “The essence in this business is still having a great juice. Now the strategics are looking for that hero product that is driving the business.”
Take Creed Aventus, for example. While the house’s heritage—beginning in 1760 with scenting the gloves of King George III—has been called into question by authors like Gabe Oppenheim, one can’t argue that the brand’s creation left an indelible mark on the men’s fragrance landscape with the unmissable inclusion of pineapple in the fruity chypre creation. Bold enough to stand out, yet not so avant-garde as to be outlandish. While the scent’s popularity may fluctuate, the 2010 creation has nonetheless stood the test of time. As for fragrance shoppers looking to make their first splurge (a 50ml bottle will set one back about $345), a regal three-feather logo and hundreds-of-years-long lineage will likely be an inviting factor, in the same way that a Hermès handbag is deemed a worthy investment for the long haul.
Even creations at a more affordable price point are being designed with a long-term perspective. Clean perfume brand The 7 Virtues, whose other investors include Newbound and Penultima, marked the first-ever fragrance investment for Unilever Ventures. “The 7 Virtues has cracked the code on creating long-lasting perfumes using sustainable ingredients that their loyal customers love, along with their empowering and authentic story," Anna Ohlsson-Baskerville, Partner at Unilever Ventures, said at the time of announcement. "Driven by its philosophy, The 7 Virtues is elevating from an exciting indie brand to a legacy brand and we're delighted to be a part of its growth journey." The brand’s founder, Barb Stegemann, revealed to BeautyMatter that she practices a heroes-first mentality when working on the next release. With consistent bestsellers like Vanilla Woods, 80% year-over-year growth, and a recently opened Perfume Atelier in Canada, making crowd-pleasing fragrances that regularly excite noses worldwide is certainly paying off.
In June 2024, Kering Beauté made a minority investment in Matière Première, which is distributed in more than 50 countries globally across 400 sales points. Its retail sales in Europe were reported at €30 million ($33 million) in 2023. The brand’s current bestseller, the 2023 launch Vanilla Powder, not only constitutes a quarter of overall sales, but taps into the ongoing craze for gourmand scents. What makes it a timeless fragrance with enduring appeal is that perfumer Aurélien Guichard tempered its vanilla, lactones, and coconut notes with palo santo and white musk—making it sweet enough for the dessert scent seekers, but sophisticated enough for everyday office attire.
Equally, Ex Nihilo, which received a €25 million ($27 million) investment from Eurazeo in January 2024, has a bestseller with celebrity backing: Fleur Narcotique, a floral fruity creation of peony flower, litchi, and musk by Quentin Bisch. When Hailey Bieber, known for her influence in the “clean girl beauty” movement, revealed it as the fragrance she wears, the online fragrance consumer took notice. Parfums de Marly’s Delina, a rhubarb rose scent with 60,000 TikTok searches and counting, endorsed by none other than Snoop Dogg, also has a loyal following and reputation as a compliment-getting fragrance.
Ellis Brooklyn, which recently closed a $9 million funding round led by Redo Ventures, was launched with a clean ingredient and sustainable sourcing focus. Its bestsellers, including the 2016 launch Myth (a musky floral with cassis, orchid, jasmine, and white cedarwood) and Salt (an amber floral with ylang-ylang, tiare flower, musk, and sandalwood) are described by customers as versatile and well-rounded fragrances for all occasions. By tapping into the market for clean fragrances, and offering them everyday yet elevated scents in shelfie-worthy packaging, the brand subtly snuck itself into the hearts of investors as well.
“Outside of brand storytelling, a brand also differentiates itself with a product portfolio built around a signature, hero scent with a loyal consumer following, along with high-performing fragrances, which consumers often measure by the longevity of a scent. Lastly, from a branding perspective, the look and feel of a brand matters greatly to consumers as fragrances are often put on display. For that reason, a brand must also focus on packaging that is unique and elevated above the rest,” Gersten adds.
