Indian FMCG stares at broadening commodity inflation and a new source of cost pressure

The comfort of falling input costs is fading for India’s FMCG companies as a fresh wave of commodity inflation has begun to offset the relief from cheaper crude-linked raw materials, a report by Equirus Securities said on September 3.

The raw-material cost environment for FMCG makers has become increasingly uneven in the second quarter of FY27, with prices of several agricultural and food commodities moving higher even as crude and some imported packaging inputs offered sequential relief, according to the report.

The brokerage said the broad benefit from lower input costs was narrowing, with individual commodity movements likely to create greater divergence in margins across companies.


Sugar has emerged as a key source of concern. Prices were up 19% year-on-year and 20% from the previous quarter, raising the cost burden for categories such as biscuits, confectionery, malted beverages and carbonated drinks.

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Cereal-based inputs, in contrast, remained relatively benign. Wheat prices increased 2% year-on-year and rice prices rose 5%, while maize was 11% cheaper year-on-year, despite a 4% sequential increase.

The beverage segment is also seeing renewed pressure. Arabica coffee prices climbed 19% sequentially and were broadly unchanged from a year earlier. Robusta prices declined 5% year-on-year but increased 11% quarter-on-quarter.

Cocoa offered a similar mixed picture. While prices remained 28% below year-ago levels, they surged 48% sequentially, reducing some of the earlier benefit for chocolate and malted-beverage makers. Tea prices increased 10% year-on-year.

Edible oils have added to the cost pressures. Palm oil prices rose 21% year-on-year, while mustard, soya, sunflower and groundnut oil prices increased 8%, 9%, 14% and 10%, respectively. Copra remained 34% below year-ago levels, although prices rose 6% sequentially amid stronger festive demand.

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Other ingredients have also become more expensive. Soyameal prices jumped 70% year-on-year and fishmeal increased 32%. Milk prices rose 3% annually and 5% sequentially. Equirus expects elevated cattle-feed costs to keep milk procurement expenses under pressure in the near term, although some moderation could emerge in the second half of the year.

There were pockets of relief elsewhere. Crude prices declined 10% sequentially, while high-density polyethylene, an important packaging material, fell 18%. However, domestic polymer prices increased, while menthol prices climbed 33% year-on-year and 21% quarter-on-quarter.

Companies with greater exposure to sugar, coffee and specialised ingredients are therefore likely to see sharper input-cost inflation. FMCG players with portfolios weighted towards cereals could remain relatively better placed as commodity trends increasingly determine margin performance.