Key Points
Urban market to drive 60% of FMCG revenue
Digital channels and D2C brands expanding
Price increases expected in key product categories
Sector's operating profitability stable at 20-21%
According to Crisil Ratings, this increase will be driven by a 4-6 per cent rise in sales volume, supported by a gradual recovery in urban demand and steady rural consumption.
"We expect recovery in volume as moderating food inflation, easing interest rates and tax relief measures announced in the Union Budget for next fiscal encourage urban demand," said Anuj Sethi, Senior Director, Crisil Ratings.
Traditional FMCG companies are focusing on expanding their reach through digital channels and acquiring direct-to-consumer (D2C) brands.
Apart from volume growth, an additional 2 per cent boost in revenue is expected from price increases. FMCG companies are likely to pass on the impact of inflation in key product categories such as soaps, biscuits, coffee, hair oil, and tea.
The price hikes will be influenced by high input costs of essential raw materials like palm oil, coffee, copra, and wheat, the report said.
According to the Crisil, the sector's operating profitability is expected to remain stable at 20-21 per cent in FY26.
However, it may see a slight decline of 50-100 basis points in FY25. Still, the financial position of FMCG companies remains strong, thanks to their ability to generate cash, maintain robust balance sheets, and hold significant liquid reserves.
A study by Crisil Ratings covering 82 FMCG companies, which together account for about a third of the sector's estimated Rs 5.9 lakh crore revenue in the current fiscal year, highlights these trends.
The urban market contributes nearly 60 per cent of total revenue, while rural areas make up the rest. Food and beverages form nearly half of the FMCG sector's revenue, with personal care and home care segments each contributing about a quarter.
In FY25, urban consumption was affected by high food inflation, rising interest rates, and slow wage growth.
This particularly impacted the personal care and food and beverage segments. However, rural demand has remained resilient, benefiting from favourable monsoon conditions in recent months.
