According to Anand Rathi report, despite inflationary pressure, revenue growth of the FMCG sector will be good in the first quarter of FY27. Premium products, selective price increase and better demand will support the sector. Despite softening of rural demand, urban consumption remains strong.
New Delhi, [भारत] June 30 (ANI): India’s fast-moving consumer goods (FMCG) sector is expected to maintain good revenue growth in Q1FY27 despite inflationary pressures, according to a report by Anand Rathi. This growth will be driven by increasing demand for premium products, selective price increases, strong performance of modern trade and quick commerce.
The brokerage said growth in the sector remains strong, with better pricing power, favorable seasonal demand, innovation and reduction in GST rates in select categories supporting consumption. It is also expected that lower prices of crude oil and crude derivatives will improve margins in the coming quarters.
Double digit growth expected in the sector
“We interacted with several dealers/distributors/experts from the consumer sector (FMCG/Paints/AlcoBev) who suggested healthy sectoral revenue growth in Q1/FY27,” the report said.
The report expects the double-digit revenue growth seen in the last two quarters to be sustained or improved during Q1 and H1FY27, with pricing actions offsetting demand weakness in the general business. It also said that while rural demand has declined in some categories, urban consumption remains relatively strong.
Growth is based on prices
Beverages, summer-focused products, premium offerings and innovation-based portfolios continued to outperform, while food categories such as tea, biscuits and confectionery witnessed some deceleration due to high base. According to the report, inflation has been driven by higher commodity costs linked to crude oil, resulting in widespread price increases through increased MRP and reduction in grammes.
This has led consumers to turn to smaller packs and local brands, making growth primarily value-driven rather than volume-driven. “Value-led growth is expected to continue until there is a meaningful recovery in volumes,” the report said, adding that rural recovery and progress of monsoon remain key monitorable factors for the sector.
Change in distribution channels
The report also highlights the continued structural shift towards alternative distribution channels. Quick Commerce is rapidly expanding its presence in urban markets, while Modern Trade continues to register strong growth. However, the report said general trade will remain the dominant distribution channel due to its wide rural reach.
Paints and alcobev sector also booming
Apart from FMCG, paints and alcoholic beverages also recorded healthy growth. Due to strong repainting demand and extended summer season, paint demand remained strong despite cumulative price increase of about 15-16 per cent in the industry. In alcoholic beverages, the shift toward premium continued to aid price growth, even as overall volumes remained down.
forward perspective
On the outlook, Anand Rathi believes the recent corrections in FMCG stocks have created attractive valuations and expects around 10 per cent revenue CAGR and around 14 per cent earnings CAGR in its consumer coverage universe during FY26-28.
“We believe many FMCG companies have attractive valuations given their strong growth prospects in FY27,” the report said. (ANI)
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