FMCG Revenues Grew 12 Percent In June Quarter But Margins Hit Multi-Quarter Low
Fast-moving consumer goods (FMCG) companies in Chennai and across the country likely achieved a 12 percent aggregate revenue growth during the June quarter, driven by a combination of volume growth and price hikes. According to a report by the Systematix Group, this growth was supported by a 7 percent increase in volume demand alongside 5 percent price hikes or grammage cuts implemented to counter rising input costs.
The 12 percent topline growth acceleration represented an increase compared to the 7 percent growth recorded in the first quarter of financial year 2026 (Q1 FY26) and 11 percent in the fourth quarter of financial year 2026 (Q4 FY26). This growth was significantly driven by product price hikes or grammage cuts averaging 5 percent year-on-year, which companies introduced due to escalating input costs amid the West Asia conflict.
Pricing actions were most notable in edible oils, which saw high-single or low-double digit growth. Other product categories also experienced price increases, including noodles at 7 to 9 percent, biscuits and shampoos at 5 to 9 percent, detergents at 6 to 7 percent, soaps at 3 to 6 percent, toothpastes at 4 to 5 percent, dairy and salt at 4 to 5 percent, savoury snacks at 4 percent, and tea at 2 to 4 percent.
The June quarter was marked by sharp raw material cost inflation, particularly in crude-linked inputs which rose by 22 percent quarter-on-quarter. Packaging costs for high-density polyethylene (HDPE) spiked by 52 percent quarter-on-quarter, while palm oil prices increased by 10 percent quarter-on-quarter. On average, the overall raw material basket costs rose by 8 to 10 percent.
Despite maintaining a 7 percent volume growth that reflected strong pricing power and brand strength, the operating margins of these companies declined. Operating margins in the June quarter fell by 110 basis points quarter-on-quarter and 30 basis points year-on-year, reaching a multi-quarter low.
The drop in margins was caused by high raw material inflation that was not fully offset by pricing actions, high freight and logistics costs, and increased spending on brand-building, consumer promotions, distribution, and salesforce expansion. Looking forward, product pricing is expected to remain stable, with potential reversals of price hikes or grammage cuts during the festive and wedding seasons in the latter part of FY27 if input costs stabilize.
