PWC Memo on industry definition_20170313[1]

Memorandum To: / Location:

Farah Ahmed / IFRANA

Cc: / Location:

Stephen Sibert / Sibert Advisory Services

From: / Location: Peter Merrill and Qiang Ma / PwC Date: March 13, 2017 Subject: Defining the Fragrance Industry

A key step for an industry-­level economic impact analysis is to define the direct industry under study by reference to the North American Industry Classification System (NAICS) used by government statistical agencies. Our preliminary research suggests that the US fragrance industry spans a number of NAICS codes. Broadly speaking, the fragrance industry can be divided into two primary segments: manufacturing and distribution: 1. Manufacturing includes development, production, and marketing of fragrance products. 2. Distribution includes transportation, wholesaling, and retailing of these products. Retail activities include the sale of fragrance products in a variety of retail establishments, such as department stores and drug stores. As shown in the appendix to this memo, the manufacturing activities of the fragrance industry are found to be subsumed within three NAICS codes: 1. NAICS 325199 : All Other Basic Organic Chemical Manufacturing, which includes perfume materials . 2. NAICS 325620 : Toilet Preparation Manufacturing, which includes blenders . 3. NAICS 339999 : All other miscellaneous manufacturing, which includes atomizers . After we reach agreement on which activities within the three NAICS codes should be included in the definition of the fragrance industry, we will XVH86&HQVXV%XUHDX¶VGDWD on sales by product line by NAICS industry to quantify the manufacturing segment of the fragrance industry. The distribution segment of the fragrance industry includes all businesses in the wholesale trade (NAICS 42), retail trade (NAICS 44-­45), and transportation and warehousing (NAICS 48-­49) sectors engaged in the distribution of fragrance products from the manufacturer to final consumers. We will rely on the IMPLAN input-­output model to estimate the distribution channel margins attributable to fragrance products.

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