Daijiworld Media Network- New Delhi

New Delhi, Apr 10: Fast-moving consumer goods (FMCG) companies are finding it increasingly tough to navigate the current market landscape, as competition from nimble regional brands and emerging direct-to-consumer (D2C) players intensifies, revealed a recent report by Axis Securities.

The report observed that, besides battling rising competition, companies are also under pressure to liquidate old inventory in traditional retail channels, further straining operations. “The operating environment remains challenging, as companies face stiff competition from regional players, the increasing presence of D2C brands, and inventory liquidation pressures in general trade channels,” the report noted.

However, there’s a silver lining — beverage companies are likely to benefit this summer, with soaring temperatures pushing up demand for carbonated drinks, thereby providing a cushion of seasonal growth.

Overall volume growth, on the other hand, continues to remain sluggish. The report highlighted that most FMCG companies under coverage are expected to post weak volume growth, in line with the trend observed during the October-December quarter of FY25.

Interestingly, rural markets are showing resilience, performing better than urban counterparts where consumer sentiment remains tepid. This rural demand is playing a balancing role in offsetting the urban slowdown.

The industry is also grappling with rising input costs. Key raw materials like palm oil, cocoa, wheat, and coffee have seen significant price hikes. While companies have responded by raising product prices, the report warned that the benefits of these hikes may not be immediately visible.

Looking ahead, some macroeconomic positives — such as a potential interest rate cut, a favourable monsoon, and supportive government policies to boost disposable income — may uplift consumer sentiment and drive a recovery in the second half of FY26.

Despite these glimmers of hope, profit margins are likely to remain under pressure. The spike in input costs is expected to squeeze gross margins, and with volume growth weak, operating leverage remains poor. As a result, many companies may be compelled to slash advertising expenses to manage costs.

In summary, while FMCG companies face stiff headwinds, strategic pricing, rural market strength, and seasonal tailwinds may offer them a temporary lifeline as they wait for broader market revival