Companies observed that supply chains focused on liquidating higher-priced inventory, which had adjusted following GST rate cuts on many FMCG products.
In its pre-quarterly update, Dabur India said: “During the quarter, early signs of demand recovery were witnessed, aided by GST rate revisions. In October, distributors and retailers focused on liquidating existing higher-priced inventory in the channel. After trade stabilisation, consumer sentiment improved in both urban and rural areas. Rural demand continued to outperform urban demand this quarter as well.”
Marico noted steady demand trends during the quarter. “We remain optimistic about gradual improvement in consumption in the quarters ahead, supported by easing inflation, lower GST rates driving affordability, minimum support price hikes, and a healthy crop-sowing season,” the maker of Parachute coconut oil said.
Nomura, in its pre-quarterly report, described Q3 as a story of two halves. The first half (October to mid-November) continued to see the effects of the GST-led transition, as dealers and retailers still held old-price stock.
“However, we believe restocking after mid-November improved sales, with some contribution from lower-priced stock entering the market after GST cuts. We expect the full impact of lower product prices on demand to be seen from the fourth quarter,” the report added.
Brokerage firm Emkay also highlighted that while the festival season arrived early, the quarter saw disruption from the GST transition in trade. “Given fast inventory turns for food, growth accelerated over October–November, with retailers restocking inventory. However, home and personal care categories experienced gradual disruption and limited restocking. Overall, full restocking of inventory seems unlikely, as the trade channel views this as an opportunity to improve return on investment,” the firm said.
Dabur India further said that it expects its consolidated revenue to grow in the mid-single digits, with operating profit and profit after tax expanding ahead of revenue.
“Favourable macroeconomic conditions and recent tax reforms are expected to support sustained recovery in demand and an improvement in the revenue trajectory in the coming quarters,” it added.
Brokerages also anticipate that lower winter temperatures will bolster demand for seasonal products. “We expect Q3FY26 consumer staples sales to grow 7.8 per cent year-on-year (Y-o-Y), above the eight-quarter average of 6.1 per cent Y-o-Y.” Nomura said.
The brokerage expects rural demand to continue improving. On urban demand, it added, “Income-tax cuts in the 2025 Budget, lower interest rates, and labour reforms aimed at improving income/savings are expected to support urban consumption.”
Regarding volume growth, Nomura said that while sequential improvement is expected — after the second quarter (July–September/Q2) was more adversely impacted than anticipated — the recovery will likely remain partial. Companies that execute effectively are expected to see stronger volume growth, while others will continue to face challenges from the GST transition.
Emkay noted moderate margin expansion for the quarter. “Ebitda margins for our FMCG universe are expected to see moderate expansion in Q3FY26E. We believe Britannia Industries, Marico, and Godrej Consumer Products will register low-to-mid-teens earnings growth, while Honasa, Bikaji, and Gopal Snacks could see profits rise 2x Y-o-Y.”
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