FMCG and retail stocks are under pressure as inflation concerns and weak monsoons threaten India's consumption narrative. Nestle India shares plunged 8% on Thursday amid growing worries of cost inflation.
However, Manoj Menon, head of research and consumer analyst at ICICI Securities is of the view that diversified and premium-focused businesses such as Nestle could benefit from steady urban demand. In contrast, Dabur India and Emami are exposed to the risk of weak rural incomes.
Retail giant Avenue Supermarts (DMart) is also struggling with margin woes and intense competition from quick commerce (QC) companies. Rather than attempting to replicate 10-minute delivery models, Menon said that DMart's strongest defense is leveraging its price advantage where QC networks cannot compete profitably. Edited excerpts:
DMart’s retail productivity is under pressure. This is mainly due to competition from quick commerce and changes in DMart’s store network. Store-level analysis shows that about 80% of DMart’s trade areas already overlap with quick commerce services. These services are taking away frequent, small top-up purchases because they are more convenient.
At the same time, mature metro stores are reaching their physical capacity during peak hours. DMart’s rapid expansion—adding about 85 stores in FY26 to reach 500 stores—has also led to some cannibalization. New stores in tier-1 and tier-2 markets are growing faster than the company average, but they start with lower sales and take longer to reach full potential. In addition, high-margin general merchandise and apparel (GM&A) has stayed at about 23% of revenue, providing limited support to overall store sales.