Consumer behavior phenomenon – popularized in the 2001 recession with the ‘Lipstick Index’ by Leonard Lauder, president of Cosmetics Giant Estee Lauder – Feels right for consumers and companies in India too, shows an I-Sec study. Consumer-focused companies TOI said sales of some discretionary products reflect this trend.
In the last 10 years, smelly The index gave below inflation returns (less than 6%) in 2016, 2019 and 2020. their Income growth and stock price) of the recession for most of those years.
Even between fiscal years 2020 and 2022, when there was significant revenue disruption due to Covid, business performance in beauty, packaged goods, affordable fashion and value hotels compared to big-ticket items (such as cars and homes) I have been very strong. Hence, the ‘affordable luxury’ segment is relatively resistant to the general economic downturn, the study said.
For example, during a recession, consumers turn to cheaper packaged foods such as instant noodles, biscuits, and chips rather than more expensive gourmet items. Nestle’s revenue from ready meals and cooking auxiliaries (Maggi noodles and Masala-Magic) for FY19-FY22 saw strong growth – a compound annual growth rate (CAGR) of around 15% – while confectionery (Munch and KitKat chocolates) Viewed just over 17%. Besides, the CAGR for biscuit maker Britannia was 14%.
In addition, the ‘Lipstick Index’ trend is also visible in the affordable fashion and travel space. Consumers may turn to affordable fashion purchases such as private labels, scarves, handbags, and jewelry (smaller ticket) instead of purchasing more expensive items.
Aditya Birla Fashion and Retail Business Head (Jeypore) Rashmi Shukla said that the change in behavior during Covid was a testament to the desire for the little things and the importance of finding joy in the little things.
“We believe that consumer behavior can evolve during an economic downturn. We saw a change when consumers moved away from highly-embroidered cashmere shawls priced above Rs 75,000 and towards solid cashmere pashminas priced at Rs 16,000-20,000 . In our homeware segment, we saw double-digit growth in the mid-premium segment. People have shifted from fine porcelain to handcrafted ceramic dinnerware and serveware. It was also triggered by his yearning for the authentic and the original,” he said.
The premiumization trend at ITC was evident in categories like staples, with the value added portfolio of ‘Aashirwad’ witnessing strong consumer appeal. The biscuit business continued to focus on the premium segment, the Dark Fantasy franchise, to enhance brand affinity and drive penetration in emerging channels.
B Sumant, Executive Director, ITC, said, “Discerning consumers at the upper end of the curve are looking for unique and innovative products that deliver superior sensory experiences and incorporate natural ingredients as well as offerings in the health and wellness sector. ” There is also a preference for affordable travel destinations, the study said. A case in point is that the occupancy rate for IHCL (which operates Taj hotels) is 68% versus 73% during pre-pandemic levels (in FY19).
A Nestle official said, “Consumer preferences are rapidly evolving. In the post-pandemic world, consumers are looking for brands that deliver high-quality ingredients – reliable, transparent, trustworthy and scientifically proven to be the better brands to call out. We are seeing a positive traction in terms of consumer desire for something that has been around for a while and offers these qualities. This is boosting the consumption momentum. While decadal high inflation and other global adversities continue, we believe there is a quiet positivity working its way through the consumption economy. ,
Shivendra Nigam, CFO of Cantabil Retail, an apparel maker in the mid-premium segment, primarily gets “entry-level customers” because it is “reasonably priced”. The company witnessed a CAGR of 24% over 2019-2023.