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17 Apr 2023 - The Lipstick Effect

By: Insync Fund Managers

The Lipstick Effect

Insync Fund Managers

March 2023

Beauty lasts.... 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 FundInsync Global Quality Equity Fund

Equity Trustees Limited ("EQT") (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Insync Global Quality Fund and the Insync Global Capital Aware Fund. EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) ("Insync"), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.

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