Indian FMCG industry expects margin improvement and volume recovery in 2026

New Delhi: The Indian fast-moving consumer goods (FMCG) sector expects 2026 to be a more favourable year, supported by policy tailwinds such as income tax relief and GST reforms, along with benign commodity prices. Industry executives anticipate high single-digit volume growth, improvement in margins and a gradual revival in urban demand, which is seen as an important growth driver.

Lower inflation is expected to support gross margin expansion, allowing companies to increase investments in advertising, widely regarded as a core growth lever for FMCG brands.

At the same time, companies are reassessing their media strategies, as traditional platforms continue to lose relevance amid changing consumer behaviour across age groups, influenced by shifts in content consumption, formats and time spent on media.

FMCG firms are also expected to increase investments in new technologies, including automation, analytics and AI-led demand forecasting, alongside supply chain optimisation, personalised consumer engagement and rapid delivery formats. Same-day and 10–30 minute quick-commerce deliveries are increasingly being viewed as central to omnichannel growth strategies.

“Digital-first, personalised, and performance-led platforms have gained prominence, while traditional mass media has gradually lost relevance and efficiency. This has required FMCG companies to rethink media mix, content formats, and engagement strategies to stay relevant and effective,” Emami Vice Chairman & MD Harsha Vardhan Agarwal said, as per the NewsDrum report.

Premiumisation is expected to continue, though in a more selective manner, with consumers prioritising quality, indulgence and wellness. Categories offering differentiated benefits are likely to perform better.

“For the broader FMCG industry, 2026 is shaping up to be a more favourable year, supported by easing inflation, benign commodity trends, tax relief measures, higher government capex, and a more accommodative monetary stance. These factors collectively strengthen the outlook for consumption,” Agarwal said.

He expects a “gradual recovery” in both rural and urban markets, along with continued premiumisation and further share gains for organised retail, e-commerce, D2C and quick-commerce channels.

“For our company, we enter 2026 with optimism and a clear growth agenda. We anticipate recovery in the second half of FY26 (October 2025 to March 2026), setting the stage for double-digit growth in FY27,” he added.

Dabur India CEO Mohit Malhotra said the Indian FMCG landscape is undergoing a transformation, driven by rising affluence, rural demand, favourable demographics and technological advancements.

India’s young population, particularly Millennials and Gen Z, continues to influence consumption patterns, with a preference for experiential purchases and lifestyle-oriented spending, he said.

“With rising incomes and a growing middle class, there is an increasing demand for premium and high-quality products, particularly in urban India. Consumers are willing to pay a premium for products that offer better quality, unique features, or enhanced experiences. This trend is more visible in the online space,” Malhotra said.

Godrej Consumer Products MD & CEO Sudhir Sitapati flagged concerns over the sector’s relatively slow volume growth over the past few years.

“It’s been lower than what it should be. FMCG volume growth has been 4–5%, while GDP has been 7–8%. So that’s been a puzzle,” he said.

Sitapati noted that consumption growth has lagged GDP growth, with rural markets outperforming urban centres in recent quarters.

“Urban has been a bit slow, but I am hoping now with this GST 2.0, a lot of the benefits of GST 2.0 will actually come into urban areas more than rural. Because categories like foods… are all urban consuming categories,” he said.

However, he expects the demand outlook to improve on the back of GST changes and income tax reductions.

Marico MD & CEO Saugata Gupta described 2025 as a “year of decisive transformation for the consumer goods sector”, marked by income tax and GST reductions, along with benign FMCG inflation.

“It marked a phase of steady growth for the Indian FMCG sector, driven by improving demand conditions, easing inflation, and a recovering consumer base. Rural consumption made a strong comeback, along with the premiumisation trend in urban markets,” he said.

“Looking ahead, we remain confident in the growth outlook. Demand fundamentals remain strong, rural recovery is gaining momentum, and new-age consumption is being shaped by digital adoption, accessibility, premiumisation and supportive policy measures are expected to further boost consumption,” Gupta added.

Anand Ramanathan, Partner and Consumer Industry Leader at Deloitte India, said e-commerce penetration is expected to deepen further, with consumers in smaller towns and rural areas increasingly shopping online.

“Quick commerce and social commerce will continue to disrupt traditional models, and omnichannel maturity will enable unified experiences and flexible fulfilment options,” he said.

DS Group, which owns brands such as Catch, Pulse, Pass Pass and Ksheer, has crossed the Rs 10,000 crore turnover mark and expects a “healthy margin outlook and robust revenue growth” in 2026.

“This acceleration will be supported by recovering urban demand and resilient rural consumption. While higher disposable incomes will benefit urban areas and tier 2 and tier 3 markets, the sector faces persistent headwinds from competition posed by regional and D2C brands, monsoon risks and structural e-commerce shifts,” Vice Chairman Rajiv Kumar said.

Naveen Malpani, Partner and Consumer & Retail Industry Leader at Grant Thornton Bharat, said investment activity in 2026 is likely to remain selective but positive.

“Looking ahead to 2026, we expect investment activity to remain selective but positive, with capital likely to flow toward premium, wellness, home solutions and fast-moving discretionary categories, as well as into supply-chain technologies and Q-commerce-linked infrastructure,” he said.