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Consumer sector is showing mixed signals in demand post GST transition. 3Q can’t be seen as a normal quarter given that GST transition got completed by mid Nov and early start to festival season, and that does show some impact of inventory re-stocking. We have been of the view that the growth acceleration in staples will be category specific (Link of note) like it had happened in FY18 and after consideration of the changed competitive scenario and distribution moats over the years. QSR’s have shown some green shoots, however structural demand recovery is yet to set in.

Paints segment continues to show sustained competitive intensity in decorative paints, although noise levels seem to be subsiding. Industrial Paints sems to be riding on growth led by Automotive and General Industrial paints demand. Jewellery players seem well placed due to high gold price inflation (80% YoY) and expected pressure on local and regional players. Food and grocery retailing is showing impact of rising competition from Quick commerce players as new players and scale benefit remain at play.

Britannia and MRCO are preferred plays in staples, Pidilite in construction aids and Titan Company/ JUBI in Jewellery/ QSR/retail. Any spike in input costs and El Nino disrupting monsoons can be a key risk to our call.

Segment Highlights

Staples: Demand witnessed a gradual recovery, with October impacted by GST trade disruptions, however Nov/Dec saw a rebound. Both urban and rural markets delivered healthy growth, Rural continues to grow ahead of urban. We expect this momentum to sustain into Q4, supported by new launches, increased brand investments and higher affordability post GST rationalization.

QSR: Demand trends remained mixed, with October being muted, followed by recovery in Nov/Dec. Geographical and segment specific variations continue in the food services segment. The momentum has continued into Q4, supported by menu innovation and improving consumer sentiment.

Paints & adhesives: Demand remained muted amid extended rainfall and a shorter festive period. Competitive intensity stays elevated, with no let-up likely in the near-term. However, adhesives and other construction aids are witnessing healthy traction, supported by improving real estate and construction activity.

Retail: Jewellery demand remains resilient despite elevated gold prices, supported by healthy festive and wedding season traction. Footwear is a key beneficiary of GST 2.0, with improving footfalls driving recovery. Meanwhile, modern trade continues to face heightened competitive intensity from quick commerce in food and grocery retailing, impacting throughput and operating leverage.

Staples: Green shoots, but no major acceleration post GST

* 3Q26 volumes have shown a QoQ recovery partly due to de-stocking by trade during GST transition. 2Q/3Q average volume growth does not show much acceleration so far, however the trends in Dec25 show some green shoots.

* If we look at 2Q/3Q average volume growth of FY26/FY25, Nestle, Marico and Dabur show higher growth YoY, while Colgate and Britannia are lower. HUL is at the same level.

*-On similar lines, sales growth acceleration is seen in Marico, Dabur, Nestle and ITC. HUL is flattish while BRIT shows a small reduction.

* BRIT, Dabur, Emami and ITC have shown YoY gross margin expansion due to favorable input costs. Nestle Marico and Britannia have shown QoQ margin expansion. Input cost trends indicate positive margin outlook for BRIT, Nestle, Marico and Dabur.

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