The Indian consumer sector is entering FY26 on a cautiously optimistic footing, backed by a recovery in rural demand, softening input costs, and digital-first brand strategies. But not everything is smooth sailing: early showers have rained on the parade for summer-centric categories, urban demand is underwhelming, and promotional wars are taking a toll on margins.

“FY26 outlook by most companies is positive on demand and margins. Valuations are reasonable, and we anticipate limited downside potential,” says Abneesh Roy, executive director at Nuvama.

Ice creams, talcum powders, and beverages bear the brunt

In a season usually feared for soaring temperatures and booming demand for cold beverages, ice creams, and personal cooling products, India’s FMCG sector is facing an unexpected chill. Unseasonal rains and an early monsoon have disrupted summer product sales, forcing companies to trim production and manage excess inventory. According to the Nuvama Institutional Equities’ latest consumer report, summer-related sales in April–May 2025 have dropped 10-15% year-on-year, prompting many companies to scale back production by up to 25%.

"Many consumer companies and retailers had stocked up excess inventory by March, anticipating a stronger summer season," the report notes. But the combination of erratic weather, early rainfall, and weakened consumer sentiment—particularly in out-of-home consumption categories—has left companies grappling with unsold stock and declining demand in peak months.

The most immediate casualty of the weather-induced slowdown is the beverage segment. Varun Beverages, one of India’s leading bottlers for PepsiCo, has seen significant pressure on out-of-home channels like kirana stores due to softer spending and persistent rainfall. Last summer, Varun Beverages recorded a 22.9% YoY volume growth in Q2FY25; this year, however, the company is unlikely to replicate that momentum.

Talcum powders, another summer staple, are also seeing a slump. Emami, known for brands like Navratna and Dermicool, has reported muted demand, especially in the southern and eastern parts of the country. In the base quarter last year, Emami’s summer portfolio had jumped 27% YoY. Now, it's expected to post low-single-digit growth in Q1FY26. 

In fact, Emami’s vice chairman acknowledged the dent, saying, “Unseasonal rains have hurt demand for its summer products such as talcum powder. Summer has not gone down well (for the segment).”

Ice cream sales, which typically peak during May and June, have also taken a hit of up to 10%, particularly in the southern and western regions. For categories like beverages and ice cream, the loss is irreversible. “These are time-sensitive categories. Once the summer window is missed, there is little chance of recovery,” the report warns.

Tata Consumer Products, too, is feeling the squeeze. Demand for its Indian beverages segment, especially single-serve RTD (ready-to-drink) packs, is likely to remain muted due to a drop in out-of-home consumption linked to the weather.

The beer category is similarly exposed. United Breweries, which had grown volumes by 5% YoY in Q1FY25 despite election-related restrictions, now faces a shortened peak season for beer consumption due to early monsoons.

Even the paints industry hasn’t been spared. Decorative paint demand is expected to remain subdued in H1FY26 as early rains defer purchase decisions. While this is largely a case of postponed rather than lost demand, it nonetheless contributes to the broader slowdown in seasonal sales.

Adding to the woes is the statistical base effect of last year’s heatwave. The scorching summer of 2024 drove a surge in demand for cooling products, with categories like beverages and powders growing as much as 40–60%. That unusually strong performance has created a high base, making it even harder for companies to report YoY growth this summer.

Dabur’s CEO summed up the concern, saying, “Out-of-home consumption tends to suffer when there are rain spells in the peak of summer. So, categories that ride the summer season including beverages, ice creams, talcum powder will take a hit. We do not expect the June quarter to be strong from a beverage sales perspective due to the unseasonal rains.”

Rural India emerges as a bright spot

Growth has clearly turned inward. Rural markets clocked 8.4% volume growth in Q4FY25, while urban volumes grew just 2.6%, according to data from Nielsen. That’s a threefold gap—and a continuation of the trend seen over the last year. Analysts at Nuvama don’t expect urban demand to pick up meaningfully before the second half of FY26.

“Rural continues to outperform urban by a wide margin. The early monsoon, government spending and improving agri sentiment are helping sustain demand,” adds Roy.

In the overall FMCG sector, rural markets continue to outpace urban areas due to increased distribution of freebies and favourable sentiment due to a good monsoon. Rural demand is anyway doing well, whereas urban markets are facing pressure and are likely to remain under strain until H1FY26, as per the report.

Companies across the FMCG spectrum have echoed this trend. Dabur says that rural India is outperforming urban by 450 basis points. Colgate says rural growth has outpaced urban for three straight quarters. Godrej Consumer sees positive momentum in general trade in rural markets, aided by its Van operation programme. ITC expects a gradual pickup in consumption driven by continued rural recovery.

Marico also highlighted stable consumer sentiment during the quarter, with rural showing recovery and urban demand being more mixed. The top 30% of urban consumers have continued to drive premium segment growth, but the remaining 70% have shown muted sentiment, according to Colgate. 

What it means for H1FY26 and beyond

While many categories are struggling due to weather-related disruptions, the overall sentiment is not one of panic—but of recalibration. Roy says that while the immediate impact on summer-centric categories is visible, it’s unlikely to affect the broader recovery trajectory of consumer demand in India.

“We’ve seen that rural has shown strength consistently over the last year. The long-term structural story remains intact, but yes, in time-sensitive categories like beverages or ice creams, once you lose the peak season, the loss is largely irrecoverable,” Roy explains.

He adds that inventory correction is already underway in many companies and that the second half of FY26 could see improved demand in urban areas as macro factors stabilise and discretionary spending picks up.