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GST Cuts, Lower Input Costs to Boost Consumer Staples Margins in Q4 FY26

A report by Systematix Research forecasts a material improvement in consumer staple company margins for the fourth quarter of FY26. This recovery is expected to be driven by easing consumer pricing following GST cuts and a pullback in raw material costs. The report notes that volume growth improved to 3.5% year-on-year in Q3FY26, with strong performance in categories like biscuits, noodles, and winter products. The paints segment is also anticipated to see a meaningful sequential pickup in volume growth.

Key Points: Consumer Staples Margins to Improve in Q4 FY26 on GST Cuts

  • GST cuts lower consumer prices
  • Easing raw material costs support margins
  • Volume growth improved to 3.5% in Q3FY26
  • Paints segment sees high single-digit volume pickup
2 min read

GST cuts, lower input costs to boost consumer staples margins in Q4 FY26: Report

Report predicts margin recovery for consumer staple companies in Q4 FY26, driven by GST cuts, easing input costs, and gradual volume growth improvement.

"We expect margins to improve materially in 4Q26 as costs continue to ease - Systematix Research Report"

New Delhi, January 8

The margins of consumer staple companies are expected to improve in the fourth quarter of FY26 as lower consumer prices following GST cuts support recovery, according to a report by Systematix Research.

The report highlighted that lower consumer prices following GST cuts and easing input costs also due to low inflation are likely to support margin recovery in the quarter.

"We expect margins to improve materially in 4Q26 as costs continue to ease, we expect gradual QoQ improvement in volume demand on (1) easing consumer pricing (as input costs pull back)" the report stated.

The report expects this improvement is expected to be driven by two key factors, easing consumer pricing as raw material costs pull back, and ongoing expansion of distribution networks by most consumer staple companies.

Before this expected recovery in the fourth quarter, consumer staple companies likely delivered revenue growth close to high-single digits in the third quarter of FY26.

The report estimated revenue growth of around 6.7 per cent year-on-year in aggregate for companies under its coverage.

This growth was supported by an improvement in volume growth, which rose to 3.5 per cent year-on-year in Q3FY26, compared to 3 per cent in Q2FY26 and 2 per cent in Q3FY25.

The report noted that volume growth had weakened in the second quarter of FY26 due to trade disruptions and destocking by dealers after GST cuts.

While this weakness eased in the third quarter, some companies continued to face disruption during October and part of November, followed by gradual normalisation. This partly impacted overall growth in Q3FY26.

On the product side, categories such as biscuits, soaps, hair oils, noodles, coffee, chocolates and cakes performed well during the quarter. Winter-related products, including skincare items, dry fruits and honey, also saw good demand.

However, categories such as tea, edible oils, milk and other dairy products, and juices were likely impacted during the same period.

In the paints segment, the report expects a meaningful sequential pickup in volume growth to high single digits. This recovery was supported by the resumption of painting activity after the monsoon season, increased demand during the wedding season and the release of deferred demand.

Overall, the report suggested that with improving volumes and easing costs, consumer staple companies are entering a phase of gradual recovery, with margins starting to turn favourable in the final quarter of FY26.

- ANI

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Reader Comments

P
Priya S
Finally some relief! The price of cooking oil and milk has been pinching the household budget for months. If input costs are easing, we should see it reflected on MRP soon. Fingers crossed.
R
Rohit P
The report mentions trade disruption after GST cuts. This is a real issue in smaller towns. Our local kirana store was confused about pricing for weeks. Government needs better implementation.
S
Sarah B
Interesting analysis. The pickup in paints volume makes sense with the wedding season and post-monsoon repairs. It's a good indicator of broader consumer confidence returning.
K
Karthik V
Volume growth is still in low single digits. For true recovery, we need stronger rural demand. The good winter crop harvest should help in the coming months. 🚜
N
Nisha Z
As a small business supplier, I hope this margin improvement trickles down. Big companies often squeeze us when costs are high but are slow to share benefits when costs fall.

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