While growth rates in Brazil’s fragrance market may make foreign brands salivate, it is still the local direct sellers and franchising companies that are benefiting most from the category’s expansion, said a recent report in BW Confidential’s March/Aril print edition. Some 93% of fragrance sales are concentrated in the hands of local popular brands, and the country’s leaders—Natura and Boticário—together claim a 60% share of the perfume market. Indeed, among the Top10 fragrance brands in the market, Natura dominates with six products in the best-seller list, while Boticário has the remaining four top spots.

The premium market is seeing growth, but still remains small, largely due to the high taxes that apply to foreign prestige fragrances. Representing only 6.5% of the total fragrance market, prestige perfume sales were up by 13.7% in 2010 (Euromonitor), with 15% growth forecast for 2011.

Growth for the premium segment is set to be dynamic over the next five years due to the expansion of distribution. Foreign retailers, such as perfumery chain Sephora, are entering the market, and the Internet is making it easier to reach more consumers in regions with few physical points-of-sale, thereby providing an opportunity to increase sales. Sources said that 30% of prestige sales in Brazil are in the hands of local e-commerce operator, Sack’s (acquired by LVMH in 2010 and now combined with Sephora) and department-store operator, Renner.

There are opportunities for foreign players. Analysts say these brands should develop more masstige fragrances or products focusing on consumers in the 12–19 age group. According to Euromonitor, households with teen consumers spend 40% more on clothes, shoes and personal-care products than families without teenagers.

Some also see a need for products better tailored to the market. “To overcome the problem of Brazilian consumers buying fragrance outside Brazil [in duty free or in other markets], there needs to be more projects adapted to the market or sold only there. Brands, for example, could have a specific Brazilian line, explained Valérie Jacob, SGD’s International Marketing Director of Perfumes and Cosmetics. “In this market, there’s a need to be more audacious, prepare the ground and invest for the future; there are specific consumer needs there that we have to look out for.”

To read BW Confidential’s full report on the fragrance market in Brazil, go to bwconfidential.com