FMCG Growth Accelerates to 15.1% In Q1FY27, Anand Rathi Sees Better Margins & Attractive Valuations

Mumbai witnessed a significant acceleration in the growth of the fast-moving consumer goods (FMCG) sector during the first quarter of FY27, with an impressive 15.1 percent increase year-on-year, according to Anand Rathi Research. This marked an improvement from the 10.7 percent growth witnessed in Q4FY26. The paints segment experienced the most significant expansion, growing by 14.2 percent, an increase from the previous quarter's 7.6 percent.

The recovery in FMCG growth was driven by mid-to-high single-digit volume expansion and average price increases in the mid-single digits. Factors such as GST cuts, improving consumer sentiment, the popularity of premium products, and an expanded distribution network contributed to the sector's revival. Food, personal care, and home care products played a vital role in volume growth, indicating a strong demand recovery.

The second quarter of FY27 has continued the pattern of sequential improvement, suggesting that demand recovery is gaining momentum. Paints, quick-service restaurants (QSRs) demonstrated consistent performance throughout FY26. Paint demand was boosted by the extended summer season, while restaurants showed improved same-store sales growth due to a stronger dine-in business.

Paint companies anticipate double-digit value growth in FY27, driven by price hikes of 10-15 percent in decorative paints, increased volumes, and delayed festival demand. Established FMCG companies are also expected to gain market share.

To combat the rising costs of crude oil, palm oil, and freight, FMCG and paint companies gradually increased prices across product lines and pack sizes. Larger packs and premium products absorbed most of the increases, while companies protected smaller entry-level packs to ensure demand in rural and price-sensitive markets. In some cases, companies opted to reduce product quantities instead of raising prices. Additional staged price increases are likely in the coming quarter.

Despite these challenges, margins have remained steady or improved due to factors such as price hikes, cheaper inventory, better product mix, cost savings, and lower advertising expenses. Reliance Industries has unveiled a major expansion plan in FMCG, apparel, electronics, and exports. Anand Rathi expects the 16 covered companies under its watch to deliver nearly a 10 percent revenue CAGR and a 15 percent earnings CAGR over the FY26-FY28 period.

The research firm prefers Marico with a target price of Rs 990, GCPL at Rs 1,400, Mrs. Bectors Food at Rs 250, and Asian Paints at Rs 3,180.