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>4. Cosmetics
>Despite a down economy, people tend to continue spending on cosmetics and beauty products, a phenomenon that has been dubbed the lipstick effect. The theory underlying the lipstick effect is that during economic downturns, consumers trade in big splurges on things like travel for smaller luxuries.
>The largest cosmetics companies include Estee Lauder Companies Inc. (EL), L'Oréal S.A. (LRLCY), and Coty Inc. (COTY), a major licensed brand manufacturer. Both of these companies have non-cyclical product portfolios that do well in weak economic conditions, in addition to luxury brands, which thrive in a strong economy. As previously mentioned, Procter & Gamble and Unilever are also major players in the beauty industry.
What causes this and is it true? Is it really a momentary feel-good mechanism?
