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1-min read

What Lipstick is Telling Us About the Indian Economy? Hint: It’s in the Red

Colour cosmetics brands have reported double-digit growth, indicating that the ‘lipstick index’, a marker of slowdown, holds true for the Indian market as well.

News18.com

Updated:August 29, 2019, 2:28 PM IST
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What Lipstick is Telling Us About the Indian Economy? Hint: It’s in the Red
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New Delhi: The ‘lipstick index’, a typical marker of slowdown in western markets, seems to have hit India with the colour cosmetics market reporting double-digit growth even as sectors like automobiles and real estate are witnessing a slowdown.

According to a report in Times of India, both Lakme and L’oreal clocked double-digit growth rates, indicating at the ‘lipstick index’. 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.

Hindustan Unilever (HUL), which markets Lakme, feels 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. 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 and Rs 200 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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