Aside from the scented liquid, Gucci’s Flora Gorgeous Gardenia Eau de Parfum shower gel and Unilever’s Dove Go Fresh Pomegranate & Lemon Verbena Scent shower gel don’t have much in common. One is 100 times more expensive than the other by volume and is sold by a fashion label, not a packaged goods company.
But both are made by the same company, the Swiss fragrance group Firmenich. You may never have heard of it, but the compounded scent permeates thousands of products, from perfumes, toothpastes and deodorants to laundry detergent. Unseen and unknown, it is around the house.
This is a great time for luxury fragrances. Sales of scented candles, and perfumes from brands and celebrities such as singer Ariana Grande, have grown because people like them. Firmenich, which quietly produces many of them (including Grande’s RE M) has been brought together: sales of fine fragrances rose by 33 percent last year.
That ride was disrupted last week when Firmenich and its three biggest competitors came under fire from antitrust investigators from Switzerland, the EU, the US and the UK. They are suspected of colluding to raise prices, prevent competitors from supplying customers, and limit the production of some fragrances.
Firmenich, Switzerland’s Givaudan, Germany’s Symrise and US group International Flavors & Fragrances have denied wrongdoing: they said they were cooperating with the investigation, which may not lead to charges. It contains not only fragrance but “fragrance ingredients”, which enter the food to make it smell.
We do not know whether the product regulator has an eye, but I can make an observation on the gap between the prices of luxury scents and shower gel. You don’t need to fight too much when customers will be happy to pay for labels and small bottles of scent. Producing household staples is a struggle that creates temptation for collusion.
The presence of Firmenich and others is a hidden factor in the “fragrance boom” of the luxury industry. Labels realized that there was money to be made by adding perfumes to their clothing lines, but few had the capacity of Chanel to create such scents. They need a partner and the fragrance group wants to help.
The rise in sales of luxury fragrances began during the pandemic and continued. Sue Nabi, chief executive of US beauty company Coty, which makes perfumes for brands including Burberry, Chloé and Tiffany, noted last year that shoppers were “buying more . . . expensive things” for themselves, not just as gifts.
But while luxury fragrances are growing rapidly, they are only a small part of the industry. Most are less glamorous and more quotidian: they make air fresheners, deodorants, soaps, gels, washing powders, floor cleaners and all kinds of other aromatic products.
The Geneva-based International Fragrance Association is part of an antitrust investigation and says it conducts all meetings “in accordance with strict competition policy guidelines”. It is estimated that in 2017, fine fragrances accounted for 9 percent of fragrance product sales; almost 70 percent involved personal care items such as shampoo.
Life is more difficult in the latter business: there is less growth and the fragrance company faces price increases from 3,000 suppliers of raw materials, including lavender and patchouli farmers. He also had to negotiate with the world’s largest packaged goods companies to sell fragrances, including Unilever and Procter & Gamble.
The industry produces a wide variety of smells and aromas: Givaudan alone makes 176 “fragrance molecules”, ranging from benzyl salicylate (“floral, balsamic, sweet”) to Alicate (“fruity, rhubarb, aromatic, lilac”). But no matter how sweet it smells, selling chemicals to multinationals is a slog.
The fact that people choose perfumes with care but don’t care about the origin of the pine scent in the floor cleaner dictates the terms of trade. When Gucci wanted a scent with “ultra-dry Woody notes”, asked one of Firmenich’s master perfumers, who mixed the formula. When multinational companies manufacture supermarket products, there are many choices of suppliers.
Maybe the fragrance companies are conspiring to limit the selection: we’ll find out when the inquiry is over. Meanwhile, the raid tells about making money with scents, or other products. Close to price-insensitive buyers, and away from industrial supply chains.
I have another observation: one legal way to limit competition is to merge. When managers agree on prices in a company, it is called strategy, not collusion. Like others, the industry has consolidated: Firmenich merged with Dutch biosciences group DSM: a €41bn deal was cleared by EU competition authorities last month.
Expect more mergers after this. And when you spray perfume or wash your hair, check the small print on the back as well as the label on the front. The smell may have spread from Switzerland.
john.gapper@ft.com