Early rainfall spoils FMCG's summer run, register mild Q1 recovery

Early monsoon dampened Q1 FY26 demand for summer-linked FMCG goods but modest volume growth and raw material easing could support a broader recovery from Q2

Fast-moving consumer goods (FMCG) companies are expected to see some revival in volume growth on a sequential basis, while price-led growth may remain limited in the April–June quarter (Q1) of 2025–26 (FY26). The quarter, which typically sees an uptick in sales of summer-related products, was impacted by the early onset of the monsoon, brokerages observed.

 

“We expect the summer portfolio across companies to be impacted due to the early monsoon. Categories such as juice, soft drinks, water, ice cream, and cooling hair oil may be most affected, as we expect these to see a year-on-year decline in sales,” Nomura said in its preview report on the sector.

 

Rural recovery continued to gain pace during the quarter, while urban demand, which has been a pain point for companies over the past few quarters, remained weak but stable.

 

On volume growth, Nomura said it expects a marginal improvement, with sales growth in several companies now likely to be volume-led rather than price-led.

 

“Improvement in volume growth is expected in Britannia Industries, Marico, Hindustan Unilever (HUL), and Asian Paints, while other companies are likely to remain largely stable,” the brokerage said.

 

Emkay also said in its report that volume growth is likely to be similar to that seen in January–March, with select players seeing moderate improvement and others facing volume pressure.

 

It also noted that the demand slump continued in Q1FY26, with weak seasonality impacting growth recovery. “FMCG companies are maintaining healthy consumer promotions to pass on raw material benefits,” it said. 

 

Nuvama Institutional Equities, in its report on summer products, said: “Summer categories are likely to report weaker performance (especially in May) compared to initial expectations. The India business of Varun Beverages, Emami, Dabur (fruit juice and glucose), Tata Consumer (ready-to-drink), and United Breweries may be adversely impacted.”

 

The brokerage also said, “Products sold through kirana stores and quick commerce platforms, such as soft drinks and ready-to-eat snacks, are facing sluggish sales due to reduced footfall and impulse buying.”

 

It added that ice cream sales declined by up to 10 per cent, particularly in the southern and western regions of India.

 

Food companies are expected to benefit from the cooling of raw material prices, as palm oil import duty was reduced from 20 per cent to 10 per cent.

 

On competitive intensity, Nomura said that it remained moderate, as companies are still recovering from margin pressure caused by previously high raw material prices.

 

“While softening raw material prices could invite competition from unorganised players, we believe this is still a few quarters away. Companies with strong brands, pricing power, and a higher salience of premium portfolios should be relatively less impacted in that scenario,” it said in its preview report.

 

Nomura also expects gross and operating margins to remain under pressure in Q1, as companies will likely be consuming high-priced raw material inventory.

 

It added that the recent moderation in raw material prices will bring relief to consumer companies only from the July–September quarter (Q2) onwards.

 

“A double-digit quarter-on-quarter moderation has been seen in crude oil, palm oil, wheat, and coffee, which will support gross profit margin recovery from Q2FY26 onwards, with Britannia Industries, Nestlé India, Godrej Consumer Products, and HUL expected to be key beneficiaries,” it said.

 

Emkay also noted in its report that margin pressure is expected to continue in Q1FY26. On promotional intensity in Q1, Emkay said FMCG companies had sustained promotional activity, using it selectively to pass on raw material benefits. 

Rs Crore	Net Sales			Change %		EBITDA			Change %		PAT			Change %
	Q1FY25	Q4FY25	Q1FY26E	QoQ	YoY	Q1FY25	Q4FY25	Q1FY26E	QoQ	YoY	Q1FY25	Q4FY25	Q1FY26E	QoQ	YoY
Hindustan Unilever	15,523	15,446	16,072	4.1	3.5	3,792	3,619	3,620	0.0	-4.5	2,644	2,561	2,613	2.1	-1.1
ITC	18,340	18,565	18,306	-1.4	-0.2	6,748	6,519	6,603	1.3	-2.2	5,092	5,075	5,098	0.5	0.1
Varun Beverages	7,197	5,680	7,828	37.8	8.8	2,064	1,264	2,159	70.8	4.6	1,304	726	1,342	84.8	3.0
Nestle India	4,793	5,448	5,063	-7.1	5.6	1,114	1,389	1,162	-16.3	4.3	747	885	753	-14.9	0.9
Britannia Industries	4,130	4,376	4,646	6.2	12.5	754	805	798	-0.9	5.9	523	560	562	0.4	7.5
Godrej Consumer Products	3,311	3,578	3,592	0.4	8.5	726	759	721	-5.1	-0.8	451	412	505	22.6	12.1
Tata Consumer Products	4,352	4,608	4,851	5.3	11.5	667	621	609	-1.9	-8.8	302	481	382	-20.6	26.5
United Spirits	2,352	2,946	2,792	-5.2	18.7	458	675	482	-28.6	5.2	299	451	325	-27.8	8.8
Marico	2,643	2,730	3,044	11.5	15.2	626	458	591	29.1	-5.5	474	343	486	41.6