Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
4

Market Sizing Question (interview): Sales of Lipstick in the US

Estimate the total industry wide sales of lipstick in the U.S.

Estimate the total industry wide sales of lipstick in the U.S.

(edited)

4 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer

[Pop US] * [% Female] * [% use makeup] * [% use lipstick] * [# of lipsticks they own] * [1/avg lifetime before finished or stop using] * [$ per lipstick]

E.g.

300m people * 50% female * about 60% would use make up * 70% use lipstick * average of 3 lipsticks they own * 1/1 per year as last long * $10 = ~ 1.9B USD per year in sales for consumers.

We can then extrapolate and add in another ~10-20% to account for business use such as make up artists, perhaps males, etc. Giving us between 2-2.5B USD per year.

If too low, perhaps the price I set per piece is wrong, but something you can check with interviewer.

[Pop US] * [% Female] * [% use makeup] * [% use lipstick] * [# of lipsticks they own] * [1/avg lifetime before finished or stop using] * [$ per lipstick]

E.g.

300m people * 50% female * about 60% would use make up * 70% use lipstick * average of 3 lipsticks they own * 1/1 per year as last long * $10 = ~ 1.9B USD per year in sales for consumers.

We can then extrapolate and add in another ~10-20% to account for business use such as make up artists, perhaps males, etc. Giving us between 2-2.5B USD per year.

If too low, perhaps the price I set per piece is wrong, but something you can check with interviewer.

Hey, Thanks for sharing. I agree that we have to account for % that use makeup and the addition of another 10 to 20% in the end. However, don't you think that 3 lipsticks per woman is actually low and that if used continually it would take less than a year to finish a lipstick? — Sahil on Sep 22, 2017 (edited)

This is how I solved it.

Clarifying questions:

  1. Does industry wide sale of lipstick mean # units sold or $ value of the units sold?
  2. Are we interested in just the market size or the number of units sold annually?

( NO OF UNITS SOLD ANNUALLY IS PROBLEMATIC - will cover that later )

Data:

US population: 320 million

Average Life expectancy : 80 million

Approach:

I believe as per the question we are suppose to find the market size in terms of number of units sold. ( not annually; however I will mention the method to solve it annually )

  1. We split the entire female population into age groups.
  2. We assume an average number of lipsticks owned by the women in those age groups.
  3. Multiply that with the population present in the group and get the # lipsticks owned by the females in that group.
  4. We total the above to get the total market size.

Math:

No of woman in USA belonging to every age group = 320 million / ( 80 * 2) = 2 million woman in every age group.

Assuming that only women of the age 16 and above use make up we have a 130 million woman who use make up.

Age Average No of lipsticks / woman Group Population No of Lipsticks

16 to 25 10 2 million * 10 2 million*10*10

26 to 35 8 2 million * 10 2 million*10*6

36 to 60 6 2 million * 25 2 million*25*6

61 to 80 4 2 million * 20 2 millino*20*4

Total of the last Column = 820 million lipsticks.

Now if we were trying to find the annual number of lipsticks sold in the US then things get tricky.

If a person just uses one lipstick then the answer is simple :

Total market size / time it takes to finish the lipstick

However in reality women have multiple lipstick options and they dont constantly use one lipstick. Therefore, the time it takes to finish one lipstick increases significantly. Assuming that women apply the different color of lipsticks they own one after the other on different days , that every single women purchased her entire collection on the same day ( that is all lipsticks owned by a single women have the same starting point) , that all lipsticks are of the same size and that it takes roughly 3 months to finish one lipstick. We can estimate how long it would take one women to finish her entire collection.

Once we know that for each group we can then calculate the weighted average of the time taken. This way we will have just one timeline for the entire female population. Then we use

No of lipsticks sold per year =

Total market share / weighted average time taken to finish the lipstick.

NOTE: I am not sure of my final Solution. These are just my estimates.

If you find a mistake in my solution or would liek to further discuss the solutuion please do let me know.

This is how I solved it.

Clarifying questions:

  1. Does industry wide sale of lipstick mean # units sold or $ value of the units sold?
  2. Are we interested in just the market size or the number of units sold annually?

