Volume growth still eludes FMCG cos - The New Indian Express

The second quarter was a mixed bag for Indian FMCG companies as far as volume growth is concerned. The quarterly results of large FMCG players show that most of them witnessed muted volume growth and faced operational disruption in Q2FY26, as the industry grappled with the transition to a new, simplified GST regime. Some companies, though, have seen healthy volume growth in some pockets of their product portfolio.

While the landmark tax cuts are expected to boost long-term consumption, their immediate effects were not in favour of the industry.

Hindustan Unilever Ltd (HUL) reported a flat Underlying Volume Growth (UVG) for the quarter, with its CEO, Priya Nair, citing ‘transitory business disruption’ from the GST changes as a key factor. Dabur India reported a modest 2% volume growth in its India FMCG business, acknowledging that ‘trade witnessed temporary disruptions post GST reforms announcement.’ Godrej Consumer Products Q2 net sales grew 4.3% YoY, led by 4% value and 3% underlying volume growth in the India business.

ITC Limited's FMCG segment (excluding notebooks) sustained an 8% revenue growth, but noted that ‘excessive rains and transition to the new GST regime posed operational challenges causing short-term business disruptions’. Its cigarette segment, however, reported volume-led growth.

However, Nestlé India bucked the trend with strong double-digit volume-led growth in categories like confectionery and beverages, partially offsetting softness in milk products.

During the quarter, the government slashed GST rates on a wide range of everyday consumables, moving a significant portion of the FMCG portfolio from 12-18% tax slabs to a uniform 5%.

Dabur stated that 66% of its India portfolio benefited from the rate reduction. ITC confirmed that over 50% of its FMCG portfolio saw lower GST rates. HUL transitioned approximately 40% of its portfolio to the new 5% rate.

All companies emphasised that they have proactively passed on the full benefit of the tax cuts to consumers. However, the process of re-pricing thousands of SKUs, communicating changes to a vast trade network, and managing trade de-stocking and re-stocking led to significant one-time disruption.

Despite the quarterly slowdown, the industry's leadership is unanimously optimistic about the future.

HUL's management stated that GST-related disruptions are expected to continue into October, with ‘normal trading conditions anticipated early November onwards.’ They expect the second half of FY26 to be better than the first. Dabur echoed this sentiment, stating the GST reforms are "lighter on the pocket, brighter for the future," and are likely to boost consumption going forward.