Burberry's move on fragrance

British Burberry Group PLC, which is world-renowned for it's 1,500-euro trench coats lined with its distinctive camel, red, and black check pattern, reported a strong year with excellent profit owing to the strong demand in Asia.  Revenue performance remained bright, rising 14% in the Chinese market alone.  This year, Burberry plans to continue confidently investing in new stores, adding 25 this year with three located in Shanghai.  

However, in the twelve months to March 31, net profit did fall by 3.4 percent due to costs associated with the company's breakup with Inter Parfums in July 2012.  Fragrance is often the main entry point for consumers with a luxury brand, which is why controlling the product's communication and marketing strategy is key for Burberry.  Research from Citi indicated that their fragrance business makes up about 2 percent of Burberry's revenues - but about 50 percent of Inter Parfums'.

Comparatively, some estimates give Chanel's fragrance a $1 billion, 20 percent share of the  company's $4.5 billion sales.  Burberry has some room to continue to grow their own perfume business, with their own skincare and makeup lines, Burberry Beauty.  The one-time costs associated with bringing the fragrance category in-house are expected to quickly pay off because of the growth potential.