( NO OF UNITS SOLD ANNUALLY IS PROBLEMATIC - will cover that later )

Data:

US population: 320 million

Average Life expectancy : 80 million

Approach:

I believe as per the question we are suppose to find the market size in terms of number of units sold. ( not annually; however I will mention the method to solve it annually )

  1. We split the entire female population into age groups.
  2. We assume an average number of lipsticks owned by the women in those age groups.
  3. Multiply that with the population present in the group and get the # lipsticks owned by the females in that group.
  4. We total the above to get the total market size.

Math:

No of woman in USA belonging to every age group = 320 million / ( 80 * 2) = 2 million woman in every age group.

Assuming that only women of the age 16 and above use make up we have a 130 million woman who use make up.

Age Average No of lipsticks / woman Group Population No of Lipsticks

16 to 25 10 2 million * 10 2 million*10*10

26 to 35 8 2 million * 10 2 million*10*6

36 to 60 6 2 million * 25 2 million*25*6

61 to 80 4 2 million * 20 2 millino*20*4

Total of the last Column = 820 million lipsticks.

Now if we were trying to find the annual number of lipsticks sold in the US then things get tricky.

If a person just uses one lipstick then the answer is simple :

Total market size / time it takes to finish the lipstick

However in reality women have multiple lipstick options and they dont constantly use one lipstick. Therefore, the time it takes to finish one lipstick increases significantly. Assuming that women apply the different color of lipsticks they own one after the other on different days , that every single women purchased her entire collection on the same day ( that is all lipsticks owned by a single women have the same starting point) , that all lipsticks are of the same size and that it takes roughly 3 months to finish one lipstick. We can estimate how long it would take one women to finish her entire collection.

Once we know that for each group we can then calculate the weighted average of the time taken. This way we will have just one timeline for the entire female population. Then we use

No of lipsticks sold per year =

Total market share / weighted average time taken to finish the lipstick.

NOTE: I am not sure of my final Solution. These are just my estimates.

If you find a mistake in my solution or would liek to further discuss the solutuion please do let me know.

Structure:

1. How many people use lipsticks?

a) Women + Men

# of women = 320 M * 50% = 160 M

# of men = 320 M * 50% = 160 M

b) Women + Men who use lipsticks

160 M * 80% + 160 M * 10% = 144 M (here I assume 80% of US women and 10% of men use lipsticks)

2. How many lipsticks do these people buy?

I divide lipstick consumers into three tiers

a) 40% buy 3 lipsticks per year

b) 40% buy 2 lipsticks per year

c) 20% buy 1 lipstic per year

***alternatively, it is porbably also fine to just assume the average number of lipsticks bought per person per year (as a side note, people do not necessarily wait till one lipstick to use up to buy new ones so no need to consider this factor)

3. How much does one lipstick cost?

assume average cost per lipstick is $20 dollars

Therefore, the sale of lipsticks in the US per year equals

(144*40%*20*3) + (144*40%*20*2) + (144*20%*20*1) = ~ $ 6.38 B

Structure:

1. How many people use lipsticks?

a) Women + Men

# of women = 320 M * 50% = 160 M

# of men = 320 M * 50% = 160 M

b) Women + Men who use lipsticks

160 M * 80% + 160 M * 10% = 144 M (here I assume 80% of US women and 10% of men use lipsticks)

2. How many lipsticks do these people buy?

I divide lipstick consumers into three tiers

a) 40% buy 3 lipsticks per year

b) 40% buy 2 lipsticks per year

c) 20% buy 1 lipstic per year

***alternatively, it is porbably also fine to just assume the average number of lipsticks bought per person per year (as a side note, people do not necessarily wait till one lipstick to use up to buy new ones so no need to consider this factor)

3. How much does one lipstick cost?

assume average cost per lipstick is $20 dollars

Therefore, the sale of lipsticks in the US per year equals

(144*40%*20*3) + (144*40%*20*2) + (144*20%*20*1) = ~ $ 6.38 B

I really like this structure. Thanks for sharing — Kyra on Feb 24, 2019

Write down your own attempt as well and where you are stuck.

