FMCG Sales May Rise In Q2, But Soaring Input Costs Threaten Profit Margins
New Delhi: India's fast-moving consumer goods (FMCG) companies are expected to report healthy revenue growth in the September quarter of FY27. However, rising raw material costs and expensive packaging could squeeze operating margins despite improving consumer demand. Higher crude oil prices, inflation in key commodities and uneven rainfall have increased cost pressures, forcing companies to…
India's fast-moving consumer goods (FMCG) firms are projected to witness robust revenue growth in the second quarter of fiscal year 2027. However, soaring input costs and expensive packaging could dampen operating margins, despite a strengthening consumer demand. Factors contributing to increased costs include elevated crude oil prices, inflation in key commodities, and erratic rainfall patterns.
Brokerage firm ICICI Direct projects double-digit revenue growth for several major FMCG companies in Q2 FY27; yet, the operating profit growth may not keep pace. Higher crude oil and derivative prices are particularly likely to impact home and personal care companies. Inadequate rainfall could result in reduced agricultural output and weaken rural consumption.
Simultaneously, a rise in food inflation could affect urban demand, potentially squeezing profit margins during the remainder of FY27.
Dabur India anticipates double-digit revenue growth, driven primarily by its core businesses. However, inflation in home and personal care products and healthcare categories has taken a toll on operating margins. The company has managed to partly offset higher expenses through selective price increases and cost-saving measures. Marico, on the other hand, anticipates stronger gross margins, despite rising crude-linked derivative costs.
Dabur India has noted that copra prices are currently 35% below their peak levels, helping to maintain profitability through a favorable product mix. Godrej Consumer Products has also reported renewed inflation in crude derivatives, palm oil, and other essential raw materials. Despite these challenges, the company remains optimistic about another strong quarterly performance, buoyed by a favorable year-ago comparison.
Brokerage firm Nomura warns that several commodity prices remain above year-ago levels, despite some sequential moderation. FMCG growth accelerated to 15.1% in Q1 FY27. Anand Rathi Securities reports that higher crude oil, packaging materials, palm oil, and sugar prices could affect profitability in consumer businesses. Companies are responding with selective price hikes, improved procurement strategies, and tighter cost controls.
However, passing additional costs to consumers remains a challenge for companies seeking to protect festive demand and market share.
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