FMCG Companies To See Volume Growth in December Quarter

Chennai: FMCG companies are likely to report an increase in volume growth for the December quarter, both year-on-year and sequentially; Revenues, on the other hand, will increase on an annual basis with sequential improvement in profit margins due to reduction in GST rates and softening in raw material prices.

Volume growth could be 3.5 per cent in Q1FY26 compared to 2 per cent in the same quarter last year and 3 per cent in the second quarter of FY26. Trade disruptions and inventory meltdown following the GST cuts eased from second-quarter levels in the third quarter, except for some companies like HUL, which saw the disruption continue in October and partly into November.

Categories such as biscuits, soap, hair oils, noodles, coffee, chocolate and cakes and winter skin care products, dry fruits and honey are expected to perform well. However, tea, edible oils, milk, dairy products and juices were most likely affected, according to Systematix. Due to the resumption of painting works after the monsoon and the wedding season, an increase in the volume of dyes was also observed.

As a result, FMCG companies probably achieved revenue growth of close to 6.7 percent, compared to 5 percent in the same quarter last year, but in the previous quarter it was just under 7 percent. Systematix expects better revenue growth than Marico by 26 percent, Tata Consumer by 12 percent and Godrej Consumer by 9 percent.

Operating margins will likely increase by 30 basis points sequentially but remain flat on a yearly basis. Price adjustments in some categories have failed to keep pace with the decline in cost inflation and have supported margins. Among the commodities and inputs whose prices softened in this quarter were wheat, which softened by 10 percent compared to the previous year, copra and corn prices, which decreased by 6 percent compared to the previous quarter, and 14 percent. Equirus Research found that milk and tea prices have improved and a softening in crude oil prices has helped input costs.

Gradual relaxation in major cereals Britannia, Nestlé India, Mrs. It has benefited Bectors Food Specialties, United Breweries, Tata Consumer Products and ITC. Softer milk and SMP trends supported margin improvement for Nestlé India, Zydus Wellness, Britannia Industries, Tata Consumer Products and HUL.

However, most companies continued to expand trade and consumer promotions, brand-building investments, and distribution and sales force. This has restricted margin gains for many companies.

Systematix expects a gradual quarter-on-quarter improvement in volume demand as GST-related cuts phase out. Margins may improve in Q26 as costs continue to decline, the gap between realization and input cost inflation narrows, and operating leverage improves. However, brand and commercial spending will remain at high levels as competitive intensity increases.