Good noses run in Patrice Martin's family.

Martin's father was a "nose," and so was his father's father in this hillside town north of Nice where some of the world's sweetest perfumes have been created.Grasse has trained some of the great noses - as creators of perfume are known. Many now work in Paris or New York, the new capitals of the booming international perfume trade.

French perfume holds 38 percent of the world market, and last year the French industry had its best year in a decade. Perfume and cosmetics sales rose to a record $5.7 billion, up 14.7 percent over 1987.

French women buy the bulk of French perfume, but sales abroad soared to $2.3 billion last year, an increase of about 19 percent, according to the Paris-based French Federation of Perfume, Beauty and Toiletry Products.

West Germany, Italy and the United States lead the list of foreign buyers. Industry analysts attribute the excellent year to a growing world demand for luxury goods and the stability of the dollar.

Martin says the French succeed because of the excellence of their noses, designing scents the way artists paint with oils.

"But knowing all the colors does not make you Rembrandt," says the 32-year-old perfume maker, who trained at Roure, a perfume school founded here in 1820. "There is a special sensibility that comes from training in Grasse."

Roure graduates an average of four students each year from its rigorous three-year training program. Other noses learn their trade in a perfume school in Versailles or from one of a dozen or so other perfume laboratories and plants here.

Except for Roure, little remains of the enormous perfume industry that once flourished in Grasse.

Fragrant fields of lavender, tuberose and trees brimming with orange blossoms once filled the terraced hillsides around the town, providing the raw material for perfumes. Peasant women in broad straw hats and long cotton skirts gathered the flowers each morning.

The flowers and peasants are gone now, replaced by high-tech labs and chemists plotting formulas on computer screens. Grasse, slow to adapt to changes in the marketplace, was bypassed by American and French companies that diversified into providing scents for products ranging from laundry detergent to insecticide.

Clients who commission perfume based themselves in the capital, and the big perfume-making companies were forced to follow.

But companies in Grasse still deal in the import, processing and resale of raw materials - jasmine from India, musk from Africa and methyl dihydrojasmonate from the French chemical firm making the jasmine derivative.

With thousands of scents passing through local labs, Grasse is still ideal for the novice nose.

After finishing school, Martin, like many of his peers, went to work in Paris, where luxury perfumes these days are made under contract to cosmetic houses, fashion designers or movie stars - those with the financial means to gamble in a highly competitive game.

Launching a new scent costs about $17 million. Research and development account for only 4 percent, with marketing and promotion making up the rest.

At Roure's lab, Martin says, noses compete to come up with a scent to satisfy a client, using computers and a variety of other technological tools to mix natural and synthetic scents.

"Clients come with an idea of what they want," Martin says. "They'll say, `Give me something in a certain price range for athletic, working women 30 to 40 years old.' The nose translates the words into an odor.

"We're getting more sophisticated all the time, but nothing can replace a good nose."