#3 Immersive Retail Concepts
A stand-alone store is the business calling card of any aspiring fragrance brand: a blank slate to express a brand ethos in more mediums than just scent. A majority of companies with an acquisition/investment track record have demonstrated their prowess in crafting this medium prior to transactions (although with retail stakes and costs consistently rising, how feasible this is in 2024 and beyond without outside investment remains to be seen).
Frédéric Malle is credited by many as putting perfumers on the map—on the bottle of his fragrances and their pictures above the fragrances in-store displays to be precise. He gave a face and name to those who had previously worked in the shadows of the industry. While other fragrances were quietly put into their branded shelves, Malle’s vision brought a certain visual boldness and theatricality to the mix, including external pop-ups like the recent Editions de Parfums Frédéric Malle Red Gallery, which was closer to a museum exhibition than a mere brand history activation.
When Bettina O’Neill, now SVP Business Development, Merchandising & Wholesale at Scentbird but then Vice President Divisional Merchandise Manager for Cosmetics & Fragrances at Barney’s, brought the brand (plus Le Labo and Byredo) to the department store, she witnessed firsthand his impact on the fragrance retail space, including smelling columns, refrigerated perfume cabinets, and space that merged fragrance laboratory with an upscale living room. “The best founders are the ones who are unreasonable. They have a vision, this is what they believe, and they stick to it. It's about the person having real passion and not compromising,” she explained on the “Making Sense of Fragrance’s Future” panel at FUTURE50.
Le Labo’s in-store blending and custom labeling was a key differentiator from its onset. Byredo brought chic Swedish minimalism to shoppers with storefronts that mixed natural materials like smooth wooden finishes and polished marble with sleek silver and glass countertops. D.S. & Durga, of which Manzanita Capital acquired a majority stake in August 2023, has storefronts that marry neon lighting with a Brutalist architecture experience, colorful fluorescent glows bouncing off of stark, blank white walls.
Aside from aesthetics, incorporating more tech-driven elements are another differentiator mark in fragrance retail. Inside its Pantone 293 Blue walls and white Calacatta marbled flagships, Ex Nihilo offers an in-store Osmologue, or a personalization robot, to customize fragrances for consumers on the spot. Regardless of the methods employed, be they visual or technical, a store generating repeat visits or stopping passerbys in their tracks, undoubtedly helps build brand buzz—a buzz that begins with audiences but soon reaches investors.
#4 Unique Branding Identity
In the case of D.S. & Durga, its not only its bestsllers like the Iso E-Super and Ambrox Super-focused fragrance enhancer I Don’t Know What or the woody fruity creation Debaser (named after a Pixies song, see the aforementioned point about cultural cachet) that are drawing in attention. Aside from cross-industry projects like a Duran Duran collaboration, it was their Surrealist-looking campaigns in partnership with Leta Sobierajski, equal parts striking and humorous, like a hand with melting candles for fingertips holding a bottle of Burning Barbershop that demonstrated the brand as a new voice in fragrance creativity. With its Studio Juice drops and limited-edition launches including a Crush Balls tennis-inspired scent, the brand continues to leverage the ever-spinning minds of its creative co-founders.
“You need to have a really unique point of view, a clear point of differentiation, a reason for people to come and explore and buy into their universe,” Richards adds. “Metrics that we would look for is not just the ability to drive customers to try, but the ability to bring them back again and again. It's the holy grail of beauty and harder with fragrance. It’s not a fast replenishment category, but being able to bring customers back in, whether that's through home fragrance or bodycare products, or just keep them engaged and in the universe, is key for us when we're looking at brands we think will stand the test of time.”
While D.S. & Durga was born in the cool streets of Brooklyn, Maison Francis Kurkdjian, Parfums de Marly, and Ex Nihilo are seeking to redefine the legacy of French perfumery, bringing its historical grounding in ingredients and craftsmanship into a new digital era. The minimalist packaging of Le Labo, Editions de Parfum Frédéric Malle, and Byredo echoed the sentiment of genderless fragrance at a time when the concept was just beginning to take mainstream hold. Their advertising campaigns took fragrance away from the often gender-stereotyped representations of masculinity and femininity present in traditional perfume messaging. Scents for anyone who wants to wear them, rather than just a man or a woman. Some might argue that genderless fragrance is a clever tactic of also not reducing your customer by half, but in the realms of art, would one ever reduce a buyer of a painting to male or female? No. Art is subjective and shouldn’t be beholden to gender restrictions.
