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FMCG companies expect inventory correction and sales to normalise by November 25

ICICIdirect Research 03 Oct 2025 DISCLAIMER

Hindustan Unilever (HUL) released its pre-quarter update to provide gist of transitory impact of implementation of GST 2.0. resulting flat to low single digit revenue growth in Q2FY26.
HUL’s 40% of the product portfolio (including soaps, toothpaste, shampoo and other foods) will be under the 5% rate from earlier rates of 12-18%.
With the commitment of passing on benefits to the consumers, HUL will feel the heat of transitory impact in the form inventory correction at distributors and retailers across channels to clear existing inventory with old prices.
Consumers have postponed their purchases in anticipation of receiving new stocks with updated prices.
This has led to a short-term impact on the sales in September. Also, with the existing pipeline of inventory, the company expects the impact to continue into October as well. Q2FY26 revenues are expected to be flat or in low single digit.
However, post entire pipeline correction the company expects good recovery in sales from Nov,25 due to price stabilisation, increased wallet shares and ongoing portfolio transformation.
View: We believe its passing by effect and will be there for all the FMCG companies depending on their inventory level in the market. The impact with food companies might be relatively lesser compared to the categories such as personal care and home care having higher shelf life. Important to watch out for is the impact of price revision on consumer demand, which is expected to pick up from Nov,25. Thus volume growth recovery would be gradual from Q3 and is expected to consistently improve in the quarters ahead.
 

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