India's FMCG Sector Poised for Revenue Rebound Amidst Competitive Pressure

India's FMCG sector is expected to see a revenue growth of 6-8% in 2025-26, driven by rising volumes and partial inflation pass-throughs. Crisil Ratings highlights the competitive landscape as traditional companies face competition from digital channels and lower-priced brands, with operating profitability remaining stable.

India's fast-moving consumer goods (FMCG) sector is set for a revenue rebound, with projected growth of 6-8% in the fiscal year 2025-26, according to a recent report by Crisil Ratings. This represents a rise of 100 to 200 basis points compared to the expected 5-6% growth in 2024-25. The uptick is driven by anticipated volume growth of 4-6%, spurred by urban demand recovery and consistent rural consumption.

Traditional FMCG companies are focusing on acquiring direct-to-consumer (D2C) brands, boosting digital sales channels, and offering more budget-friendly products to spur volume growth amid heightened competition. Revenue is also expected to increase by 2% as companies partially transfer inflationary costs in key sectors such as soaps, biscuits, coffee, hair oil, and tea to consumers.

High input costs, including palm oil, coffee, copra, and wheat, are prompting pricing adjustments. Despite a 50-100 basis point drop in the fiscal year 2024-25, operating profitability is projected to stabilize at 20-21% for 2025-26. Crisil states that FMCG firms' credit profiles are likely to remain stable, based on their analysis of 82 companies representing one-third of sector revenue.