Vyrao, the 2021 launch that has received investment from Kinship Ventures and L Catterton, as well as a minority stake from The Estée Lauder Company’s New Incubation Ventures, is tapping into the current zeitgeist around fragrance as not a mere function of aesthetics, but also one of wellness. The creation of Yasmin Sewell, the former Fashion and Creative Director of luxury retailers Liberty and Browns, the company is distributed at some of the most coveted retailers across 20 countries: Selfridges, SpaceNK, Saks Fifth Avenue, and Violet Grey, to name a few. With Sewell’s keen creative eye, which helped launch fashion designers like Pierre Hardy and Rick Owens in the UK, Vyrao has an attention-grabbing and modern visual presence, but it doesn’t end there. By tapping into IFF’s neurological research on fragrance ingredients, putting them in the hands of master perfumers, and employing an all-senses-focused branding approach, the perfume house is speaking to an entirely new mix of fragrance consumers: those who might just appreciate fragrance as an art form as well as those who want to tap into the health benefits of scent. But above all, Vyrao is banking on the most elusive, rare, and coveted ingredient of all: emotion.
“Scaling a fragrance brand to legacy status takes time, but some fundamental building blocks are core to success in fragrance. In a category where product needs to build an emotional connection with consumers, a brand needs to have unparalleled storytelling abilities. Product features that define scent, attributes around sustainability / clean, etc. are not enough alone to build a fragrance brand,” Gersten remarks. “Brands that can transport consumers through bringing scent to life with immersive and unique marketing tactics will win out among the rest. These brands are able to build a brand universe that builds consumer loyalty and keeps consumers coming back.”
Potential Hurdles: Time, Distribution, Regionality
Priming a brand for a successful strategic exit is no overnight matter. Seglin highlights the amount of time required for a brand to acquire this standing both in the industry and with its customer audience. “In the consumer's mind, some time needs to pass for them to consistently see the brand with the right messaging, with the elevated product and experience at retail, the right collaborations for them to think of a brand as a luxury brand. When you look at LVMH’s portfolio, the average age of a maison is 60, these brands have been around for a long time,” he adds. “Byredo was a 20-year success, that didn't happen in three or five years, which is the typical private equity playbook. That's one piece that people frequently overlook. With fragrances, all you're selling is aspiration, lifestyle, an emotional reaction. You can build a luxury brand in skincare maybe faster than you can in fragrance, because there is no efficacy in fragrances, it’s just marketing.”
He emphasizes distribution as especially critical in the fragrance category, not just in terms of the gray market and knockoffs, but also the limited areas to build a luxury business, often reduced to department stores for the US market, which see little traffic. “In Europe, you’ve got to go through perfumeries. That's not an easy distribution for small brands to manage just because it really varies from country to country. You can't be too online because it's hard to think of a brand as luxury that's purely online. You need to have physical interaction with the brand and then the number of touch points that you can have is limited. Doing your own stores is an expensive proposition,” Seglin adds.
He also notes a certain regional bias. “If you really look at luxury fragrances, the buyers tend to be European buyers: L'Oréal, Puig, and Kering,” Seglin explains. “They will always be predisposed against American brands. I think they want to buy French and Italian brands.”
There is not only more competition for investor dollars, but also an increasing influx of new launches that challenge consumer loyalty. With more customers adopting fragrance wardrobes instead of signature scents, plus buying travel sizes rather than 100ml bottles, the growth opportunity has slightly changed form. Equally, dupe culture means customers might be swayed to buy identical, more affordable alternatives, but Seglin sees it as an opportunity for luxury brands to make these rivals work to their advantage. “You can leverage dupes to validate your brand. You can fool around, but ultimately you want the real thing,” he says.
