India's Consumer Staples Demand Set to Rebound in Q2 FY26
Despite a slow start in Q1 FY26 due to weak urban consumption, consumer staples demand in India is expected to recover in Q2. Factors such as improved monsoon outlook and economic conditions are anticipated to boost demand. Price hikes and raw material cost adjustments also play a key role.
- Country:
- India
In the first quarter of FY26, India witnessed weak demand for consumer staples, predominantly due to sluggish consumption in urban areas, according to a report by Motilal Oswal. Urban consumption remained low, while rural markets began showing signs of improvement.
Despite the early onset of the monsoon negatively impacting demand for summer-oriented products, home insecticides, and out-of-home categories, the report highlights a positive outlook for the second quarter. Authors noted no significant upswing in demand trends, similar to previous quarters.
While raw material prices showed a decline, benefits won't be immediate as many companies hold costly inventories of essential inputs like tea, wheat, and palm oil. Consequently, consumer staples firms will likely see gross margins contract by 170 basis points year-on-year, with EBITDA margins shrinking by 130 basis points. Aided by price hikes, revenue growth saw some support, although volume growth is expected to linger in the low- to mid-single digits.
Looking forward, demand is anticipated to recover gradually in the upcoming quarters, bolstered by a favorable monsoon outlook, income tax benefits, interest rate cuts, and improving economic conditions across both urban and rural markets. (ANI)
(With inputs from agencies.)
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