Gen Z's New Obsession with Perfumes Fuels Growth for Coty and Estee Lauder

The younger shoppers continuing to surprise the beauty industry are those from Generation Z. Unlike previous assumptions that luxury goods would fall out of favor during economic uncertainties, today's Gen Z is splurging on perfumes. They view fragrances as a small indulgence that expresses personality and uplifts mood without breaking the bank.

Leading companies in the beauty sector like Coty (NYSE: COTY) and Estee Lauder (NYSE: EL) have seen a notable uptick in perfume sales, with fragrances becoming their key revenue drivers recently. Both firms are ramping up investments in this segment, recognizing that scents are rapidly becoming a staple rather than a niche luxury.

Coty recently projected a strong outlook, particularly propelled by popular labels like Calvin Klein and Hugo Boss. Their CFO mentioned plans to expand the fragrance business further, highlighting how the category nicely aligns with Gen Z's consumption patterns.

Estee Lauder, which owns Jo Malone among other fragrance brands, reported a 14% growth in fragrance sales for the last quarter ending September. This increase helped balance out the slowdown they faced in makeup, placing perfumes at the forefront of their product mix.

Meanwhile, companies like Elf Beauty, which don't have a fragrance offering, have stumbled with weaker results and a significant drop in share price. It signals how critical perfumes have become to maintaining momentum in the beauty market.

L'Oréal sealed a sizable $4.7 billion deal recently to boost its fragrance portfolio, acquiring brands and securing long-term licenses, including for Gucci. On another front, Coty is aiming to streamline by potentially offloading slower categories such as CoverGirl and Rimmel to focus sharply on its fragrance segment, which now accounts for about 75% of sales.

The surge in fragrance sales isn't just a Western phenomenon. Rising disposable incomes and the growth of middle-class populations in regions like China, India, and the Middle East are also underpinning global demand. Estee Lauder's new boutique openings and investments in AI-driven marketing tools speak to efforts to connect with younger consumers through more personalized and engaging experiences, including via social media platforms like TikTok.

According to recent data, fragrance sales outpaced both makeup and skincare growth in the first half of 2025, with prestige fragrance revenues rising 6% to reach $3.9 billion, while makeup and skincare had modest or negative growth. For Gen Z, perfumes offer a slice of prestige and self-expression without the price tag of high-end luxury items, making them an appealing buy during uncertain times.