Mumbai: After a lukewarm June quarter, India’s large consumer goods firms are betting on a broader demand revival, dismissing fears of a return to the ‘K-shaped’ consumption growth that was seen after the pandemic.
Carefully calibrated price hikes are seen helping fast-moving consumer goods (FMCG) sales volumes recover, while concerns over energy-linked cost spikes and the El Niño impact have eased, giving the companies greater confidence.
“Price increases have been well calibrated, so as not to impact volume growth significantly,” said Anuj Sethi, senior director at Crisil Ratings.
The sector’s optimism stems from hope around raw material prices stabilizing. “If the war ends tomorrow, then I think petroleum prices will come down, and therefore crude-linked inflation will come down, and we’ll be very confident on delivering a double-digit profitable growth in line with top line,” Dabur India Ltd global chief executive officer Mohit Malhotra said at the quarterly analyst call on 29 July.
The ongoing war in West Asia, a crucial energy supplying region as well as a key trade pathway, led to disruptions, disrupting fuel supplies and raising inflationary pressures across the economy.
In the June quarter, benchmark Brent crude oil contracts surged to a record $126.41 a barrel from the $72 level prior to the war amid fears over supply disruption due to the US-Iran war and the closure of the Strait of Hormuz. The price surge upended Indian companies’ cost math, as their estimates had pegged oil prices below $90. The price surge also pushed up the cost of crude-linked inputs, including packaging plastic material and linear alkylbenzene used in detergents, apart from transportation and logistics.
Even as the war continues, crude oil prices now appear stable at below $80 a barrel amid signals that the two sides are closer to truce.
“Crude prices are now much more stable than what they were a few weeks ago. It is now much more reasonable,” said Ajay Thakur, research analyst, FMCG, Anand Rathi Institutional Equities.
The other concern for the FMCG sector this year was deficient monsoon, triggered by the El Niño weather phenomenon—and this fear has also eased to an extent. The weather bureau had predicted El Niño intensification in the latter half of 2026 that would reduce rain intensity, hit farm output and, thus, rural consumer demand.
“Compared to June, the rainfall deficit has improved significantly as of the first week of August. Hence, concerns around rural demand are much lower than they were in June, when the monsoon was delayed,” Marico Ltd chief executive officer Saugata Gupta told Mint.
From an over 35% rain deficit at the end of June, the south-west monsoon season’s first month, the gap is now down to 13%, per latest official data.
On 28 July, Hindustan Unilever Ltd's (HUL) management also indicated that just 15% of the country depends on agriculture today, and as such, weak rainfall does not pose as much of a threat on demand as it was in the earlier days.
As for the likely recovery in the months ahead, the momentum is seen broad-based.
India’s recovery seen after the covid pandemic hit was described by many economists as ‘K-shaped,’ with the higher-income households driving premium demand, while the lower-income faced stagnant wages and financial pressure.
Now, even amid the war-triggered disruptions, which have led to volatile raw-material costs and rising broader inflation across the economy, companies and analysts argue that the country will not see another K-shaped recovery.