The Invisible Hand That Protects Profits | Quick ₹eads

by Karnivesh | 8 January 2026

The $30 Pair of Glasses Worth $300

A pair of glasses costs $30 to manufacture. It retails for $300. That's a 1000% markup.​​

How is this possible? Because Luxottica controls 80% of the global eyewear market. They own Ray-Ban, Oakley, LensCrafters, Sunglass Hut, and a dozen other brands that look like competitors but aren't.​​

When you walk into LensCrafters, you think you're choosing between Ray-Ban, Oakley, and Versace. Actually, you're choosing between three Luxottica products. The company controls what's in the store, what's displayed, and what the price is. Consumers have no choice. Luxottica is a price maker, not a price taker.​​

This is pricing power the ability to raise prices without losing customers. And it's the single most valuable trait a business can have.

What Is Pricing Power?

Pricing Power = The ability to raise prices without losing a proportional amount of volume.

A company with pricing power can raise prices 10% and lose only 2% of customers. The net profit impact is positive (8% more revenue from 98% of customers).

A company without pricing power raises prices 10% and loses 15% of customers. Profit declines.

Here's how it manifests:​

Nestlé India wants to raise coffee prices by 10% to offset 75% commodity inflation. The company can do it because coffee drinkers are loyal to Nescafé. They'll pay more. Nestlé has pricing power.​

Asian Paints tried to raise prices by 1.2% in Q2 FY25 to offset rising raw material costs. Market share collapsed. Competitor Grasim gained 5% market share in one year with aggressive pricing. Asian Paints lost pricing power.​

Luxottica raised eyewear prices by 15% last year. Customers still bought because there are no alternatives. Luxottica has extreme pricing power.​​

The Pricing Power Spectrum: From Monopolies That Charge 1000% Markups to Commodities That Can't Raise Prices 

The difference isn't product quality. It's brand dominance, switching costs, or lack of alternatives.

The Nestlé Story: When Brand Creates Pricing Power

Nestlé India has built pricing power across its portfolio through brand trust and category dominance.​

Consider Nescafé instant coffee. Nestlé has sold Nescafé for 50 years in India. Grandmothers grew up drinking it. Mothers serve it. Kids associate it with family mornings.​

When Nestlé raises Nescafé prices by 10%, what do coffee drinkers do? Switch to local brands like Café Coffee Day or regional brands? Most don't. The brand loyalty is too deep. Nestlé keeps 92-95% of customers while raising revenue 10%.​

This is brand-based pricing power. Consumers are willing to pay a premium because they believe Nescafé is superior (or at least familiar).​

Nestlé is leveraging this further through premiumization—launching Nespresso cafes in India, premium coffee pods, and niche products. Premium products have 30-40% price premiums while maintaining healthy volumes.​

insight: "Nestlé's pricing power comes from 50 years of building a moat. You can't reverse-engineer it in one year."​

The Asian Paints Collapse: When Pricing Power Erodes

Asian Paints is the cautionary tale. For 30+ years, the company had untouchable pricing power.​

Asian Paints' advantage was simple: Distribution + Brand + Emotional Connection.

The company had 167,000+ retail points across India the widest network in the industry. Customers bought Asian Paints because it was everywhere and "trusted."​

Emotional marketing was brilliant. Ads showed families painting dream homes, weddings, festivals. Buying Asian Paints wasn't just paint. It was buying emotion aspirations, memories, belonging.​

With this moat, Asian Paints commanded 20-30% price premiums over local brands. Operating margins hit 18%+.​

Then Grasim entered. In one year, Grasim captured 5% market share using aggressive pricing. JSW Paints and Haisha Paints followed.​

Suddenly, Asian Paints' pricing power evaporated. The company raised prices only 1.2% in Q2 FY25 far below cost inflation. Why? Because raising prices further would trigger mass volume loss to competitors.​

The Result:​

• Market share fell from 42% to 40.5% in one quarter​

• Gross margins compressed by 280 basis points​

• Premium product sales fell 8% while cheaper products grew 15%​

• Operating margins dropped from 18% to 12%​

Pricing power doesn't stay forever. When competition arrives with better offers, pricing power dies fast.​

The Luxottica Monopoly: When Vertical Integration Creates Unbreakable Pricing Power

Luxottica is the extreme case of pricing power.

