FMCG Revenues Likely Grew By 12 Pc in June Quarter

Chennai: FMCG companies likely delivered around 12 per cent aggregate revenue growth in the June quarter on product price hike and grammage cuts taken due to sharp escalation in input costs amid the West Asia crisis. Volume demand also grew by 7 per cent, finds Systematix Group.

The 12 per cent topline growth acceleration comes against 7 per cent growth in Q1 FY26 and 11 per cent in Q4 FY26. This has been meaningfully driven by product price hikes or grammage cuts aggregating to 5% y-o-y taken by companies on the back of a sharp escalation in input costs amid the West Asia conflict. Pricing actions were more salient in edible oils with high-single or low-double digit growth, noodles 7-9%, savoury snacks 4%, soaps 3-6%, detergents 6-7%, toothpastes 4-5%, biscuits, shampoos 5-9%, tea 2-4%, salt, dairy 4-5%.

Most of the quarter was characterised by sharp raw material cost inflation especially in crude-linked inputs-22 per cent QoQ, packaging (HDPE - 52% QoQ), and palm oil 10 per cent QoQ. Raw material basket costs also increased by 8-10 per cent on average.

Despite this, volume growth remained at 7 per cent and this reflects significant pricing power and brand strength for frontline companies.

However, margins were lower both yearly and sequentially. Operating margins in the June quarter likely declined by 110bps QoQ and 30bps YoY to a multi-quarter low.

Margins were impacted by high raw material cost-inflation not fully covered by pricing, elevated cost-inflation in freight and logistics, and companies reinvesting in brand-building, consumer promotions, distribution and salesforce expansions.

Going ahead, current product pricing to remain largely stable with no further significant hikes. The latter part of FY27 could see price hikes/ grammage cuts also getting reversed during the festive and wedding seasons if input costs stabilize at lower levels.