FMCG sector poised for strong growth in FY27: Abneesh Roy

Abneesh Roy, a noted market strategist from Nuvama Institutional Equities, told ET Now, “Yes, the gradual recovery will continue. In Q3, paint companies saw around 8% volume growth for the market leader Asian Paints, after a weak October month. In Q4, we expect Asian Paints to deliver almost 10% volume growth.”

Roy highlighted the broader urban-rural dynamics driving FMCG growth. “Rural continues to grow faster than urban for most companies. Urban demand has come back strongly, and Nestle is a very good barometer for that. Nestle will continue with strong double-digit sales growth led by volume growth in the next three quarters.”

Large FMCG companies are also actively seeking market share expansion. “Asian Paints has clearly highlighted that they will go for market share gain in the next one to two years. Britannia’s new CEO has laid out plans for acquisitions and market share expansion. HUL has said its hair care market share is at an all-time high,” Roy said.

From a macro perspective, Roy expects FY27 to be a strong year for FMCG, aided by GST rate cuts, controlled inflation, and stable raw material costs. “We also expect 1% to 2% price hikes for most FMCG companies in FY27,” he added.

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Margin Divergence Across Companies
The sector has seen a divergence in margins, with companies like HUL strategically lowering profitability to drive growth. “HUL’s margins have come off a bit in the past few quarters, but that was a stated strategic objective. They said they will lower margins by 100 bps to focus on volume and market share. With the ice cream business out of the base, EBITDA margins should shift toward 22.5%–23.5%,” Roy explained.
He also pointed out that operating leverage and scale will support margin expansion. “1% to 2% pricing growth and volume growth recovering for most FMCG companies should help expand EBITDA margin. Advertising spends will go up, but that’s positive because it drives demand creation,” Roy noted.
Demand Recovery and M&A Activity
Despite GST-driven incentives, some FMCG players have struggled to see double-digit growth in recent years. Roy attributed this to urban slowdowns and competition from D2C startups. “HUL, Marico, ITC, Dabur, and Emami have been aggressive with M&A to scale their portfolios. Legacy companies acquiring D2C startups is the visible template, and both organic and inorganic growth should accelerate,” he said.

Premiumisation Drives Sector Growth
Premium products are emerging as a key growth driver across FMCG categories. Roy explained, “The premium and lower-end segments are growing faster. There’s some downtrading in the middle-end segments, but broadly, companies are seeing a 100 bps premiumisation impact on portfolios annually. Consumers are willing to pay extra for better benefits.”

He added that categories like personal care, functional foods, tea, salt, carbonated drinks, and biscuits are witnessing stronger growth in premium segments. “Even laggard companies like Colgate have seen double-digit growth in premium products, and FY27 should see recovery with premium segments growing faster than overall volumes,” Roy said.

Outlook
With volume recovery, strategic market share gains, M&A activity, and premiumisation trends, the FMCG sector is positioned for a strong FY27. Analysts expect that controlled inflation, GST benefits, and stable raw material costs will provide the right backdrop for growth, making FMCG an attractive sector for both investors and companies alike.