Gradual recovery in urban demand and steady rural demand is expected to help the FMCG industry is expected to see revenue growth of 6-8 per cent in FY26, an improvement of 100-200 basis points (bps) over the modest revenue growth of 5-6 per cent seen in FY25, as per a report by CRISIL Ratings. The report noted that volume is also expected to rise 4-6 per cent in FY26.
About 2 per cent revenue uptick is expected from price hikes as FMCG companies are expected to partly pass on the impact of inflation in key categories such as soaps, biscuits, coffee, hair oil and tea. This is due to the elevated prices of key inputs such as palm oil, coffee, copra and wheat.
However, operating profitability is expected to stay flat but healthy at 20-21 per cent in FY26 after a 50-100 bps decline in FY25. All said, credit profiles of FMCG companies are expected to remain stable, the report noted.
The study is based on analysis of 82 FMCG companies, accounting for a third of the sector’s estimated ₹5.9-lakh crore revenue this fiscal.
Urban demand
Anuj Sethi, Senior Director, Crisil Ratings, said, “We expect a modest recovery in volume as moderating food inflation, easing interest rates and tax relief measures announced in the Budget for the next fiscal encourage urban demand. Rural demand will grow steadily given the continuing allocation to welfare schemes and a hike in minimum support prices.” Raw material costs, monsoon and utilisation of higher disposable incomes by households will remain key monitorables.
Urban segment contributes nearly 60 per cent of FMCG sector’s revenues and in terms of category nearly half of the sector’s revenues come from the food and beverage segment.
In FY25, high food inflation, elevated interest rates and sluggish wage growth impacted urban consumption across segments. Personal care and certain F&B sections demand was impacted more than other categories. Also, rural volume has recovered and outpaced urban in the past few quarters after another spell of adequate monsoon.
D2C brands
Traditional FMCG companies are seeing rising competition from regional and local companies as consumers have been downtrading to lower-priced brands. At the same time, rising popularity of digital channels has enabled D2C brands to ramp up their distribution.
“Traditional FMCG companies will continue to target acquisition of direct-to-consumer (D2C) brands, increase adoption of digital channels and introduce more lower price packs and products amidst rising competition to support volume growth, which has remained subdued over the past few fiscals,” the CRISIL Ratings report noted.
Aditya Jhaver, Director, Crisil Ratings, said, “Apart from seeking D2C brand acquisitions and increasing digital advertising to push premium products, traditional FMCG companies have introduced affordable packs and increased distribution reach across hinterland. With quick commerce now accounting for nearly 30 per cent of the e-commerce channel, companies have been introducing exclusive packs for such platforms. These measures are gradually enabling traditional FMCG companies to withstand competitive intensity.”
Despite the modest revenue growth, the credit profiles of FMCG companies in the Crisil Ratings portfolio remain stable, supported by their healthy cash generating ability, strong balance sheets and sizeable liquid surpluses.
