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The Lipstick Effect Insync Fund Managers March 2023 Beauty lasts.... ...at least as far as products are concerned. A beauty revolution is fuelling the explosive growth of the cosmetics industry even with the threat of recession. Premium cosmetics are part of Insync's Beautification & Wellbeing megatrend. Forecast growth is 8% pa over the next 5 years, 2x global GDP. Cosmetic businesses are some of the most enduring and profitable ones in the world.
Key drivers behind the secular and sustainable growth in cosmetics include the growing Emerging Market - middle class (+700m more people are entering this cohort by 2030). Increasing consumer preferences for higher-quality, natural/organic products, and changing consumer behaviours and lifestyles present premium pricing opportunities. These global brands often prioritize ethical and sustainable practices which appeal to consumers that prioritize social responsibility. Demand for cosmetics may not be completely recession-proof, but it does tend to be relatively resilient during downturns. Cosmetic products are considered an affordable luxury, as many are relatively inexpensive compared to other luxury goods. Consumers are willing to spend a little extra on cosmetics as a way to treat themselves, even during difficult economic times. This is called the Lipstick effect - and we wrote more about this back in 2021. So regardless of whether we face a deflationary shock or a sustained period of inflation, the premium cosmetic industry is well-positioned to keep growing and provides a greater level of certainty for the uncertain near-term environment Funds operated by this manager: Insync Global Capital Aware Fund, Insync Global Quality Equity Fund Disclaimer |
