Mumbai: After a lukewarm June quarter, India’s large consumer goods firms are betting on a broader demand revival, dismissing fears of a return to the ‘K-shaped’ consumption growth that was seen after the pandemic.
Carefully calibrated price hikes are seen helping fast-moving consumer goods (FMCG) sales volumes recover, while concerns over energy-linked cost spikes and the El Niño impact have eased, giving the companies greater confidence.
“Price increases have been well calibrated, so as not to impact volume growth significantly,” said Anuj Sethi, senior director at Crisil Ratings.
Calmer times?
The sector’s optimism stems from hope around raw material prices stabilizing. “If the war ends tomorrow, then I think petroleum prices will come down, and therefore crude-linked inflation will come down, and we’ll be very confident on delivering a double-digit profitable growth in line with top line,” Dabur India Ltd global chief executive officer Mohit Malhotra said at the quarterly analyst call on 29 July.
The ongoing war in West Asia, a crucial energy supplying region as well as a key trade pathway, led to disruptions, disrupting fuel supplies and raising inflationary pressures across the economy.
In the June quarter, benchmark Brent crude oil contracts surged to a record $126.41 a barrel from the $72 level prior to the war amid fears over supply disruption due to the US-Iran war and the closure of the Strait of Hormuz. The price surge upended Indian companies’ cost math, as their estimates had pegged oil prices below $90. The price surge also pushed up the cost of crude-linked inputs, including packaging plastic material and linear alkylbenzene used in detergents, apart from transportation and logistics.
Even as the war continues, crude oil prices now appear stable at below $80 a barrel amid signals that the two sides are closer to truce.
“Crude prices are now much more stable than what they were a few weeks ago. It is now much more reasonable,” said Ajay Thakur, research analyst, FMCG, Anand Rathi Institutional Equities.
The other concern for the FMCG sector this year was deficient monsoon, triggered by the El Niño weather phenomenon—and this fear has also eased to an extent. The weather bureau had predicted El Niño intensification in the latter half of 2026 that would reduce rain intensity, hit farm output and, thus, rural consumer demand.
“Compared to June, the rainfall deficit has improved significantly as of the first week of August. Hence, concerns around rural demand are much lower than they were in June, when the monsoon was delayed,” Marico Ltd chief executive officer Saugata Gupta told Mint.
From an over 35% rain deficit at the end of June, the south-west monsoon season’s first month, the gap is now down to 13%, per latest official data.
On 28 July, Hindustan Unilever Ltd's (HUL) management also indicated that just 15% of the country depends on agriculture today, and as such, weak rainfall does not pose as much of a threat on demand as it was in the earlier days.
The shape debate
As for the likely recovery in the months ahead, the momentum is seen broad-based.
India’s recovery seen after the covid pandemic hit was described by many economists as ‘K-shaped,’ with the higher-income households driving premium demand, while the lower-income faced stagnant wages and financial pressure.
Now, even amid the war-triggered disruptions, which have led to volatile raw-material costs and rising broader inflation across the economy, companies and analysts argue that the country will not see another K-shaped recovery.
To begin with, it’s about the nature of price increases. Companies have leaned on passing on the cost burden for premium products.
“I want to correct that notion and say we continue to be competitive. It is very important, given our scale, for us to continue to be competitive at the mass end of the portfolio,” said HUL chief executive Priya Nair at the analyst call post results on 27 July, when asked about the likelihood of a K-shaped recovery. The top FMCG firm’s portfolio spans home care, beauty and personal care, and food items.
HUL took around a 5% increase in prices of select products during the reporting quarter. Other companies are following suit.
“There might be a bit of a time lag between when it (cost increase) hits us and when we pass it on. But I would say broadly, we would pass on the inflation and try to ensure that we maintain margins,” said Sunil D’Souza, chief executive officer of Tata Consumer Products Ltd, in an analyst meet on 24 July.
The FMCG sector is set to witness steady volumes in the coming quarters. “The volume trends are expected to continue to stay steady. The way the volumes are tracking, it is more broad-based than just being premium driven,” said Thakur of Anand Rathi.
Even as retail inflation is on the rise, having hit an 18-month high of 4.38% in June, industry experts said there are no broad signs of downtrading or consumers shifting to cheaper brands.
“We’re not seeing any broad-based evidence of downtrading happening, though it is possible in select categories such as edible oils, where the prices have risen sharply,” said Sethi of Crisil.
While some companies such as HUL and Dabur saw their volume growth decline from the Q4 FY26 level, experts see it picking up as rural demand will perk up closer to the upcoming festival season.
Earnings show
Various factors related to the war and beyond threw up varying results in the FMCG space.
Procter & Gamble Hygiene and Health Care, which sells products such as Whisper sanitary pads, reported a 34% decline in profit during the June quarter due to commodity cost rise amid the geopolitical uncertainties. On the other hand, Bajaj Consumer Care Ltd, which sells products such as almond oil, reported an 84% jump in profit, as its sachets and price point packs pushed up volumes, as is typically the case during times of economic uncertainty.
HUL’s revenue rose to a 13-quarter high of 10% to ₹17,341 crore during the June quarter, but consolidated profit fell 2% year-on-year to ₹2,680 crore. ITC Ltd’s consolidated net profit before exceptional items (after tax) fell 23.2% during the June quarter on higher tax on cigarettes, while Godrej Consumer Products Ltd reported an 11.5% rise in consolidated net profit to ₹504.52 crore, led by an exceptional growth in Africa. Marico’s net profit, on the other hand, rose 27% to ₹652 crore as price of its major raw material, copra, fell 45% from its peak during the quarter.