FMCG Companies To See Volume Growth in December Quarter
The trade disruptions and destocking post the GST cuts eased in Q3 from Q2 levels, except for some companies like HUL, which saw the disruption continuing in October and partly in November
Chennai: FMCG companies are likely to report an uptick in volume growth for the December quarter both yearly and sequentially, while revenues would improve on a y-o-y basis along with sequential improvement in profit margins on GST rate cut and softening of raw material prices.
The volume growth could be 3.5 per cent in Q3 FY26 against 2 per cent in the same quarter last year and 3 per cent in Q2 FY26. The trade disruptions and destocking post the GST cuts eased in Q3 from Q2 levels, except for some companies like HUL, which saw the disruption continuing in October and partly in November.
Categories like biscuits, soaps, hair oils, noodles, coffee, chocolates and cakes and winter-specific skincare products, dry fruits, and honey are expected to have performed well. However, tea, edible oils, milk, dairy products, juices were likely impacted, finds Systematix. Paints too have seen volume growth due to post-monsoon resumption of paint jobs, and wedding season.
As a result, the FMCG companies likely delivered revenue growth close to 6.7 per cent against 5 per cent in the same quarter last year, but tad below 7 per cent in the previous quarter. Systematix expects better revenue growth from Marico at 26 per cent, Tata Consumer 12 per cent and Godrej Consumer 9 per cent.
Operating margins would likely improve by 30 bps on a sequential basis but remain flattish on a yearly basis. The price corrections in a number of categories have not kept pace with easing cost-inflation, supporting margins. Among the commodities and inputs that saw prices easing in the quarter included wheat prices softening by 10 per cent, copra easing by 6 per cent q-o-q and maize 14 per cent y-o-y. Milk and tea prices have corrected and the softening of crude prices have helped the input costs, finds Equirus Research.
Gradual easing in key cereals benefitted Britannia, Nestlé India, Mrs. Bectors Food Specialities, United Breweries, Tata Consumer Products, and ITC. Softer milk and SMP trends supported margin recovery for Nestlé India, Zydus Wellness, Britannia Industries, Tata Consumer Products, and HUL.
However, most companies continued to drive trade and consumer promotions, investments in brand-building, distribution and salesforce expansion. This restricted the margin gains for many companies.
With GST-related disruption phasing out, Systematix expects gradual q-o-q improvement in volume demand. Margins might improve in Q4 FY26 as costs continue to ease, the gap between realization and input-cost inflation narrows and operating leverage improves. However, brand and trade spends would sustain at high levels with elevated competitive intensity.
