For FMCG Inc., the holy grail of volume growth is in sight

Companies and analysts alike said that falling prices of wheat, maize, barley and oils will help expand volumes, in a change from the recent experience of pricier products driving revenue.

On 31 May, the government halved the basic customs duty on crude soybean oil, crude palm oil, and crude sunflower oil to 10%, eight months after raising it from nil to 20%. The move had prompted packaged goods makers to hike prices of items like soaps and biscuits to protect their margins. Crude palm oil and its derivatives are widely used across packaged foods, including cookies, cakes, chips, detergents, and soaps.

“The recent 10% point cut in import duties on crude and refined edible oils is expected to provide meaningful cost relief, particularly for palm oil. The correction in palm oil prices is likely to support margins for food and beverage, as well as home and personal care companies,” analysts at Equirus Securities said in a report dated 4 June.

Companies said that a stable input cost outlook and steadily declining inflation will help them focus on boosting volumes by investing in advertising and brand building.

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“Crude palm oil prices have softened, but some of our other raw materials are still relatively high,” said Sunil Agarwal, co-founder and chairman of Joy Personal Care (RSH Global), a maker of moisturizers, face wash, and sunscreen. “Overall, the cost environment looks stable for now, and we don’t expect major inflation in the near term—unless there are unexpected global changes. This stability allows us to shift focus from pricing to driving stronger volume growth in FY26,” Agarwal added.

At 3.16%, India’s retail inflation in April rose at its slowest pace in over six years on the back of lower food prices, potentially allowing the central bank to cut its key policy rate for a third successive time to stimulate consumption and spur economic growth. Respondents in a Mint poll of economists and treasury heads expect the Reserve Bank of India’s Monetary Policy Committee to reduce the repo rate by 25 basis points to 5.75% on Friday.

The country’s weather office has predicted plentiful monsoon rains, potentially leading to a bumper harvest and boosting rural incomes, supporting demand for an assortment of fast-moving consumer goods (FMCG).

Fewer price changes

Bikaner-based packaged foods company Bikaji Foods International Ltd, which went public in November 2022, anticipates “nominal” price increases this fiscal year.

Rishabh Jain, chief financial officer, Bikaji Foods International Ltd, said, “While wheat isn’t a major component of our input basket, the decline in palm oil prices will certainly contribute to improved margins. Overall, a favourable commodity environment should support better profitability this year.”

The company’s strategy will shift to driving volume growth as commodity prices stabilize, Jain added. “Our focus will be on achieving growth primarily through increased volumes rather than price-led expansion… The easing of commodity prices provides us with the flexibility to invest more in consumer promotions, which will translate into stronger volume growth,” he said.

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Palm oil accounts for 25-30% of raw material costs for the company.

Despite selective price hikes by most FMCG companies in recent quarters, these haven’t fully offset cost inflation in categories like dairy, beverages, and confectionery.

While the FMCG industry saw an 11% year-on-year value growth in the March quarter (driven by 4.45% volume and 5.6% price increases, as per NielsenIQ), high edible oil prices have kept staples expensive.

Consequently, gross margins came under pressure in the March quarter due to costlier inputs like palm oil, tea, coffee, and copra, Nuvama Institutional Equities analysts said.

Biscuit maker Parle Products said lower palm oil prices might lead to a halt in price increases during the latter part of FY26.

“We are expecting palm oil prices to come down by ₹13 to ₹14 (per kilo) in cost of palm oil. However, there’s some appreciation in the Malaysian ringgit as well. Net-net we will see ₹8—10 reduction in palm oil rates,” Mayank Shah, vice-president, Parle Products, said.

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India imports palm oil from Indonesia and Malaysia, the world’s largest and second-largest producers of the commodity, respectively. A stronger ringgit makes imports from the southeast Asian nation costlier.

If customs duty cuts were not announced, there would have been a round of price hikes towards the third or fourth quarter of the ongoing fiscal year, Shah added.

Parle’s volumes rose 3-3.5% in FY25, but the company expects them to grow 7-8% this fiscal year.

However, key inputs like cocoa, milk, and tea continue to face upward price pressures. Coffee prices, though off recent peaks, remain elevated on a year-on-year basis.

Prices of wheat, rice, maize, and barley have softened more recently, with wheat prices down 16% quarter-on-quarter, but up 3% year-on-year; rice prices are down by 1% quarter-on-quarter, and barley by 4% quarter-on-quarter, analysts at Equirus Securities noted. While milk prices remained stable through FY25, early signs of inflation emerged in the March quarter, driven by increased fodder costs and supply constraints.

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Prices of groundnut, soybean, and mustard oils have remained largely stable on a quarter-on-quarter basis. Brent crude prices have declined by 21% year-on-year, they said.

Edible oil prices

AWL Agri Business Ltd, which sells Fortune edible oils, said it is closely monitoring input costs and inventory cycles. The company was earlier called Adani Wilmar.

“Once the higher-duty stocks are consumed, we will suitably reduce prices in line with the new duty structure. As always, we remain committed to passing on any sustained benefits in costs to our consumers,” Angshu Mallick, chief executive officer and managing director, AWL Agri Business.

The edible oil market remains stable, supported by a strong domestic supply environment. The current mustard crop has been robust, with seed production estimated at 108–120 lakh tonnes and high oil content, contributing to overall supply comfort. These factors are expected to support bulk demand and B2B agri-sales in the near term, Mallick said.

“If lower prices sustain, we expect margins to start recovering from Q2FY26,” said analysts at Nuvama Institutional Equities.

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