FMCG industry looks for better margins in 2026

Expecting 2026 to be a ‘favourable year’, with policy tailwinds as tax reliefs and GST reforms, along with benign commodities, the Indian FMCG industry looks for a high single-digit volume growth, improvement in margins and comeback of the urban demand, which is a vector of growth. Benign inflation will help expand gross margins, enabling companies to invest more in advertising, the lifeblood of FMCG (Fast-Moving Consumer Goods).

However, the companies also need to rethink their media strategies, as traditional media is losing relevance amid evolving consumer habits and preferences, driven by where, how, and how much time different age groups spend on media. FMCG companies are also expected to invest in new technologies — from automation and analytics to AI-driven demand forecasting, supply chain optimisation, and personalised consumer engagement and same-day and 10 – 30 minute Quick-Commerce deliveries are expected to be the critical pillar for 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 and MD Harsha Vardhan Agarwal told PTI. The trend of premiumisation is expected to continue, but more selectively, with consumers continuing to prioritise quality, indulgence and wellness, and categories offering differentiated benefits expected to outperform.

“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,” he said. He expects a “gradual recovery” in both rural and urban markets, 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,” said Agarwal. Dabur India CEO Mohit Malhotra said the Indian FMCG landscape is transforming.

The growing affluence in India, rural demand, the rich demographic dividend, and technological advancements will be the four major drivers reshaping consumption in the FMCG space in the years to come. India’s young demographic, characterised by Millennials and Gen Z, has a significant impact on

consumption patterns, favouring 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,” he said. Godrej Consumer Products MD and CEO Sudhir Sitapati is concerned about the slow volume growth of the FMCG sector, which has been “puzzling” him for the last 4-5 years.

“It’s been lower than what it should be. FMCG volume growth has been 4-5 per cent, while GDP has been 7-8 per cent. So that’s been a puzzle,” he said. One puzzle is that consumption growth in India has been lagging GDP growth. Rural has been leading urban for a few quarters now.

 

 

“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, Sitapati expects the demand outlook to be good on the back of both GST and income tax reduction.

Marico MD & CEO Saugata Gupta said the year 2025 was a “year of decisive transformation for the consumer goods sector” in which income tax and GST reduction happened, and more crucially, inflation in FMCG was benign. “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,” he said.

Anand Ramanathan, Partner & Consumer Industry Leader, Deloitte India, said e-Com penetration will deepen, with more consumers from smaller towns and rural areas 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, a FMCG company that owns brands such as Catch, Pulse, Pass Pass, and Ksheer brands, has crossed the `10,000 crore turnover milestone and also 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,” said its Vice Chairman Rajiv Kumar.

Naveen Malpani, Partner and Consumer & Retail Industry Leader, Grant Thornton Bharat said: “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.”