Currently, input cost pressures have intensified, with Brent crude rising nearly 70% year-on-year and 40% sequentially as of April 2026, driven by geopolitical disruptions. This has pushed up costs across crude-linked raw materials and created supply-side challenges. Companies have responded with calibrated price hikes in the mid- to high-single-digit range. While these increases may not fully offset inflation if crude sustains above USD 85 per barrel, they demonstrate the sector’s pricing agility and ability to protect profitability over time.
Encouragingly, the year began on a strong footing, with consumption trends improving sequentially in early 2026, supported by better macros, festive demand and relatively stable input costs. Although recent inflationary pressures may moderate this recovery, underlying demand resilience remains visible.
Past inflation cycles provide useful perspective. During 2011-2014, prolonged inflation led to industry consolidation, enabling larger players to gain share from smaller and unorganised competitors. Volume growth remained robust, and profitability expanded for several players despite cost pressures. Even in the more challenging 2022-2023 phase, marked by sharp inflation and rising competition from new-age brands, the sector demonstrated resilience, maintaining volume growth before witnessing a temporary slowdown.
In the current cycle, competitive intensity remains elevated, with innovation, premiumisation and digital-led marketing reshaping the landscape. This has shifted the focus from aggressive market share gains to disciplined share retention, while also encouraging product differentiation and portfolio premiumisation.
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From a policy standpoint, earlier GST reductions provided a temporary boost to consumption by lowering end prices. Although recent price hikes have offset part of this benefit, they underline the sector’s ability to balance demand and margin considerations.
Looking ahead, the trajectory will largely depend on crude price movements and the timing of pricing actions. If input costs stabilise or soften, companies could see a margin recovery, especially if they stagger price reductions. Meanwhile, recent stock corrections indicate that near-term headwinds are already reflected in valuations.Overall, despite short-term pressures, the FMCG sector remains structurally well positioned, supported by strong demand fundamentals, pricing power and an evolving competitive landscape that continues to reward scale and adaptability.
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Marico: Buy | Target Rs 900
Marico’s India business reported high single-digit volume growth in its Q4 business update, led by robust demand in Parachute, Value-Added Hair Oils and Saffola Oils, along with continued traction in foods and premium personal care.
This supported consolidated revenue growth in the low twenties YoY, in line with its full-year mid-twenties growth guidance. The international business sustained healthy momentum with high-teen constant currency growth.
However, the Gulf region remained an outlier due to ongoing geopolitical disruptions in the Middle East. Copra prices have corrected about 35% from peak levels, supporting sequential margin recovery. Marico expects double-digit operating profit growth in Q4 FY26, driven by steady volume growth and improving cost efficiencies.
Radico Khaitan: Buy | Target Rs 3,850
Karnataka’s new excise policy is likely to drive MRP reduction of 10-20% for the P&A (premium and above) portfolio, while lower-priced brands could see a price increase of around 10-15% due to slab rationalisation, further boosting premiumisation in the state.
Radico derives 8-10% of its volumes from the Karnataka market. Radico has seen a sharp shift towards P&A, with volumes rising from about 4 million cases in FY15 to about 17 million in FY26E, strengthening earnings. P&A now contributes about 70% of IMFL revenues, compared with about 48% in FY19, and is expected to rise further, driven by premiumisation and efficiencies.
Radico’s debt is declining steadily, supported by healthy free cash flow generation. Radico is currently trading at 56x/46x FY27E/FY28E P/E, with RoE/RoIC of 18%-20%. We believe that about 25% EPS CAGR over FY26-28E provides adequate support for sustaining rich valuations.
(The author is Siddhartha Khemka is Head of Research at Wealth Management, Motilal Oswal Financial Services)
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of The Economic Times.)