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Last Updated : Aug 30, 2019 05:57 PM IST | Source: Moneycontrol.com

‘Lipstick index’ that typically hints recession hits Indian market: Report

Economists have explained it with the theory that consumption of inferior goods increases with the fall in income.

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Due to geopolitical uncertainties and fall in domestic demand, Indian markets are seeing a slowdown in many sectors like automobile and real estate. But, the colour cosmetics market is seeing double-digit growth, as per a report by The Times of India.

Brands like Lakme and L’oreal are indicating at the “lipstick index” through their growth rates in the country.

The rationale of this index dates back to 2001 when the chairman of Estée Lauder, Leonard Lauder, discovered that they were selling more lipsticks when the economy was tanking. Several colour cosmetic brands indicated similar trends in 2001 and 2008 slowdown.

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Hindustan Unilever (HUL) that markets Lakme, feels that colour cosmetics are less affected by slowdown as consumer usage is still low as per the report.

Economists have explained it with the theory that consumption of inferior goods increases with the fall in income. Lipsticks are not exactly inferior goods but cheaper substitutes to expensive indulgences. If houses and cars are expensive, so are Zara dresses for most people’s budget. A Rs 600 L’oreal is still a good distraction. A New York Times article calls it a mood booster in times when people find bags too expensive.

Most of the brands have several lines of lipstick in a different price range that becomes attractive to all categories of shoppers. If not a premium Lakme lipstick worth Rs 800, Rs 200 ones are also available.

Consumers may also be buying multiple lipsticks with each launch that has around 20 new shades. An HUL spokesperson adds that there are consumers who may just pick one-two shades annually.

L’Oreal India is also growing in "high double digits" which gets 35-40 percent of its sales from colour cosmetics, as per the company spokesperson in the report. He adds that rising awareness and education about makeup are responsible for the growth, with YouTube and social media playing an important role in it.

L’Oreal’s drugstore brand, Maybelline, has also been driving volumes in categories like “creamy matt” which costs around Rs 299. Nykaa’s chief business officer also agrees that the business is doing great for them. With new consumers entering the market, Nykaa clocked 115 percent growth in 2018-19.

The “Lipstick index” does not necessarily indicate an approaching recession, but it has been true during slowdowns. The Indian market is an example.

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First Published on Aug 29, 2019 01:55 pm
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