Impact of correction in the crude oil and edible oil prices on consumer goods companies

Crude oil prices have corrected by ~24% from its YTD high of $86.9 per barrel. Further global uncertainties led by imposition of reciprocal tariff by US resulted in correction in the edible oil prices. Correction in the crude oil prices will lead to consequential decline in the prices of crude derivative – packaging cost, which forms 10-15% of the overall raw material cost of consumer goods companies.

Malaysian Palm oil prices have corrected by ~11% from its Dec24 high while Soyabean oil has witness correction of ~4% from its recent high. However any further correction will be positive for soap manufacturers such as HUL and GCPL. Though current prices are far away from its low, any further correction from the current levels will help soap manufacturers to recover the lost volumes through relevant price cuts in the quarters ahead

Soyabean oil, Rice bran oil and Saff-flower (kardi oil) prices are 35-60% of overall raw material cost of edible oil companies. Correction in the edible oil prices will provide some breather for branded edible oil companies to reduce stress on the margins in backdrop government hiking the import duty on the edible oil prices. If edible oil prices continue to correct from the current levels, it will be positive for the companies such as Marico and Adani Wilmar. Further the correction in the edible oil prices will also help in the reducing the pricing premium over regional brands available in the market aiding market share gains.

Malaysian Palm oil prices have corrected by 11% from its recent high..
Crude derivatives form 20-25% of paint companies raw material cost. Correction in crude prices augurs well for paint companies in the times of competitive intensity from large entrant, which has put significant margin pressure through its pricing and branding strategy. We believe large paints players such as Asian Paint would be of the advantage as compared to smaller players in the current correction of crude oil prices.
Overall we believe if crude oil and edible oil prices further corrects from the current level, we might see gradual recovery in margins from Q1/Q2FY26 as the companies normally hold 2-3months of raw material inventory. If price correction sustains, then we might see the companies passing it on to consumers in the form of price cuts from H2FY26.

In the consumer goods space ITC and Tata Consumer Products are our preferred picks. However considering the recent scenario of falling edible oil prices, Marico looks good after the correction of 17% in the stock from its high.