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Crude Oil Scenario – Remain volatile over the next 3–4 months

* Crude oil prices have witnessed sharp volatility, rising from ~USD 70/b (prior to the US–Israel attack on Iran) to nearly USD 120/b at peak levels and currently moderating to ~USD 91/b following the recent G7 meeting.

* Sustained volatility in crude prices could create pressure on gross margins across the FMCG sector. Crude and its derivatives constitute a significant portion of raw material costs, particularly for Beauty & Personal Care (BPC) companies (30–40% of the raw material basket). In contrast, Food FMCG companies have relatively lower exposure, with crude derivatives accounting for only 10–15% of total raw material costs.

* If crude prices climbed to USD 100–130/b range, we estimate a 100–250 bps impact on gross margins for most BPC  FMCG players. In order to offset the cost pressure, FMCG companies might have to take high single-digit to low double-digit price increases. However, this would eventually led to near term volume pressure on the sector (reversing the volume recovery trend of last 1-2 quarters). The impact on food-focused FMCG companies is expected to remain limited, as their key raw material exposure is palm oil, which has remained relatively stable.

* Given the ongoing volatility in crude markets, we continue to closely monitor the situation to assess the broader implications for the FMCG sector, particularly in terms of pricing actions and demand environment.

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