FMCG Revenue to Rebound in Fiscal 2026: Crisil Ratings

New Delhi, Mar 19 (PTI) India's FMCG sector is expected to witness a mild revenue rebound of 100 to 200 basis points to 6-8 per cent in fiscal 2026 on the back of a gradual recovery in urban and steady rural demand, Crisil Ratings said on Wednesday.

In the ongoing 2024-25 fiscal, the sector is expected to have a modest 5-6 per cent revenue growth as volume rises 4-6 per cent, it said in a statement.

Another 2 per cent revenue uptick should come from realisations as FMCG companies partly pass on the impact of inflation in key categories such as soaps, biscuits, coffee, hair oil and tea, it added.

The pricing actions will be driven by elevated prices of key inputs such as palm oil -- a key input for all three segments - F&B, personal care and home care -- coffee, copra and wheat.

Operating profitability is expected to stay flat but healthy at 20-21 per cent in fiscal 2026, after a 50-100 bps decline in fiscal 2024-25, Crisil Ratings said, adding credit profiles of FMCG companies are expected to remain stable.

A study of 82 FMCG companies, accounting for a third of the sector's estimated Rs 5.9 lakh crore revenue this fiscal, indicates as much, it added.

The insights-driven analytics firm also noted that 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.

"We expect a modest recovery in volume as moderating food inflation, easing interest rates and tax relief measures announced in the Union Budget for the next fiscal encourage urban demand. Rural demand will grow steadily given continuing allocation to welfare schemes and a hike in minimum support prices," Crisil Ratings Senior Director Anuj Sethi said.

Apart from the macro factors, traditional FMCG companies have had to contend with rising competition. Regional and local companies have been gaining with consumers downtrading to lower-priced brands. Besides, rising preference for digital channels has opened distribution avenues on a much larger scale for D2C companies, Crisil Ratings noted.

It pointed out that the urban segment accounts for about 60 per cent of revenue and rural markets the rest. By category, food and beverages generate nearly half of the sector's revenue, and personal care and home care a quarter each.

High food inflation, elevated interest rates and sluggish wage growth impacted urban consumption across segments in fiscal 2025, with personal care and certain F&B sections taking a bigger hit, Crisil Ratings said.

Rural volume has recovered and outpaced urban in the past few quarters after another spell of adequate monsoon.

Going ahead, input price, monsoon and utilisation of higher disposable incomes by households will bear watching, it added.