Fast-moving consumer goods companies seem to have run into an improbable rival -- the commercial bank.
Here's how: an internal survey by a huge FMCG player has revealed that consumers are not migrating from low- and medium-end products to high-end products -- as should happen with rising income and standard of living.
Instead, they are utilising their surplus money to repay loans taken for homes, cars and other consumer durables.
In other words, consumers prefer to over-leverage themselves to attain higher aspirational goals than spend their surplus on premium toiletries.
Which, in turn, means banks are turning out to be the headache the FMCG industry did not think existed in the first place.
FMCG giants have in the past sparred with smaller fry as consumers shifted to cheaper products to get value for money, a trend, which in market parlance is called 'downtrading'. Bankers are a bit confused lot on the findings of the survey.
"Some time back, an NCAER survey clearly indicated that migration to better products was happening. People's aspiration level was going up and so was the level of surplus money. But this is something else," said a senior banker.
Another banker said there is an increasing trend among people to over-leverage as income rises.
"The aspiration level has changed. Instead of buying better soaps and toiletries, people are using their money for other things. They are buying houses, cars and white goods. Bulk of the money is going to pay off bank loans and very little is left for other things," said this banker.
Banks are also aggressively selling their products as the focus is now on retail loans with corporates shying away from bank financing.