Write down your own attempt as well and where you are stuck.

Related case(s)

Oliver Wyman case: Full Electrons Ahead

Solved 99.7k times
Oliver Wyman case: Full Electrons Ahead Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise them on how to adjust the product offering.
4.6 5 6486
| Rating: (4.6 / 5.0)

Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise ... Open whole case

Bain Case: Old Winery

Solved 68.5k times
Bain Case: Old Winery You have inherited the “Old Winery” from your grandfather, a winery which has been family owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in the conventional way, i.e. they are not organically farmed and certified. The vine stocks are in a good condition regarding age and care. Overall, only ¼ of the harvest is made into wine by the winery itself; the rest is sold. Your grandfather never wanted to change the image of the winery and left the managerial and administrative task to a young and energetic wine-maker. Due to the not so well-known brand , the demand for the “Old Winery” wine is currently rather low. You do not intent to run the winery operatively, given your limited knowledge of wine making, but find the idea of owning a winery exciting. Your plan is to give the winery some fresh impetus.
4.4 5 1869
| Rating: (4.4 / 5.0)

You have inherited the “Old Winery” from your grandfather, a winery which has been family owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in the conventional way, i.e. ... Open whole case

Roland Berger Case: Onlinestar

Solved 48.4k times
Roland Berger Case: Onlinestar Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mainly imports goods from Chinese manufacturers but also operates its own production of cat lavatories (special business) in Eastern Europe. The company sells its goods via Amazon and ebay, and recently via an online shop on its website. Despite this development, the financial ratios have deteriorated in recent years. In particular, gross profit margin decreased significantly. Combined with a significant increase in shipping costs, this led to a negative result for the first time in the recently ended fiscal year and a resulting strained financial situation. Against the background of expected stagnating sales for the current financial year, short-term action is required. The board of Onlinestar asks you for an analysis of the reasons for the negative result as well as a derived recommendation for action. As a consultant, you should bring in your knowledge in online trading and develop solutions. In addition, the management board would like to receive a sales and gross profit plan from you for the current financial year.
4.3 5 1019
| Rating: (4.3 / 5.0)

Onlinestar, an online retailer of furniture and garden products (core business), has grown significantly in recent years as a result of an expansion of its product portfolio. The company mainly imports goods from Chinese manufacturers but also operates its own production of cat lavatories (special b ... Open whole case

Nutripremium

Solved 69.7k times
Nutripremium Nutripremium is a very well-known premium nutrition food company in Europe (€1 billion revenue last year). It is based in Spain and has an excellent market share not only in its home country but also in Portugal, France, Italy and Germany.  Nutripremium has two main lines of products: Vitamin-supplements for pregnant women Concentrated dehydrated aliments and vitamin pills for sick patients (with Diabetes or Cancer). The CEO of Nutripremium thinks that the market in Europe is starting to get saturated and wants you to analyze the Chinese market. What are the key areas you would explore to determine whether this is a good idea?
4.5 5 2244
| Rating: (4.5 / 5.0) |

Nutripremium is a very well-known premium nutrition food company in Europe (€1 billion revenue last year). It is based in Spain and has an excellent market share not only in its home country but also in Portugal, France, Italy and Germany. Nutripremium has two main lines of products: Vitamin-su ... Open whole case

Children vaccine

Solved 61.8k times
Children vaccine Beyer, one of the biggest pharmaceutical companies in the world, just invented a very reliable vaccine against Chickenpox, a disease that affects children in the age from 2 to 16 years. Beyer came to you wondering what their potential sales in Europe in the first year would be if they launched this product next year. They are only interested in the overall sales revenue as they already know that the vaccine can be sold for a profit. This is more meant to show them how big the volume they have to supply is and what the revenue would be.
4.4 5 2229
| Rating: (4.4 / 5.0) |

Beyer, one of the biggest pharmaceutical companies in the world, just invented a very reliable vaccine against Chickenpox, a disease that affects children in the age from 2 to 16 years. Beyer came to you wondering what their potential sales in Europe in the first year would be if they launched this ... Open whole case