What a great story when you need to teach about beta and the CAPM! Lindsay Whipp reports on the ups and downs of the $50bn market for male grooming [1]. What caught my attention was the following paragraph:
The slowdown in growth for male grooming products is partly explained by lacklustre economic growth, analysts say. Unlike women, who count beauty products as essential items, for many men, particularly those with families, male grooming items —with the exception of razors— more easily drop off the shopping list when money gets tight. Brazil, a top male grooming products market, had been a particularly bright spot, having enjoyed a 16 per cent CAGR increase in the five years to 2015. But as the nation’s economy struggles in a deep recession, growth in 2016 is estimated at 4.6 per cent to $6.79bn.
Remember Prof. Damodaran's 'determinants of beta': "... the degree to which a product's purchase is discretionary should affect the beta of the firm manufacturing the product. Thus, the betas of discount retailers such as Wal-Mart, should be lower than the betas of high-end specialty retailers, such as Tiffany's, because consumers can defer the purchase of the latter's products during bad economic times" [2].
[1] Lindsay Whipp: "Made-up men reflect changing face of male grooming", Financial Times, 6 February 2017.
[2] Aswath Damodaran. Applied Corporate Finance, Fourth Edition. John Wiley & Sons, 2017, p. 117.
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