FMCG Growth To Stay Strong In Q1 FY27 Despite Inflation, Driven By Premiumisation, Pricing Power: Report

New Delhi, Jun 30 (KNN) India's fast-moving consumer goods (FMCG) sector is expected to maintain healthy revenue growth in the first quarter of FY27 despite persistent inflationary pressures, supported by premiumisation, selective price hikes, and stronger performance in modern trade and quick commerce, according to a report by brokerage Anand Rathi.

The brokerage said sectoral growth remained resilient on the back of improved pricing power, favourable seasonal demand, product innovation, and GST rate cuts in select categories. It expects lower crude oil and crude-derivative prices to support margin improvement in the coming quarters, ANI reported.

Anand Rathi said it had interacted with multiple dealers, distributors, and experts across the consumer sector — spanning FMCG, paints, and alcoholic beverages — who pointed to healthy sectoral revenue growth in Q1 FY27.

Pricing-Led Growth to Continue

The report expects the double-digit revenue growth recorded over the past two quarters to sustain or improve through Q1 and the first half of FY27, with pricing actions offsetting pockets of demand weakness in general trade. While rural demand has moderated in some categories, urban consumption has remained relatively resilient.

Beverages, summer-centric products, premium offerings, and innovation-led portfolios continued to outperform, while food categories such as tea, biscuits, and confectionery saw some slowdown on a high base.

Inflation driven by higher crude-linked commodity costs has resulted in widespread price increases through maximum retail price (MRP) hikes and grammage reductions, prompting consumers to shift toward smaller packs and local brands — making growth largely pricing-led rather than volume-driven. 

The report noted that this trend is expected to persist until a meaningful volume recovery emerges, with rural recovery and monsoon progress remaining key factors to watch.

Shift Toward Alternate Distribution Channels

The report highlighted a continued structural shift in distribution, with quick commerce rapidly expanding its presence in urban markets and modern trade recording robust growth. General trade, however, is expected to remain the dominant channel given its extensive rural reach.

Paints and Alcoholic Beverages See Healthy Momentum

Beyond FMCG, the paints and alcoholic beverages segments also reported steady momentum. Paint demand remained resilient despite cumulative industry price hikes of around 15-16 per cent, supported by strong repainting demand and an extended summer season. In alcoholic beverages, premiumisation continued to drive value growth even as overall volumes stayed subdued.

Outlook

Anand Rathi said recent corrections in FMCG stocks had created attractive valuations and projected a revenue compound annual growth rate (CAGR) of around 10 per cent and earnings CAGR of nearly 14 per cent across its consumer coverage universe during FY26-28, adding that valuations of several FMCG players remained attractive given improved growth prospects for FY27.

(KNN Bureau)