If it feels like your grocery bill keeps rising but your shopping bag looks the same, you’re not imagining it. India’s consumer staples companies grew revenues this quarter not because people bought more, but because prices kept going up, even as demand stayed soft, says a Jefferies report.
The GST rate rationalisation was seen as a major trendsetter. But it’s not as straightforward as you would imagine. While the overall volume growth across the sector was just 2% year-on-year, the revenues rose 6% because companies continued to benefit from the price hikes taken over the past few quarters.
The “Price-Led” Winners: Edible oils and coffee
The strongest example of pricing strength came from Marico. Its flagship Parachute hair oil brand posted a sharp 59% year-on-year growth in value. This growth was driven almost entirely by price increases, even as volumes declined marginally after cumulative price hikes of around 60%. Marico also recorded the highest pricing growth during the quarter. This is in comparison to the other key FMCG companies covered by Jefferies.
A similar trend was visible in edible oils. Marico’s Saffola reported 19% value growth even though volumes were flat. AWL’s (formerly Adani Wilmar) edible oil segment grew 26% in value while volumes increased by only 2%. Patanjali’s edible oil business grew 17% in value despite a 7% fall in volumes. These figures show that consumers continued to accept higher prices for essential commodities, even as buying remained cautious.
Tea and coffee also showed steady performance. Coffee, in particular, outperformed. Tata Consumer Products reported a strong 56% growth in its coffee business. This, too, was largely driven by the pricing changes.
HUL’s beverage portfolio saw double-digit growth, with tea recording high single-digit growth, supported by both pricing and a modest improvement in volume. Nestlé witnessed a healthy growth in its beverage portfolio.
In categories like soaps and biscuits, most companies continued to experience a benefit from the earlier price hikes, with the premium variants performing better than the mass products.
The Volume Laggards: Oral care and seasonal misses
However, beyond the essentials, the story was a bit different.
In contrast to edible oils, oral care remained one of the weakest categories. Colgate reported a 6% decline in revenue, with volumes falling around 5%. The company also posted a negative pricing impact for the third consecutive quarter, indicating that it has been unable to pass on costs without hurting demand.
HUL’s oral care business also declined during the quarter, highlighting broader pressure in the segment, although Dabur stood out with double-digit growth.
Seasonal and weather-sensitive categories also disappointed. Varun Beverages’ India carbonated soft drink business saw a volume decline of 1% YoY (year-on-year), while their juice segment experienced a volume drop of 13%.
According to the report, these were largely driven by unseasonal rains and disruption due to the GST changes. HUL’s ice cream business also saw a YoY decline in value due to the aforementioned reasons.
Furthermore, winter categories faced deferred stocking as distributors postponed purchases amid the GST adjustments. While companies remain hopeful that a harsher winter will revive the demand in the third quarter, the impact of the delayed loading was clearly visible in the second quarter of FY26, according to the report.
The Margin Squeeze: Why profitability lagged revenue
Despite high revenues, the companies were subjected to a profitability gap. Gross margins across the sector contracted by more than 170 basis points (1.7%) compared to the same time last year. Despite that, the companies witnessed some sequential improvement from earlier price hikes and partial moderation in the input costs.
On the commodity front, Copra, the raw material used for hair oil, witnessed sharp inflation, which in turn resulted in squeezing margins for hair oil manufacturers. Edible oil prices remained stable, thus offering some relief. Crude oil prices moderated year-to-date, while agri input trends were mixed.
Coffee prices remained highly volatile, while tea prices were corrected from February 2025 levels. The report states that key input prices are expected to cool off or remain in the range, which could support a gradual recovery in the margins.
Furthermore, as a result of the stabilised profitability, the companies have also stepped up their advertising and promotional spending in a bid to revive the demand and strengthen the brand’s visibility.
FMCG: What investors should watch
For investors, the quarter highlights a clear reality. Growth in the FMCG sector is currently being driven by pricing, not by stronger consumption. Companies with pricing power and strong brand loyalty, such as Marico and leading edible oil players, have been able to outperform. In contrast, players heavily exposed to oral care, beverages and seasonal categories continue to face pressure.
Going forward, the sustainability of earnings will depend on whether volumes start recovering. Without a meaningful revival in demand, the scope for continued price-led growth may narrow, making volume growth the next critical trigger for the sector.
