FMCG sector can hope for revenue revival as urban demand returns: Crisil

India’s fast-moving consumer goods (FMCG) sector should see revenue rebound in financial year (FY) 2026 aided by a gradual recovery in urban demand and steady rural demand, according to a report by credit-rating agency Crisil.

 

The report says the FMCG sector should see revenue rebound by 100 to 200 basis points (bps) to 6–8 per cent in FY26 up from an expected 5–6 per cent in FY25 as volume rises 4–6 per cent.

 

“Traditional FMCG companies will continue to target the acquisition of direct-to-consumer (D2C) brands, increase adoption of digital channels, and introduce more lower-price packs and products amid rising competition to support volume growth, which has remained subdued over the past few financial years,” the report said.

   

The rating agency added that another 2 per cent revenue uptick should come from FMCG companies partly passing on the impact of inflation in key categories such as soaps, biscuits, coffee, hair oil, and tea.

 

Pricing actions will be driven by elevated prices of key inputs such as palm oil for all three FMCG segments—food and beverage (F&B), personal care, and home care as well as coffee, copra, and wheat.

 

Crisil expects operating profitability to stay flat but healthy at 20–21 per cent in FY26, after a 50–100 bps decline in FY25, and the agency expects the credit profiles of FMCG companies to remain stable.

 

A Crisil Ratings study of 82 FMCG companies, accounting for a third of the sector’s estimated Rs 5.9 trillion revenue this financial year, indicates as much.

 

The urban segment currently accounts for 60 per cent of revenue, with rural markets making up the rest. By category, F&B generates nearly half the sector’s revenue, while personal and home care contribute a quarter each.

 

“We expect a modest recovery in volume as moderating food inflation, easing interest rates, and tax relief measures announced in the Union Budget for the next financial year encourage urban demand,” Anuj Sethi, senior director at Crisil Ratings, said in the report.

 

Sethi added that rural demand will grow steadily given continued allocation to welfare schemes and a hike in minimum support prices.

 

The last few years have seen FMCG companies battle rising competition, with regional and local companies gaining traction as consumers downtrade to lower-priced brands, driven by macroeconomic factors. Additionally, the rising preference for digital channels has opened up distribution on a much larger scale for D2C companies.

 

“On their part, traditional FMCG companies have been taking steps to push growth. Apart from seeking D2C brand acquisitions and increasing digital advertising to promote premium products, they have introduced affordable packs and expanded distribution reach across the hinterland,” said Aditya Jhaver, director at Crisil Ratings.

 

Jhaver added that with quick commerce now accounting for nearly 30 per cent of the ecommerce channel, companies are introducing exclusive packs for such platforms to withstand competitive intensity.

 

Despite modest revenue growth, credit profiles of FMCG companies in the Crisil Ratings portfolio remain stable, supported by their healthy cash-generating ability, strong balance sheets, and sizeable liquid surpluses, the agency said.

 

It expects input costs, monsoon patterns, and the use of higher disposable incomes by households to be key factors to watch.