Why You May Be Seeing More Cheap Beer At Your Summer BBQs

Quick: what's the connection between cheap beer and expensive lipstick? Inflation! (Per Forbes). 

When prices are high and money is tight, most people –- not surprisingly –- start cutting back on expenses. There are many ways of doing this, but one of the most common is to avoid buying costly luxury goods, getting rid of all the expensive extras. Seems pretty obvious. The surprise is that when families are cutting back on their budgets (including their overextended food budgets) many women — who are often responsible for the majority of household expenses (via Market Watch) – tend to spend a bit more on cosmetic items (via Forbes). People don't want to stop eating well, but they try to save everywhere they can for the most part. Scrimping and saving takes a psychological toll, however. 

The theory is that an expensive lipstick is still pretty cheap in the scheme of things and so buying lipstick takes the place of purchasing something bigger and pricier items (like a new article of clothing). This type of buying is considered big indicator of the nation's economic mood, to the extent that an increase in lipstick sales is considered a clear sign of a recession (via The Business Professor). The takeaway is clear: when lipstick is selling like hotcakes, the economy is definitely not.

When it comes to other goods that don't provide the same psychological boost associated with cosmetics, most consumers elect to either cut back or trade down. This is especially true when it comes to items relatively fixed in consumption rates, and accounts for the relatively slow consumer response to behavioral changes due to fluctuating in gas prices. For example, people often cut back on other things before they buy less gas (See NACS Magazine and US News). 

Apparently, for many Americans, beer and cigarettes are two items with pretty fixed consumption rates. Because instead of choosing to scale back and drink fewer pricy beers or smoke fewer high-end cigarettes, most people are deciding to trade down, and buy cheap beer and cigarettes (though there does seem to be some decline in consumption, per Couche-tard). Retailers across the country are seeing increased sales in less expensive brands of alcoholic beverages and nicotine (per Couche-tard and LinkedIn). As the price index increased by 9.1 %, prices of Milwaukee's Best, Busch Light and Icehouse went up 5.4 in the month of June, while Montego and Maverick cigarettes were also on the uptick (per LinkedIn). 

When life is hard, and prices are high, it looks like all we need is some expensive lipstick and cold, cheap beer.  And maybe a little fried chicken.