GST cut drives FMCG growth in first quarter: Consumers buy more soaps, snacks and staples

Sales of daily household necessities and groceries saw stronger volume growth during October-December, compared with a year ago, reflecting a pickup in demand after the goods and services tax (GST) was lowered on a number of items from September 22.

Data from the first quarter following the rationalisation suggests that the intent of reviving sales following multiple quarters of an inflation-led slowdown in the consumer market was achieved.

Volumes rose 9-10% in the December quarter, up from 7.1% a year earlier, according to executives citing research firm NielsenIQ’s estimates and internal sales numbers. The higher volume growth indicates an increasing number of products sold, from soaps and detergents to snacks and noodles, despite trade disruptions and restocking at trade channels. “The first quarter (after) GST reforms clearly shows volume growth and a further narrowing of the urban-rural gap,” said Mayank Shah, vice-president at Parle Products.

“We expect the momentum to continue over the next two quarters, with a clear focus on premiumisation,” said Shah. The company produces snacks and bakery products such as Hide & Seek and Monaco.

Value or revenue growth, however, remained flat due to steep price cuts across consumer categories. Data showed that fast-moving consumer goods (FMCG) grew 10-11% by value in the December quarter, compared with 10.6% in the year-ago period.

The revamped GST regime lowered taxes on daily essentials — including soaps, shampoos, toothpaste and food items — to 5%, from 12% or 18%. However, the trade pipeline for many companies virtually dried up as partners did not want to block working capital by ordering and getting credit for the price difference later.

Wipro Consumer Care and Lighting, which sells Santoor and Yardley, said several factors contributed to higher sales, with a cumulative impact over time. “There are income tax benefits which still exist in the system,” said its chief executive Vineet Agarwal. “Commodity prices, including crude oil, are now cooling. All of this is clearly positive. The monsoon has been good, which adds to the overall picture. So, the direction is encouraging.”

Demand in cities had started to slow from the middle of last year, hurt by surging costs of core commodities and fuel, leading consumers to cut back on spending. Further, legacy firms across categories, from noodles to detergent, have been facing stiff competition from digital-first and regional brands.

“The outlook is quite positive,” said Sudhir Sitapati, managing director at Godrej Consumer Products. “GDP growth seems good, and all the factors for consumption growth are in place. I am expecting the demand outlook to be good on the back of both GST and income tax reduction. There is more money in consumers’ hands, so hopefully that will drive growth.”

Last quarter, most listed companies said they expect the second half of FY26 to provide volume-driven growth after supply chain normalisation.

NielsenIQ noted in its July-September FMCG update that growth in villages outpaced that of cities by volume for seven consecutive quarters, though the gap narrowed as demand from urban centres showed signs of sequential recovery. Rural markets grew 7.7% by volume in the September quarter, compared with 3.7% in cities.