Inflation can’t derail FMCG growth story

India’s FMCG growth remains pricing-led, with premiumisation and quick commerce offsetting inflation, while volume recovery depends on rural demand revival

India’s fast-moving consumer goods (FMCG) sector is expected to maintain steady growth in the first quarter of FY27 despite persistent inflationary pressures, supported by premium product demand, selective price hikes and the rapid expansion of modern retail channels, according to a report by Anand Rathi.

   The brokerage said revenue growth across the sector remains resilient, driven by improved pricing power, product innovation and stronger consumption in modern trade and quick commerce platforms. Seasonal demand, particularly for summer-focused products, has also supported sales momentum.   The double-digit revenue growth seen in the previous two quarters is likely to continue through Q1 and the first half of FY27. 

  Companies have increasingly relied on calibrated price increases and product mix improvements to offset inflation-led cost pressures. Inflation in crude-linked commodities has led to higher input costs, prompting many FMCG companies to raise maximum retail prices or reduce product grammage. This has pushed several consumers towards smaller pack sizes and cheaper local alternatives, making sector growth largely pricing-led rather than volume-driven.

  The report noted that meaningful volume recovery remains limited and may take longer to emerge. Rural demand has softened in certain categories, while urban consumption has remained comparatively stronger, especially in premium and convenience-driven segments.

  Beverages, summer-centric products and innovation-led premium offerings continued to outperform.  However, food segments such as tea, biscuits and confectionery witnessed slower growth due to a higher base and weaker discretionary spending. 

  A structural shift in distribution channels is also reshaping the sector. Quick commerce continues to gain market share in urban centres, while modern trade has maintained robust growth. 

However, general trade remains critical due to its deep penetration in rural India. Beyond FMCG, the report highlighted healthy momentum in paints and alcoholic beverages. 

   Paint demand stayed resilient despite cumulative price hikes of 15–16%, while premiumisation continued to support value growth in alcoholic beverages. Anand Rathi expects FMCG companies under its coverage to deliver nearly 10% revenue CAGR and around 14% earnings CAGR during FY26–FY28, aided by improving margins and attractive valuations after recent stock corrections.    —ANI