Several agricultural inputs and packaging materials, for instance, are getting cheaper, while other commodities such as sugar, coffee, and fishmeal are becoming more expensive, potentially producing an uneven impact on FMCG companies' profit margins.

Commodity whiplash

Industry analysts say that the coming quarters may bring margin relief in some pockets for large food, beverage and home-and-personal-care companies, even as price volatility persists in other key commodities.

"Considering current raw material inflation and GST 2.0 rollout, majority of the companies will witness volume-led growth in the second half of FY26, especially in food and beverages & beauty and personal care segments," said Ronak Shah of Equirus Securities.

Edible oils remain among the more volatile inputs. Price of copra—crucial for manufacturers of hair oils, soaps and coconut-based foods—declined 6% in the ongoing quarter (as of November-end), but remains sharply elevated on a yearly basis, up 60% due to production disruptions and festive demand, analysts at Equirus Securities said in a note released Thursday. The brokerage has used 1 December spot prices, rather than 31 December quarter-end data, for its sequential and annual comparisons.

Pricing tightrope

Companies say some margin respite is likely in the near term.

"Palm oil prices have definitely cooled down the last four weeks on the back of good production in Malaysia and Indonesia. It is difficult to say how much we can pass on to the consumer because when the prices went up, we didn't hike prices a lot, and therefore, that impacted margins to a certain extent. Margins dropped with palm oil prices moving up. Now with the softening, we will have to see how competition behaves, and then take a call. The way palm oil and crude prices have been reasonably benign, I would say margins would improve a little bit," Vineet Agrawal, chief executive officer (CEO) of Wipro Consumer Care and Lighting, told Mint on Friday.

The company raised prices of its Santoor soap brand ahead of the implementation of the new GST rates as palm oil costs surged. Effective 22 September, the government simplified the indirect tax system into two main slabs of 5% and 18%, with a few items such as tobacco and high-end cars in a new, outlier slab of 40%. A host of mass-use items such as hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, tableware, kitchenware, and other household articles moved from either 18% or 12% to 5%.

"I don't see any price increases going forward at least in the short term," Agrawal added.

Meanwhile, edible oil company Marico Ltd faced elevated cost in the July-September quarter due to higher copra prices, a key input for its Parachute coconut oil brand.

Copra price rose 113% year-on-year during the September quarter. Marico raised prices of Parachute products by 60% over the past year. The portfolio contributes 36% to the company's India revenue. Parachute reported a small drop in September quarter volumes.

Saugata Gupta, managing director and CEO of Marico, said prices have started easing. "Copra is 16% off its peak. We believe that by March it is expected to be better," he said in a November interview with Mint. In the September quarter, the company's gross margin shrank about 810 basis points (bps) from a year ago.

"Next year if there is a significant reduction in copra prices, we will pass on the value to the consumer. We are waiting for the copra season to start and pricing to correct. I think crude is pretty stable, so we don't have to worry," he said.

According to the Equirus Securities note, palm oil prices rose 2% during October-November from July-September, but remain 4% lower year-on-year. Mustard, sunflower and soybean oils continue to trade firm, with annual price increases of 13%, 11% and 6%, respectively, as of November-end.

Sugar prices have risen 8% year-on-year amid tight supply conditions, reversing the easing seen in cereals. This could keep cost pressures elevated in select categories.

Biscuit maker Parle Products said sugar prices are "manageable" for now. In certain categories, like confectionery, it has an impact but not a significant one, said Mayank Shah, vice-president, Parle Products.

"Overall, we don't see any major issues as far as inflation is concerned. There might be a little bit of impact as far as rupee depreciation is concerned," he added. He expects pricing to remain stable at least until the end of March.

However, Shah cautioned against a dwindling rupee that could have a bearing on palm oil sourcing as well as cocoa prices. "A lot depends on rupee depreciation and its impact that we may see in certain commodities, especially palm, foreign charges and cocoa products," he cautioned.

Palm oil and cocoa are widely used in biscuits, chocolates, cakes, and ice-creams.

In beverages, coffee has become a major outlier. Arabica prices surged 18% quarter-on-quarter (as of November-end) and 46% year-on-year following supply disruptions in key producing regions. Robusta posted a 15% sequential increase. By contrast, cocoa continues to correct, falling 8% month-on-month and 26% quarter-on-quarter, while tea remains subdued and is down 4% from year-ago levels, the report said.

Pockets of relief

Meanwhile, relief is emerging for the dairy and crude oil segments.

Skimmed milk powder is showing early signs of correction, while crude oil has fallen 10% year-on-year and 5% quarter-on-quarter, easing freight, logistics and packaging costs.

These trends are particularly favourable for home and personal care firms such as Hindustan Unilever, Godrej Consumer, Jyothy Labs and Dabur, where packaging accounts for a substantial share of input costs, per Equirus Securities.