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Why Is Cologne So Freaking Expensive?

Scent is the primary money-maker for virtually every major fashion house — but it’s also high-quality stuff

Ahh, cologne — those alluring natural and synthesized oils in a stylishly designed bottle that’ll make you smell like your favorite celebrity. Sure, colognes have complex scents created at considerable cost by professionals (known as perfumers). But why does three ounces of the stuff cost $100? Is the chance to literally smell like your favorite brand really that intoxicating? 

It sure is! But there’s also a lot more to it, because the world of fragrance is complex. Alongside Chandler Burr, author, former scent critic for The New York Times and a fragrance expert par excellence, we dabbed on some answers!  

All right then: Why is cologne expensive?

First of all, Burr says the term “cologne” is marketing jargon that was created to give straight American males psycho-emotional permission to wear it, so henceforth we’ll call it perfume or scent. “Real perfumers hate [the term ‘cologne’] and anyone who knows anything about perfume ignores that — and your readers should, too,” he says. “There is no such thing anymore as gendered fragrance, just as there is no gendered music, gendered painting or gendered architecture. The idea is stupid, it’s pure marketing and it has nothing to do with anything aside from people trying to sell you shit.” 

In other words, if you like a scent, wear whatever the hell you want, no matter how it’s marketed.

Noted. But why is it so expensive?

Because every single luxury brand owes its existence to its perfume, Burr says. Sure, fashion houses make clothing, which they’re known for. But what they sell the most of are bags and fragrance — they make tons and tons of it. Numbers are impossible to come by, even for public companies, because fragrance revenue often falls under a brand’s larger umbrella of “beauty” (meaning makeup, skincare and perfume). But Burr says it’s often the lion’s share of a fashion house’s revenue. 

“The reason perfume is the difference between life and death for luxury brands is that perfume is the most efficient machine ever created for turning celebrity and brand into cash,” he says. “Only 0.00001 percent of the world, maybe it’s 10 zeros, can afford a $3,000 Chanel shirt. That’s where their prestige comes from. But virtually everybody can afford an $80 bottle of Chanel No. 5. So fragrance is the part of the very expensive luxury brand that normal people — huge numbers of people — can buy.”

So what are the profit margins like?

They’re not much different than any other consumer good, he says. People have notions that perfumes are marked up 500 percent or more, but that’s simply not true. It’s just that these brands make and sell so much fragrance. “As a perfume executive pointed out to me, ‘If in fact the profit margin were that high and we were making that much money, all the capital would flow to perfume. That’s the only thing everybody would make.’ That’s what capital markets do. And they don’t.”

What am I actually paying for, then?

Burr compares it to purchasing a Mercedes, which, sure, uses top materials, but also charges you for the intangibles. “You pay X amount for the car, Y amount for the marketing and Z amount for the hood ornament,” he says. “We all know that. When you buy a luxury perfume, it’s exactly the same: X is for the actual juice (the packaging is generally not part of it), you’re paying Y for the marketing and you’re paying Z for the brand.” 

Companies are just putting their name on scents and coasting on it?

Some are, but others aren’t. “There are companies that can make a ton of money on perfume that still put money into the formula — that’s the term of art,” Burr says. “And others will put all the money in the marketing and no money in the juice.” (It’s actually le jus in French.)

Chanel, Hermes and Prada, as well as Frederic Malle, Byredo and Diptyque are six brands, Burr says, that put a ton of money into the juice. For example, if you buy a product from them, you’re buying a fragrance in which the rose they use is a really high-quality rose, and the citrus will come from Sicily or Calabria (or possibly Florida, which produces high-quality citrus oils for the perfume industry).

Natural ingredients are more expensive, then?

Actually, no. There are cheap natural ingredients and expensive natural ingredients. Likewise, there are cheap and expensive synthetic ingredients as well. It’s a misconception that all synthetics are cheap and all natural ingredients are expensive. 

But expensive ingredients are better? Is that it?

No again. “The beauty of a fragrance has nothing to do with the cost of the formula per kilo — nothing,” Burr says. “There are incredibly expensive perfumes that come out of the Arab world that are filled with all kinds of things that cost $50,000 a kilo, $100,000 dollars a kilo, and they smell like shit.”

He compares the skill of a perfumer to that of a pastry chef: A great pastry chef can take basic ingredients like flour, water, eggs, sugar, salt and decent chocolate and make something incredible out of it.

So what makes a fragrance good?

Burr has several criteria he uses for scent. Is it well built, does it hang together and does it perform? In other words, does it all come off the skin together? Because you can’t have one giant raw material (maybe a floral like geranium, or a wood) jumping out that overpowers everything else — that indicates that it’s not well made.

One thing that bad scents do is what’s called “front-loading the money.” That’s when you apply it and it’s great for 10 minutes (in which time you’ve decided on it at the counter, have paid for it and are walking out of the store with it), then it quickly falls apart and smells different. The reason this happens is because of the different molecular weights of the ingredients: light ones fall off before the heavy ones. A good perfumer knows how to make a scent hold together; a hack one will front-load the money.

About that marketing…

Yeah — all that advertising and all those endorsements cost a fortune. But it all pencils out! Burr compares it to making a $200 million blockbuster movie. You pay, say, $10 million for your star, then many millions total for all that other stuff: the screenplay, all the crew, the director, the cinematographer, that helicopter shot over Prague, whatever. And then an additional 50 percent for the marketing. It might be a blockbuster for a few months — perhaps doubling its budget — then, for the most part, its chance to earn huge money is mostly over as it gets licensed to Netflix or whatever for the next decade.

For the big fashion houses, they pay scent houses to develop the formula, they pay Cate Blanchett $8 million to $10 million to endorse it, then they spend $10 million to $20 million on the marketing. You’re up to $50 million to start with, but here’s the thing, according to Burr: Armani Si makes something like a half-billion dollars a year — year after year after year! Dolce & Gabbana Light Blue makes a billion a year! The best-selling scent in the world is Acqua di Gio, and while L’Oreal won’t share the exact figures, so nobody knows for sure, global sales are estimated at $1 billion to $2 billion a year for a product created back in 1995, so there’s very little advertising these days. It’s in a sort of perpetual motion at this point. 

Also bear in mind that a successful scent had all the development done on it years ago, and they buy millions of glass bottles at a time, so the per-unit cost of packaging is near zero. 

Fragrance is essential for a top brand, huh?

Yes. A successful scent absolutely rakes in the money for fashion houses that tend to be most well known for making clothes that, in reality, almost no one can actually afford. But don’t lose sight of the product itself: Like any luxury good, it’s crafted by experts, and there’s a true quality to it.

“People who really know fragrance know that you cannot put shit in your bottle any more than you can put shit in your cars,” Burr says. “Even if you have the reputation of BMW or Mercedes, if you let it go for one season in order to bump up profits? Consumers will know. And your reputation will be tarnished, and brand equity will go down.”

So there’s a lot riding on a brand’s fragrance, and for all the money it’ll cost you, you can at least be confident that a popular or classic scent is high-quality stuff.