Consumer goods majors eye stronger sales as inflation pushes both volumes and prices

Consumer goods makers from Hindustan Unilever (HUL) and Dabur to Godrej Consumer Products and Dixon Technologies, which had been banking largely on volume growth this fiscal, now expect inflation triggered by the West Asia conflict leading to price increases will drive both volume and price-led value growth in the near term, resulting in stronger sales growth than earlier projected.

Most fast moving consumer goods (FMCG) companies had initially anticipated a demand recovery driven primarily by volumes and had budgeted for largely flat raw material inflation this year. However, inflation stemming from the conflict has begun filtering through to consumers over the past 30-45 days.

“With the inflation picking up in India business, we expect a part value growth through price increases to come in along with the volume growth that we have pencilled. The growth trajectory and sequential recovery should continue, that will be driven partly by volume and partly by price,” said Dabur’s global chief executive Mohit Malhotra.


Malhotra said that while preparing budgets for the current fiscal, Dabur had assumed flat raw material inflation after facing around 6% inflation last year.

“With the war happening in the Middle East, we see a cascading impact happening across all countries and geographies, and therefore, inflation has really picked up. We now see an inflation of around 10% hitting us in a lot of portfolios, barring beverages and healthcare,” he said.

Dabur has taken price hikes of around 4% to offset inflationary pressures, while the country's largest FMCG company, HUL, has raised prices across fabric wash and household care products by 2-5%. Godrej Consumer Products has increased prices of soaps, detergents and household insecticides by 5-7%. Marico and Emami too have hiked prices.

HUL’s chief financial officer Niranjan Gupta recently told analysts that there could be some “rebalancing between volume and price growth in the short term”. He added that FY27 would likely see better performance than FY26, while the company continues to pursue “competitive volume-led growth”.

Godrej Consumer Products chief executive Sudhir Sitapati also told analysts that while EBITDA margins could face some pressure this quarter and the next, there were upsides elsewhere. “We're seeing pricing growth higher than what we had anticipated,” he said.

The Indian FMCG market typically derives sales growth almost equally from volume expansion and price-led value growth. Companies, however, remain confident that the recent price increases will not hurt demand, arguing that last September's GST rate cuts have provided consumers with some cushion to absorb higher prices, and prices may go back to the levels around then.

In electronics categories such as smartphones, laptops and televisions, however, price increases over the past five months have been significantly steeper than in FMCG, reaching as high as 30%. This has been driven by a two- to three-fold increase in the cost of critical memory chips, in addition to conflict-led raw material inflation and rupee depreciation. The sharp rise in prices has weighed on demand.

India's largest home-grown electronics contract manufacturer, Dixon Technologies, expects both price-led and volume-driven growth this fiscal. Chief Financial Officer Saurabh Gupta said smartphone volumes are expected to grow in the low-to-mid teens, with an additional 12-15% growth coming from higher prices.

“So, there will be a significant growth in terms of mobile revenues overall on account of both pricing and volume,” he said.

Even in appliances such as washing machines, air-conditioners and refrigerators, manufacturers have raised prices by as much as 12-13% and have indicated further increases, which are expected to support higher revenue growth rates this year.