Indian consumer goods companies are expected to report pressure on first-quarter profit margins, as Iran war-fuelled higher raw material costs outweighed benefits from resilient demand and price hikes, according to brokerages. Since the onset of the West Asia conflict at the end of February, costs of key inputs like palm oil and packaging materials have risen, prompting price hikes and pack-size cuts across the sector. As reported by Business Standard, recent pricing and pack-size changes have narrowed but not fully closed the gap created by higher raw material costs, leaving margins under pressure as companies work through high-cost inventory.
Intense competition from quick commerce is reshaping the retail landscape, with DMart experiencing particular pressure as the 10-minute delivery model continues to gain market share. According to Anand Rathi, India's quick commerce market is expected to grow to $60 billion by FY31, challenging traditional offline retailers like DMart. The company's DMart Ready online grocery business has exited 14 cities in the last 15 months, now operating in just 11 cities down from 25 cities in FY25, reflecting a measured approach to digital expansion. ICICI Securities noted that the digital business remains a defensive strategy rather than a primary growth driver, with most offline retailers cautious about scaling e-commerce given high cash burn and thin margins.
Brokerages expect resilient demand, supported by an extended summer, improving rural consumption and premiumisation, to drive sales growth, with beverages, personal care and quick-commerce channels remaining key growth drivers. According to Systematix's outlook for top consumer staples companies, about 12 per cent revenue growth is expected, driven by roughly 7 per cent volume growth and 5 per cent from price hikes and pack-size reductions. However, recent price hikes are unlikely to fully offset higher palm oil and crude-linked input costs, creating a challenging margin environment for companies.
DMart's standalone revenue grew 15.1% year-on-year in Q1FY27, though growth came mainly from new store additions rather than stronger sales at existing outlets. The company's like-for-like sales growth slowed to 5.5% compared with 10.8% in the previous quarter, with older stores in metro areas seeing flattish growth as consumers increasingly shifted to online platforms during the strong summer season. PL Capital expects DMart's EBITDA margins to decline to 7.4% in FY27 and 7% in FY28, lower than FY26 levels, as operating costs remain elevated. Despite challenges, the company added three stores during the quarter, taking total store count to 503 with retail business area expanding to 20.7 million square feet.
The Nifty FMCG index has fallen 11.82 per cent so far in 2026, compared with a 7.43 per cent decline in the benchmark Nifty 50. Jefferies expects more price hikes, while Investec forecasts double-digit revenue growth but sequential margin contraction due to crude-linked inflation. CLSA also expects gross margins to shrink sequentially, while HSBC said resilient demand should support steady sales growth even as investors monitor the impact of weather on rural consumption. Several analysts expect margins to improve in the second half of the fiscal year if crude-linked and edible-oil costs stabilise at lower levels.
