GST: Reduced input prices will increase consumer staples margins in Q4 of FY26
GST: According to a Systematix Research research, consumer staple firms’ margins are anticipated to rise in the fourth quarter of FY26 (January–March) as recovery is supported by reduced consumer prices as a result of the GST reduction.
According to the analysis, margin improvement in the quarter is projected to be supported by reduced consumer prices as a result of GST reduction and easing input costs as a result of low inflation.According to the research, “We anticipate a gradual QoQ improvement in volume demand on (1) easing consumer pricing (as input costs pull back) and a material improvement in margins in 4Q26 as costs continue to ease.”
The two main drivers of this improvement, according to the research, are the continuing growth of distribution networks by the majority of consumer staple industries and the relaxing of consumer price as raw material costs decline.
In the third quarter of FY26, consumer staple firms probably generated sales growth around high single digits prior to this anticipated rebound in the fourth quarter.
For businesses included by the research, revenue growth was projected to be around 6.7% annually.
This development was backed by an improvement in volume growth, which grew to 3.5 per cent year-on-year in Q3FY26, compared to 3 per cent in Q2FY26 and 2 per cent in Q3FY25.
According to the study, trade interruptions and dealer destocking after GST reduction caused volume growth to wane in the second quarter of FY26.
Although this weakness subsided in the third quarter, several businesses still experienced disruptions in October and a portion of November before things gradually returned to normal. This had a partial effect on Q3FY26 growth overall.
On the product side, items such as cookies, soaps, hair oils, noodles, coffee, chocolates and cakes did strongly throughout the quarter. Good demand was also seen for winter-related goods including honey, dried fruits, and beauty products.
Juices, milk and other dairy products, tea, and edible oils, on the other hand, were probably affected at the same time.
The research anticipates a significant sequential increase in volume growth to high single digits in the paints industry. Increased demand during the wedding season, the release of delayed demand, and the restart of painting activities after the monsoon season all contributed to this turnaround.
Overall, the survey showed that with improved volumes and reducing costs, consumer staple firms are beginning a period of steady recovery, with margins starting to turn positive in the last quarter of FY26.