According to Lakme Lever managing director Anil Chopra, the company has decided to stay away from price increases this year so as to stave away an erosion in volumes, rendered likely by an industry slowdown.

The move is largely aimed at covering up margins, said analysts, who feel that the industry has been impacted by a slowdown. Given that the company is posting a higher than industry growth, analysts feel this will roughly translate into a minimum of 25 per cent growth in turnover this year.

Price increases undertaken last year were more or less in line with inflation. While the company is holding on to the price line in the skin-care range, prices of colour cosmetics increased in line with the general inflation of 8 per cent to 10 per cent.

The growth of the Rs 1,500-crorecosmetics and toiletries industry, which has been booming at around 30 per cent to 35 per cent for the last two-three years, has dropped to 20 per cent to 25 per cent this year. While the industry growth is still at a healthy 20 per cent to 25 per cent, consumer trend has shown that growth has come largely in the low-to-medium priced categories (Elle 18, for instance) and not in the premium categories like Orchid.

Lakme, being a leader in the colour-cosmetics industry, will to some extent dictate the price movement in these products at the retail end. Lakme, per se, has not been affected by the marginal slowdown in the growth levels, says Chopra.

The cosmetics and toiletries industry is not performing at the same heights as in the previous years. The industry's growth was triggered by the excise duty cuts from 120 per cent to as low as 30 per cent over a period of time. Big companies like Lakme passed down these benefits to the consumer which meant price reductions. This led to increase in sales withincreased affordablity.

Last year, however, in real terms excise duty rose owing to the change in valuation of levying excise on the maximum retail price (MRP). This led to price increases in various product categories which led to the marginal drop in demand.

"In relative terms there is a slowdown in the market. It has become more and more difficult for companies to maintain the kind of growth achieved in the previous years," admits Chopra.

A general slowdown has seeped into the cosmetics and toiletries industry and this can be seen from the fact that companies like Benckiser have closed down operations and cosmetics companies finding it difficult to sell premium products, industry analysts pointed out.

Lakme's product range comprises colour cosmetics, skin care and fragrances. While colour cosmetics and skin care contribute more or less equally to the company's turnover, this year the contribution from colour cosmetics is expected to be marginally higher, says Chopra.

The range is wide spread tocover all the price points from the affordable Elle range (priced at around Rs 30) and the medium-priced Ultra range (at around Rs 60) to the premium Orchid range of colour cosmetics priced in the range of Rs 120 to Rs 187. The skin-care range of moisturisers and sunscreen lotions has a rough price range of Rs 84 for 120ml and Rs 98 for 120ml.

Besides Lakme, which is a leader in colour cosmetics, another major player is Paramount Cosmetics with its Tips & Toes range of colour cosmetic products. Other players include Revlon, Oriflame and Avon.