The Lipstick Effect

According to the theory of the lipstick effect, consumers will tend to buy less expensive luxury goods during a period of stress or economic hardship—they might not purchase a Porsche, but they’re likely to splurge on a pricey lipstick. Supposedly, lipstick sales doubled in the U.S. after the 9/11 attacks.

If this is true, most of us are buying our lipstick at Wal-Mart. Sales of Champagne were down 28% during the first nine months of this year, while sales of Prosecco were up 11% (according to Gomberg, Fredrikson and Associates, a beverage consulting firm based in California). Purchases of Cava, a Spanish sparkling wine made by the traditional Champagne method, were also up slightly.

Part of the problem might be that Americans perceive Champagne as a celebratory beverage rather than an everyday drink, and many people have been short of things to celebrate recently. The average price for a bottle of non-vintage Brut Champagne hovers around $40-45, while most Prosecco and Cava can be bought for one-third of that price. There’s a distinct difference in terms of style and quality, but (like lipstick) the cheaper stuff coats your lips just as well.

Even so, Champagne producers expect to be back to record growth by 2013, which gives us something to look forward to. During the period 1998-2007, worldwide sales of Champagne rose nearly 15%, and some producers were actually afraid that there would not be enough bubbly to supply the worldwide demand. Producers say they’ll make 315-320 million bottles this year, and expect to be up to 340 million bottles by 2013. Part of the rosy estimate is doubtless due to the booming Chinese market—particularly Hong Kong, where no lipstick is too expensive for everyday use.

The high end of the Champagne trade received a boost recently with the examination of some bottles which were nearly 200 years old. A total of 168 bottles were rescued from a shipwreck in the Baltic Sea near the Aland Islands, between Sweden and Finland. A few have been opened and tasted, and examination of the corks indicate that at least some of it is Veuve Clicquot (if so, the Champagne was bottled after 1805, when the widow Clicquot took control of the business). It was flat, of course, but an expert who was present detected notes of linden blossom, lime peel and chanterelles. Some will be auctioned off, and prices are expected to reach or exceed $70,000 per bottle. Now, that’s some expensive lipstick.


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