New Delhi [India], April 2 (ANI): Indian fast-moving consumer goods (FMCG) companies are expected to implement a fresh round of price increases starting in the first quarter of FY27. As per a report by Nuvama Institutional Equities, a sharp rise in crude oil prices and a weakening Rupee have significantly increased input cost pressures, ending a period of relative price stability for the sector.

The report forecasts price hikes of at least 3 to 4 per cent in Q1FY27 if the current inflation in raw materials persists. While the impact on the fourth quarter of FY26 is expected to be limited due to existing inventory levels, the industry is preparing for a shift as those stocks are depleted.

'In our view, companies typically maintain 30-45 days of raw material and finished goods inventory, and therefore, forecast price hikes are likely in Q1FY27,' the Nuvama report said.

The pressure is most acute in sectors like paints, edible oils, soaps, and detergents, which may see even steeper price adjustments. Packaging costs, which represent 15 per cent to 20 per cent of total expenses for most FMCG firms, have surged alongside crude oil, which is currently trading near USD 100 per barrel.

This has directly impacted the cost of petrochemical derivatives such as polypropylene (used in rigid packaging and caps) and polyethylene (used in rigid packaging and caps) films used throughout the supply chain.

'Higher crude oil prices and INR depreciation have raised input cost pressures, mainly through higher packaging costs, which comprise ~20% of costs,' the report notes.

The paints industry has already begun responding to these trends. The report notes that companies like Asian Paints and Berger Paints have initiated calibrated price hikes to offset rising costs, with approximately 40 per cent of their raw materials linked to crude derivatives. While Berger Paints implemented hikes effective late March, Asian Paints is expected to roll out sharper increases by mid-April.

'We reckon most consumer companies shall report margin pressure in Q1FY27; Q4 likely to see limited impact given inventory,' the report added.

Ongoing conflict in the Middle East has left companies like Dabur and Emami exposed, who derive roughly 6 per cent of their sales from the region, to potential disruptions. Additionally, rising insurance and shipping costs are expected to exert mild pressure on the entire consumer sector.

On the domestic front, unseasonal rains in Northern and Eastern India during March have dampened demand for summer-essential categories. This weather volatility is likely to adversely impact the sales of talcum powder, ice cream, and cold beverages for companies such as Varun Beverages and United Breweries in the final quarter of FY26.

'During periods of sharp inflation, market leaders take market share from local and new players. This is likely to play out in FY27. Reforms in liquor taxation in Karnataka are positive in FY27 for the alco-bev sector, especially beer. In FY27, summer categories have a low base along with likely El Nino -- both a positive; after a likely weak Q4FY26,' the report said. (ANI)