FMCG Companies Focus on Volume-Driven Growth Amid Easing Inflation Boosting Margins in FY27

India’s top fast-moving consumer goods (FMCG) companies are optimistic about a shift towards volume-driven growth in the fiscal year 2027. As inflation eases and commodity prices soften, these firms anticipate a recovery in margins and consumer demand. Executives from major players report that the operating environment has improved, with mid- to high single-digit volume growth already observed in the December quarter. Key factors such as lower prices for essential raw materials and favorable macroeconomic conditions are expected to support this trend.

Improved Operating Environment

The FMCG sector has experienced several challenging quarters, but recent developments indicate a more favorable operating environment. Industry leaders note that key raw materials, including edible oils, wheat, and surfactants, have seen price reductions. This decline in costs, coupled with macroeconomic factors such as the rationalization of Goods and Services Tax (GST) and higher minimum support prices (MSPs), is anticipated to bolster consumption. Executives from companies like Dabur, Marico, and Hindustan Unilever Ltd (HUL) have expressed confidence that the upcoming fiscal year will be characterized by growth driven primarily by volume rather than price increases.

Dabur’s CEO, Mohit Malhotra, highlighted that while inflation had surged in the previous quarter, it is now beginning to stabilize. He noted that the softening of prices for coconut oil and vegetable oils will contribute to a more volume-driven growth strategy. Companies are also considering passing on some cost benefits to consumers through promotions and selective discounts, while remaining cautious about the lingering effects of previous price hikes.

Consumer Demand Trends

FMCG companies are witnessing a sequential improvement in urban demand, with rural markets showing even stronger growth momentum. Marico’s CEO, Saugata Gupta, emphasized the gradual recovery in consumption, attributing it to moderating inflation and improved affordability due to recent GST adjustments. He expressed optimism that these factors will create a favorable environment for demand growth in both urban and rural markets in the coming quarters.

Gupta also mentioned that the company aims to maintain volume growth even as pricing growth slows. As input cost pressures ease, Marico expects to see improvements in operating profit growth rates. The company has observed a significant correction in copra prices, which have dropped by 25-30% following a previous spike.

Positive Outlook from Major Players

Britannia Industries has also reported favorable trends in commodity prices, which are crucial for profitability. The company’s CEO, Rakshit Hargave, noted that wheat flour prices have remained stable, which is promising as the critical wheat season approaches. HUL’s management echoed similar sentiments, stating that the operating environment and underlying demand are showing steady improvement. CEO Priya Nair pointed to increasing consumer confidence, as reflected in the Reserve Bank of India’s consumer survey, indicating a recovery in sentiment and spending willingness.

Looking ahead, HUL anticipates that fiscal year 2027 will outperform the current fiscal year, with CFO Niranjan Gupta expressing confidence in a conducive operating environment for sustained consumption recovery.

Future Growth Prospects

Godrej Consumer Products Ltd (GCPL) is also optimistic about maintaining high single-digit revenue growth. CEO Sudhir Sitapati stated that the company’s India operations are expected to continue performing well while maintaining normative EBITDA margins. GCPL is also looking forward to double-digit revenue and profit growth in its international markets, despite facing temporary macroeconomic and pricing challenges in regions like Indonesia and Latin America.

Sitapati reassured stakeholders that, despite these pressures, the company is confident in its ability to sustain profitability momentum into fiscal year 2027. He emphasized that GCPL expects a robust exit trajectory for the current fiscal year, setting a positive tone for future growth.

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