Nonetheless, he advises all fragrance brand owners to adjust their timeline expectations accordingly. “It's going to take longer for all these brands to exit to strategics, because strategics who are in a fragrance space do want to see something that is sustainable, that has a track record of having a loyal customer and that you have potential and awareness with a global customer,” he concludes.
Post-Exit Realities
Even once the papers are signed, not every strategic exit pans out as expected. Here is where the infrastructure of a brand can be what makes or breaks the future of a brand. “Le Labo fundamentally has always been set up as a very commercial brand with great profitability. Estée Lauder has done a great job extending it into more of a lifestyle brand beyond fragrances. On the other hand, Frédéric Malle is likely a disappointment for them. When they bought that brand, the idea was that Frédéric Malle (the person) was going to become the nose for Estée Lauder Companies. That never happened and he eventually left the company. On top of that, the brand has always been very precious, with stores that are expensive to build because they are sort of little architectural gems. Wholesale distribution remained very curated. As a result, that brand never got to scale where it actually moved the needle,” Seglin remarks. For brands with high price points and exclusive but limited retail distribution, without the investor funds to open their own stand-alone stores, it is a long and hard journey to break out of the small-scale bracket.
While Ohana is positive about the continuing growth of this M&A landscape, he describes one short-term issue, with supply not meeting demand. “Right now there are very few brands that are still independent, meaning not owned by a strategic, and that are sizable enough for a strategic to buy the brand,” he says. “One thing that we're seeing happening is that some of the strategics are lowering their bar in terms of size, but I believe it's reached a limit. I don't think we'll see a lot of strategics go and buy companies where they're still doing $5 million in sales. Anywhere between $20 million to $50 million in revenue is probably where the bar is. That may slow down the pace of M&A, but we're also seeing more new brands coming to market. Considering all the companies that we're seeing that are now emerging and are already in the $5 million to $15 million range in terms of size, it's just a matter of a couple of years before we have more M&A because we'll have more targets.”
Gersten adds, “Many examples in just the past year all point to the growing investor appetite for niche fragrance brands at an earlier stage. We expect these niche brands to continue to attract the greatest interest, especially as legacy players and strategics continue to look to acquire emerging indie brands as a means for growth.”
Coexisting Between Commerce and Creativity
Not all independent fragrance brands may be seeking outside funding, but those that have successfully secured it have harnessed their own visual language, perfume creativity, and community to their benefit. The path may not be straightforward nor easy to predict (cue overnight online virality), but building a business that has secure footing on these aforementioned fronts is never a bad investment.
The worlds of independent fragrance brands and M&A activity may have once been deemed irreconcilable worlds: one about continuing a generational legacy that placed art over commerce, the other a world of big checks and large corporations. However, with industry stakes higher than ever, fighting the brand battle on one’s own might not be the same game it was a decade ago. It’s also causing a redefinition of the categories as we know them.
With such a boom in the niche space, will, as fragrance taxonomist Michael Edwards predicts, niche become the new mass? Ohana argues that the sector most at threat from this new influx of niche brands will be designer houses.
“The licensees of the fashion houses have to find their position, because right now they're prestige, but if they don't pay attention they might become masstige. Some of them are launching SKUs that are targeting to compete directly with the niche fragrance houses. They need to do this to preserve their positioning as a prestige brand,” he adds. “At least for the next few years, I don't think the [niche] category is going mass. I think it's the other players in fragrance that are at risk of being relegated to mass positioning if they don't work on their assortment.”
Brands need more funding than ever before, and investors are offering the lifeblood for this endeavor. Equally, who can blame brand founders for handing their proverbial child into the hands of experienced business people who can help keep a brand alive through all the turbulent highs and lows of the market. But if brands are created based on the premise of simply building as big and fast as possible, rather than as creatively and considered as possible, what does that mean for the future of fragrance creations? Will the industry become awash with simply pleasing fragrances but no polarizing perfumes? Can art and commerce coexist, or will commerce kill the creativity? Rather than these worlds remaining archrivals, the most future-thinking brand founders are finding a way to coexist between the two, and reaping the financial benefits.
