FMCG companies face Q2 margin squeeze as rising crude oil, palm oil and packaging costs threaten profits
FMCG companies face a Q2 margin squeeze: Rising crude oil, palm oil and packaging costs threaten profits d The Economic Times
Source: The Economic Times · October 11, 2026 at 5:02 AM · AI-assisted report
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INDIA, 11 OCTOBER 2026 —
Fast‑moving consumer goods (FMCG) companies in India are likely to see operating margins squeezed in the September quarter as soaring crude‑oil‑derived packaging costs, higher palm‑oil and sugar prices and weaker monsoon rains add to input‑price inflation, a brokerage report said on Wednesday.
Market Impact
The margin pressure comes despite expectations that revenue growth will remain in double‑digit territory for most leading FMCG players, according to ICICI Direct. The brokerage warned that earnings‑before‑interest‑taxes‑depreciation‑and‑amortisation (EBITDA) margins for home‑care and personal‑care firms under its coverage will grow more slowly than sales because of the spike in commodity prices.
Higher crude‑oil and derivative prices have lifted the cost of packaging materials, while persistent inflation in a range of commodities and a deficit in rainfall have heightened cost pressures across the sector. ICICI Direct said the combined effect of “higher crude and crude‑derivative prices, coupled with increases in other key input costs” will impact EBITDA margins of most home‑care and personal‑care companies.
The brokerage added that the same forces are expected to dent margins in the second half of FY27.
Revenue growth, however, is projected to stay robust. The report expects “double‑digit” sales expansion for several FMCG firms in Q2FY27, but cautioned that operating profit growth could lag as companies absorb part of the cost inflation. It also noted that reduced rainfall in most parts of India could curb farm output, leading to a moderation in rural demand, while a further spike in food inflation might affect urban demand in the quarters ahead.
Company statements reflected the mixed outlook. Dabur India, in its quarterly business update, said inflationary pressures remained elevated, particularly in health‑care, personal‑care (HPC) and over‑the‑counter (OTC) and ethical segments. Dabur added that operating margins were “impacted by inflationary pressures during the quarter; partly offset by calibrated price increases and ongoing cost‑saving initiatives.”
Marico, the maker of Parachute coconut oil and Saffola, projected a stronger margin performance. The company reported that crude‑linked derivative prices rose further during the quarter, while copra prices stayed about 35 % below their peak levels. Marico said it expects “strong acceleration in gross margin on a year‑on‑year basis led by favourable portfolio mix and tailwind from copra prices.”
Godrej Consumer Products Ltd (GCPL) echoed the theme of intensified input‑cost pressures. The firm said that while some commodities showed signs of moderation toward the end of Q1 FY27, Q2 saw renewed inflation across several raw‑material baskets, including crude‑linked derivatives, palm oils and other commodity inputs.
Despite the challenges, GCPL expects to deliver “another strong quarter in Q2 FY27” even as consumption is affected by uneven monsoon conditions linked to an intensifying El‑Niño and broader inflationary pressures.
A Nomura report corroborated the view that raw‑material prices remained above year‑ago levels in September, despite some sequential softening. Nomura warned that higher crude and high‑density polyethylene (HDPE) prices could raise packaging costs, while elevated palm‑oil and sugar prices may weigh on select consumer businesses.
FMCG firms have been responding with calibrated price hikes, adjustments to product mix, procurement efficiencies and other cost‑control measures. The extent to which higher costs can be passed on to consumers, especially during the festive season when firms aim to sustain consumption momentum, remains a key consideration for the sector.
Related: ICICI Direct · India