Indian consumer staples are signalling a tough Q2 and investors are bracing for margin squeezes

In the face of rising input costs and inflation, Indian consumer companies report a resilient demand for the September quarter. However, analysts caution that profitability and margin recovery will be challenging.

Indian consumer companies are seeing demand hold up in the September quarter, but investors are watching margins, underlying consumption and rural demand as input costs remain a concern.

Early quarterly updates point to continued growth across consumer businesses, although a later festive calendar is expected to shift a significant part of demand into the December quarter. This comes as India’s headline inflation rate (CPI) rose to 4.82% in August 2026, the highest since December 2024, from 4.45% in the previous month.

“Amid sustained inflationary pressure, the need for price hikes is rising, potentially impacting volumes ahead,” said analysts at HDFC Securities in a 5 October report. “As companies attempt to balance growth and margins, we expect earnings stress to persist.”

Demand holds

For Marico, the maker of Parachute and Saffola, domestic underlying volume growth reached double digits in the September quarter.

“Domestic demand remained resilient during the quarter, even as the operating environment stayed volatile through the period,” the company said in a quarterly filing on Monday.

Marico’s value-added hair oils business recorded growth in the twenties for the sixth consecutive quarter, while volumes of Saffola oils declined as the company prioritised profitability and reduced supplies of some variants.

Copra prices remained about 35% below their peak, supporting Marico's gross margins.

“We forecast volumes to grow ~10% YoY led by Parachute, where volumes are expected to grow ~14% YoY—21-quarter high (~10% YoY in Q1FY27), reflecting a second consecutive quarter of market share gain in our view,” analysts at Nuvama Institutional Equities said in a report on Tuesday.

AWL Agri Business, meanwhile, is seeing a broad-based expansion beyond its traditional edible oils business.

The company delivered 12% year-on-year volume growth and 24% revenue growth during the quarter. Food and FMCG revenue rose 33%, crossing ₹2,000 crore for the first time in a quarter. The traditional edible-oil business was more subdued, with volumes growing 3%.

Costs bite

The cost environment will be another variable. Godrej Consumer Products Ltd said it would report “high-teens revenue growth, high-single-digit underlying volume growth and double-digit Ebitda growth” in the quarter.

However, the company is watchful of raw material prices. “Input cost pressures intensified during the quarter,” the company said on Monday.

“We are responding through a combination of calibrated pricing actions, cost-saving initiatives, supply-chain efficiencies, and disciplined cost management,” GCPL said.

Dabur also flagged pressure on margins. “Operating margins were impacted by inflationary pressures during the quarter; partly offset by calibrated price increases and ongoing cost-saving initiatives," Dabur said in its quarterly update on Tuesday. It expects revenues to record double-digit growth in Q2.

Sugar prices have also corrected sharply, down 21% from the peak, after a sharp 16% run-up in August.

Brent crude prices also hover around $100 a barrel due to geopolitical uncertainties, driving higher packaging costs across consumer companies and increasing raw material costs for detergent makers.

Nykaa offers a different picture, with both its beauty and fashion businesses growing at a rapid pace. Nykaa's like-for-like store sales growth was the strongest in six quarters.

Retail lags

Value retailers had a tougher time.

V2 Retail, the value-fashion retailer, reported 0.5% same-store sales growth because Navratri and Durga Puja fell in the September quarter last year and will fall in October this year, the company said.

The timing difference is particularly important for retailers. “With the festive season ahead, we are well-positioned to capture the demand uplift in Q3 while sustaining our long-term growth,” V2 Retail said.

The seasonal change also matters for Avenue Supermarts, the operator of DMart. The company reported standalone revenue from operations of ₹19,206 crore for the September quarter.

Investors were unimpressed. V2 Retail’s share price tanked 19% to hit a 52-week low after the update, while shares of DMart slipped up to 4% on Monday.

The inherent challenges of listed players become visible in such instances.

“We are not very bullish about listed large players and in all of these consumption categories. The future is going to be around the smaller players who will innovate more, who will spend more on new products, who will come out with more experiences,” said Anand Ramanathan, partner & consumer industry leader, Deloitte India.

Rural watch

Companies have implemented major price hikes in recent months.

“We would be cautious about assuming a full margin recovery in Q3 if raw-material inflation persists,” said Ronak Shah, consumer-sector analyst at Equirus Securities.

Shah expects companies to maintain prices during the festive period. “If input costs remain elevated, we would expect further price increases around October-end/November,” Shah said.

Rural demand will also be a key monitorable, given its importance to volume growth. The Union government has declared drought in five states so far and assessed 6.11 lakh hectares of cropland as having been affected by extreme rains and floods, Union agriculture minister Shivraj Singh Chouhan said on 29 September.

Companies have not yet sounded the alarm on rural demand, as irrigation facilities have developed in recent years.

About the Author

Neethi Lisa Rojan is a senior correspondent focusing on the consumer goods and retail sector working from Mumbai for Mint since 2026. She has been a journalist for a little over two years with Moneycontrol and The Morning Context. She has covered the consumer and healthcare sectors in earlier roles. She was a double gold medallist during her bachelor’s from Mahatma Gandhi University Kerala and post-graduation from Pondicherry University. With a background in commerce and journalism, she brings a sharp analytical lens to stories on India’s fast-evolving consumer goods and retail sector.<br><br>With an academic background in business administration and a keen eye for financial statement analysis, she bridges the gap between corporate data and compelling narrative journalism. Her reporting is characterized by a focus on how evolving consumer behaviours and regulatory changes impact India's largest mass-market brands. She is a keen learner with diplomas in international business, human rights and journalism. She specialized in business journalism at the Asian College of Journalism, Chennai. When she is not looking into shopping carts, you can find her explaining the latest conspiracy theory.