FMCG Sector Eyes Volume-Driven Expansion in FY27 Amid Cooling Inflation
India's premier fast-moving consumer goods (FMCG) companies are projecting a significant transition towards volume-led growth in the fiscal year 2027. This strategic shift comes as easing inflation and declining commodity prices alleviate cost pressures, paving the way for enhanced margin recovery across the industry.
Favorable Operating Environment Spurs Optimism
Industry leaders have noted a marked improvement in the operating landscape following several turbulent quarters. Major FMCG players have already reported mid- to high single-digit volume growth in the December quarter, signaling a positive trend. Key raw materials, including edible oils, wheat, copra, and surfactants, have softened in price. Additionally, macroeconomic factors such as GST rationalization, higher minimum support prices (MSPs), and a robust crop season are expected to bolster consumption recovery.
Most companies implemented measured price increases earlier in the fiscal year. Now, they foresee demand expansion being primarily fueled by volumes rather than pricing gains. Some firms have indicated plans to pass on a portion of the input cost benefits to consumers through promotional offers, increased grammage, or selective discounts, while remaining vigilant about the lingering effects of previous price hikes.
Margin Improvement and Consumer Sentiment Strengthen
Prominent companies like Dabur, Marico, Britannia, Hindustan Unilever Ltd (HUL), and Godrej Consumer Products Ltd (GCPL) anticipate improvements in EBITDA margins as inflation subsides and consumer confidence rises. Dabur India CEO Mohit Malhotra emphasized this shift, stating, "Inflation is ebbing a bit. Coconut oil prices are softening, SLES prices are softening, and vegetable oil prices are also softening. So, the next year growth is going to be more volume-driven growth and not so much price-driven or value-driven growth." He added that earlier price increases will continue to have some impact as they roll over into upcoming quarters.
Urban and Rural Demand Dynamics
FMCG firms have reported sequential enhancements in urban demand, with rural markets consistently outperforming and exhibiting faster growth momentum. Marico MD & CEO Saugata Gupta highlighted a "gradual recovery in consumption, supported by moderating inflation, improved affordability following the recent GST rate rationalisation, higher MSPs, and a healthy crop sowing season." He expressed confidence that these factors will foster demand improvement across both urban and rural segments in the coming quarters.
Gupta further noted that Marico aims to sustain volume growth even as pricing growth moderates, expecting operating profit growth to improve as input cost pressures ease. "With input cost easing and margin pressure subsiding, we expect progressive improvement in operating profit growth rates over the coming quarters," he said, mentioning a 25–30 percent correction in copra prices after an abnormal rise.
Commodity Stability and Profitability Outlook
Britannia Industries MD & CEO Rakshit Hargave pointed to favorable commodity trends that support profitability. "Commodity prices have been stable for us. Wheat flour, which is very important, actually came down marginally in Q3 '26. Based on this, we will see how it behaves going ahead, but at the moment, it looks to be stable," he explained.
HUL CEO & MD Priya Nair remarked that the operating environment and underlying demand are showing "steady improvement." She cited consistent enhancements in consumer confidence, as per RBI surveys, indicating a recovery in sentiment and willingness to spend. HUL CFO Niranjan Gupta projected that FY27 will outperform the current fiscal year, expecting the operating environment to remain conducive for sustained consumption recovery.
Confidence in Sustained Growth Trajectories
Godrej Consumer Products Ltd MD & CEO Sudhir Sitapati expressed confidence in maintaining high single-digit consolidated revenue growth. "Our India business is expected to deliver continued growth performance while holding normative EBITDA margins in the coming quarter," he stated. Despite temporary macroeconomic and pricing pressures in Indonesia and Latin America, GCPL anticipates its GAUM (Godrej Africa, USA and Middle East) business to achieve double-digit revenue and profit growth.
Sitapati added, "At a consolidated level, while temporarily macroeconomic and pricing pressure in Indonesia and Latam may have moderated the full year EBITDA growth, we remain confident of a robust exit trajectory and sustain profitability momentum into FY'27." He expects this positive trajectory to persist through Q4 FY26.
