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Nov 7 (Reuters) - Fragrances have become a staple for Gen Z shoppers, the fastest-growing buyer category globally, and beauty heavyweights are here for the trend. Once dismissed as a luxury indulgence, scents are now a go-to for young consumers seeking to express their style and boost their mood amid economic uncertainty. It is the new "lipstick effect", analysts said, referring to an economic theory that suggests consumers tend to buy small luxury items instead of expensive goods when the economy falters. Sign up here. Coty on Wednesday offered an upbeat quarterly forecast, banking on surging demand for its Calvin Klein and Hugo Boss fragrances. CFO Laurent Mercier said the company was going to expand the business. "It's a fantastic way for the Gen Z to enter the category. So it's really matching really some great consumer needs," Mercier told Reuters. About 38% of total spending on fragrances in the 26 weeks ending July stemmed from households with a Gen Z member, according to data firm Circana. Jo Malone owner Estee Lauder also saw a bump from its fragrance business, which helped offset muted demand for makeup. Its fragrance business grew 14%, on a reported basis, in the quarter ended September. Big cosmetic companies are also boosting their fragrance portfolios through acquisitions, or ditching slowing business units to free up cash flow to invest in perfumes. BIG BEAUTY BETS "Fragrance is having a cultural moment," Kendal Ascher, a senior Estee executive, told Reuters. "Rising disposable income and middle-class expansion in China, India and the Middle East are fueling sustained category growth." Estee this year opened around 40 new freestanding fragrance boutiques globally, including new flagships in SoHo, New York, while also opening a global Fragrance Atelier in Paris. Ascher said the company had invested in AI-enabled tools that translated how consumers talk about scent — matching words like "bright" or "happy" to fragrance families — and was creating TikTok videos based on that to draw in Gen Z shoppers. In the past year, global sales growth for fragrances has outpaced those of makeup and skincare, Circana data showed. Prestige fragrance sales increased by 6% to $3.9 billion in the first half of 2025, while prestige makeup sales rose 1% and prestige skincare declined 1% during the same period. "It is a product segment that gives consumers a taste of prestige, quality, or status (or personal indulgence) without the price tag of full-blown premium/luxury goods," said Michael Ashley Schulman, chief investment officer at Running Point. Reporting by Anuja Bharat Mistry in Bengaluru; Additional reporting by Prerna Bedi; Writing by Aishwarya Venugopal; Editing by Sayantani Ghosh