The company doesn't just make eyewear. It controls the entire supply chain:​​

Manufacturing: Luxottica makes Ray-Ban, Oakley, Persol frames​​

Lenses: Merged with Essilor (lens manufacturer) to control both​​

Distribution: Owns LensCrafters, Sunglass Hut, Oliver Peoples, Pearle Vision​​

Licensing: Holds exclusive rights to produce Chanel, Versace, Prada eyewear​​

Result: When you walk into an optician, 80% of frames on display are Luxottica. You think you're choosing from 20 brands. You're actually choosing from different Luxottica products.​​

The Pricing Power Play:

• Costs to produce: ~$30

• Retail price: $300

• Markup: 1000%​

Competitors like Warby Parker (direct-to-consumer) tried to disrupt with lower prices ($95 frames). But Warby Parker can't scale as fast because it lacks Luxottica's manufacturing scale and retail network.​

Operating margins at Luxottica? 17% among the highest in any industry. Not because they're more efficient. Because they can charge whatever they want.​​

The consultant's view: "Luxottica's pricing power isn't from better product. It's from owning the entire ecosystem. Competitors can't break through."​

How to Identify Pricing Power: The Signals

Signal #1: Can the Company Raise Prices Without Losing Volume?

Test: Look at price increases year-over-year. Did prices rise faster than inflation?

• Nestlé: Raised prices 3-5% annually while inflation averaged 6-7%. Yet volumes held steady. Pricing power = Strong.​

• Asian Paints: Raised prices only 1.2% when costs rose 8-10%. Volume still fell. Pricing power = Eroding.​

• Luxottica: Raised prices 10-15% annually. Volumes unchanged. Pricing power = Extreme.​

Signal #2: Operating Margins vs. Competitors

Test: Compare operating margins to industry peers.

• Nestlé: 22%+ operating margins. Competitors (ITC, HUL): 16-18%. Margin gap = Pricing power.​

• Asian Paints: Now 12% margins. Competitors (Grasim): 10-12%. Gap closing = Pricing power eroding.​

• Luxottica: 17% margins in a 5-7% margin industry. Huge gap = Exceptional pricing power.​

Signal #3: Brand Value and Customer Loyalty

Test: Would customers switch if price rose 20%?

• Luxury eyewear (Luxottica brands): Customers won't switch. They're buying status.​​

• Nescafé coffee: Long-term customers won't switch.​

• Generic paint: Customers WILL switch immediately.​

Signal #4: Vertical Integration and Control

Test: Does the company control the supply chain or just one node?

• Luxottica: Controls manufacturing, lenses, retail, licensing. Pricing power = Extreme.​​

• Nestlé: Controls brand and distribution. Pricing power = High.​

• Asian Paints: Controls brand and distribution. But competitors can now distribute separately. Pricing power = Deteriorating.​

Signal #5: Substitutes Available

Test: How easy is it for customers to switch?

• Eyeglasses: Difficult (specific prescription, brand familiarity). Pricing power = High.​​

• Coffee: Easy (many brands available). Pricing power = Medium (mitigated by brand).​

• Paint: Very easy (all paints look similar). Pricing power = Low (unless strong brand).​

The Pricing Power Scorecard

When evaluating a company, ask:

1. Have prices risen faster than inflation without volume loss? If yes, pricing power exists.​

2. Are operating margins expanding or contracting? Expanding = pricing power strengthening. Contracting = pricing power eroding.​

3. Do customers actively choose this brand or passively accept it? Active choice = pricing power. Passive acceptance = commodity risk.​

4. Are new competitors emerging with lower-priced alternatives? Emerging = pricing power at risk. Like Grasim vs. Asian Paints.​

5. Can the company afford to lose 30% of customers and still be profitable? If yes, it has real pricing power. If no, prices are already at a limit.​

The Final Truth

Pricing power is the moat. Not market share, not scale, not technology. Companies with pricing power like Luxottica, Nestlé, and (formerly) Asian Paints can:

• Raise prices without losing customers

• Maintain high margins even during cost inflation

• Fund innovation and growth from internal cash flow

• Dominate competitors indefinitely

Companies without pricing power compete on price. They discount to win volume. Margins compress. Innovation suffers. They eventually die.​

The investor's job is identifying which companies still have pricing power and which lost it. Asian Paints lost it in 2024-2025 when Grasim entered. Nestlé still has it because brand loyalty runs deep. Luxottica will keep it for decades because no competitor can replicate 80% market control.​​

That's where the money is in companies you can raise prices on, year after year, without losing customers.