As leading players mark a recovery in demand, the growth trajectory of the sector is starting to get back on track
Indicating a turnaround from a slowdown in urban consumption and high food inflation in the previous financial year (FY25), the recovery in volume growth, particularly in urban markets, steady uptick in consumer sentiment buoyed by the recent policy rate cut, expectations of a favourable monsoon propelled the fast-moving consumer goods (FMCG) sector’s growth trajectory back on track in the first quarter of FY26 (Q1FY26).
While the major companies in the space, such as Dabur, Marico, Godrej Consumer, DS Group witnessed green shoots of revival after a relatively tough phase, AWL Agri Business (formerly Adani Wilmar) continued to face challenges due to a convergence of headwinds. While discretionary spending showed fluctuations during the quarter, food and other non-discretionary categories registered steady growth, supported by consistent demand. Staples, home care, and personal care continued to perform well.
Topline Growth Sets The Stage
Sharing their quarterly updates, the companies noted that they registered healthy growth on a year-on-year (YoY) basis. While Marico noted that its consolidated revenue growth on a YoY basis stood in the low twenties, Dabur’s consolidated revenue is expected to grow in low-single digits. DS Group said that it has seen double-digit growth across all its verticals, including the food and beverages (F&B) segment.
“We have had a healthy, steady double-digit growth across our verticals of mouth fresheners, food and beverage and dairy. Overall, Q1 performance has been in line with our expectations, supported by our innovations, strong brand equity, and deeper reach across rural, tier two, tier three markets and urban markets,” Rajiv Kumar, Vice Chairman, DS Group.
While noting that the volume growth has been strongly competitive and is sequentially improving, Godrej Consumer added that its standalone business is likely to deliver high-single-digit value growth on the back of mid-single-digit underlying volume growth. However, AWL Agri Business highlighted that the company reported a 4 per cent YoY decline in overall volumes in Q1, with the rice category being the key drag.
“Consolidated revenue growth on a year-on-year basis stood in the low twenties, marking a strong start towards delivering double-digit growth on a full-year basis, underpinned by the strengthening volume trajectory. We expect gradual improvement in the quarters ahead, supported by easing inflation, a favourable monsoon season and policy stimulus,” Marico stated in a regulatory filing.
Categories Aiding Growth
While Dabur’s Home and Personal Care (HPC) division is expected to perform well, driven by the oral, home and skin care categories, its beverage portfolio was impacted during the quarter due to unseasonal rains and a short summer. Marico reported that Saffola Oils posted a healthy performance with revenue growth in the high twenties, backed by mid-single-digit volume growth. The company noted that value added hair oils grew in low double digits, witnessing a considerable step-up in the pace of recovery on the back of sustained traction in the mid and premium segments of the portfolio.
“Home care business likely to deliver double-digit value growth and UVG. Personal care business is expected to grow value in low-single digit impacted by soaps. Standalone business excluding soaps is expected to deliver a very strong performance this quarter with double-digit UVG,” Godrej Consumer Products highlighted in a quarterly update.
At DS Group, F&B continued to lead its growth in Q1FY26, maintaining its position as the group’s fastest-growing vertical. AWL Agri Business added that edible oils volume declined by 2 per cent YoY due to continued pressure on palm oil sales. Excluding the G2G business, revenue from the food and FMCG segment declined by 2 per cent YoY, the company said.
Urban Uptick And New Channels Fuel Optimism
The brands are seeing encouraging growth numbers from urban markets and tier one and tier two cities also. Rural markets remain critical for overall industry stability, closely tied to factors like rainfall and agricultural output. DS Group said that the urban market has been a key growth driver for the company. Ecommerce and quick commerce continue to be a growing segment, especially within major cities, influencing both modern and traditional retail.
“India’s consumption story today is a balance of both Bharat and India. While urban retail is regaining pace, tier-two and tier-three cities are driving the next phase of growth. New malls and retail destinations are emerging in smaller towns, fuelled by a combination of rising aspirations, local entrepreneurship, and supportive national and state policies, highlighted Kumar Rajagopalan, Chief Executive Officer (CEO), Retailers Association of India (RAI).
AWL Agri Business noted that quick commerce sales maintained strong momentum, delivering over 75 per cent YoY growth in Q1. The company added that revenue from alternate channels, modern trade, ecommerce, quick commerce, and eB2B, surpassed Rs 3,900 crore over the last twelve months.
“In terms of channels, organised trade, including ecommerce, quick commerce and modern trade maintained their growth momentum. With the refreshed strategic vision and favourable macroeconomic conditions such as above-average monsoon, good agricultural output, easing inflation and consumption-focused government measures, we expect revenue growth to regain momentum and trend higher in the coming quarters,” Dabur noted in a quarterly update.
Key Concerns Still Persist
The FMCG sector continues to operate in a complex environment, with both opportunities and structural challenges coexisting. DS Group noted that Inflationary pressures, particularly on raw materials and packaging, remain a key concern. Marico said that among key inputs, copra prices continued to witness sequential inflation, which was heightened by unseasonal rainfall patterns. Godrej Consumer Products noted that its Indonesia business faced a significant increase in competitive pricing action across all major categories.
“Consumer demand trends remained broadly consistent with the previous quarter. Market volatility in crude edible oil prices, driven by reduced customs duties, global geopolitical events, and higher biodiesel mandate in the United States, led to trade destocking during the quarter,” AWL Agri Business noted in a quarterly update.
Rajagopalan added that retail continues to face headwinds from global uncertainties, including geopolitical conflicts. Domestic challenges include flatlining lower-middle-class consumption and intense competition across categories.
With a steady start to FY26, FMCG firms are looking at brighter prospects in the coming quarters. As urban consumption shows signs of a revival and rural consumption growth remains healthy, the FMCG sector is aiming to shoot big in FY26. While sentiment is cautiously optimistic, the sustained momentum will hinge on improved consumer demand, especially in entry-price segments, and stability in global input costs.
