### The Value Rebound
Following over six years of focus on premiumization, India's consumer goods sector is strategically pivoting back to entry-level products and lower-priced packaging. This recalibration, driven by early indicators of demand recovery in rural areas and among lower-income consumers since December, aims to reignite volume growth. Companies are finding success by reintroducing smaller Stock Keeping Units (SKUs) and value-oriented offerings. The favorable impact of the September 2025 Goods and Services Tax (GST) rate cuts on daily-use and discretionary items has also provided a significant tailwind, making these affordability-driven strategies more viable.
### Volume Over Premiumization: The New Imperative
Companies are actively reconfiguring their product portfolios to cater to price-sensitive consumers. Emami, for instance, is prioritizing shampoo sachets and other small SKUs across its brands, including male grooming, to capitalize on the rural market revival. LG Electronics India is targeting first-time buyers with new entry-segment lines and re-entering the fixed-speed air conditioner category after a nine-year hiatus, aiming to expand its customer ecosystem through volume acquisition. Similarly, Varun Beverages has launched ₹10 packs in select eastern markets like West Bengal and Northeast India, with a surgical approach to regional deployment. Dabur has rolled out multiple ₹10, ₹20, and ₹50 packs, complementing its ₹100 offerings, while Hindustan Unilever introduced a ₹99 pack of Surf Excel detergent to attract new users to its premium segment. Colgate-Palmolive (India) has also introduced smaller packs for its premium teeth whitening range, demonstrating an industry-wide recognition of the need to balance accessibility with existing premium lines.
Industry Financial Health and Sectoral Comparison
The consumer goods sector, broadly represented by the Nifty FMCG index, has seen a shift in focus, impacting company valuations. As of early February 2026, key players exhibit varied P/E ratios: Emami stands at approximately 26.0x, Dabur India at 49.93x, Colgate-Palmolive (India) at 43.51x, Hindustan Unilever at 48.95x, and Varun Beverages at 50.80x. These figures indicate that investors are valuing earnings differently across the segment, with some companies trading at higher multiples, potentially reflecting growth expectations or market leadership. LG Electronics India's P/E ratio is around 47.5x, placing it within a range comparable to some of its Indian peers in the consumer durables space. The broader BSE Consumer Durables index trades at a P/E of 63.2x, suggesting that while individual companies may offer specific valuation advantages, the sector as a whole commands a premium based on future growth prospects. Competitors like Havells India (56.8x P/E) and IFB Industries (41.45x P/E) operate within a similar valuation framework, underscoring the competitive landscape for consumer durables.
Structural Weaknesses: The Margin Squeeze
While the renewed focus on affordability and smaller packs is a necessary strategic maneuver to drive volume, it introduces inherent risks, primarily margin compression. For years, companies prioritized premiumization, which generally leads to higher per-unit margins. The current shift implies a potential sacrifice of these margins to achieve volume growth. This strategy relies heavily on operational efficiencies and economies of scale to offset lower per-unit profitability. The FMCG and consumer electronics sectors have faced prolonged volume slowdowns due to the pandemic and elevated inflation, making a return to value packs a defensive necessity rather than an aggressive growth strategy. Companies with higher fixed costs or those heavily reliant on premium product mixes may find it challenging to adapt without impacting profitability. Furthermore, the continued presence of quick commerce, which often drives channel-specific, higher-priced packs, creates a dichotomy in market strategy that requires careful balancing.
Future Outlook
Industry executives anticipate sales volume growth to improve from the next quarter across both rural and urban markets. The GST rate reduction, effective September 2025, is expected to sustain consumption momentum. Analysts project high single-digit volume growth for the FMCG sector in 2026, supported by easing inflation, stable commodity prices, and supportive policy environments. However, the ability of companies to translate volume gains into significant profit growth will hinge on their capacity to manage costs effectively and maintain pricing power despite the increased focus on value offerings. The long-term strategy will likely involve a dual approach: leveraging affordability for broad market penetration while selectively nurturing premium segments for sustained value creation.