When out on tea breaks, we AIM journalists often return with a handful of candies and gums for the team in a ritual of sorts – all paid through UPI. So when we came across the whole ‘UPI killing candy’ saga, we were drawn in. 

Abhishek Patil, the founder of GrowthX®, appears to have initiated this discussion on Linkedin, which spread like wildfire on social and mainstream media. Patil claimed that with the implementation of UPI, consumers have stopped taking toffees casually because they no longer need to ask for change (a request which was inadvertently or by design almost always met with toffees).

After his LinkedIn post, renowned publications carried the discussion forward. However, what most forgot to consider was whether the discussion is based on correlation or causation. Yes, a few players may have recorded a decline in profits since the adoption of UPI, but a lot of candy companies have actually reported record profits since the adoption of UPI. So, taking those handful of companies with declining profit margins as the basis for making such blanket statements would be unfair – a mere assumption. Pulse candy, for instance, was launched around the same time as UPI and yet managed to be one of the largest hard-boiled candy brands in India. 

Correlation

The strongest argument supporting the theory that UPI has spelt doom for the toffee companies is that people no longer get toffees as loose change. In recent years, the use of UPI has undoubtedly increased, so much so, that it made India the country with the highest number of digital transactions. 

Additionally, Patil said, “During the pandemic, everyone wanted contactless payments. This gave a soft push to digital payments and toffee went off the picture.”  Yes, contactless payments did increase during the pandemic and it surely did help take India towards the digital ecosystem. 

But, is it causation?

In 2019, Parle Products Pvt Ltd, one of the biggest confectionery manufacturers in India, made the decision to stop producing its 50-paise retail chocolates, like Kismi Toffee, Orange Bite, London Derry, and Mango Bite. But, UPI was not the cause. In the twenty-first century, the business just couldn’t turn a profit on its 50-paise candies.

Inflation will eventually cause the confectionery industry to lose money until they periodically raise the prices of their products. Given that the cost of making candies increased during the pandemic, this may be one of the reasons why foreign brands experienced a fall in revenues in India. The growth in market share of domestic candy brands may also be a factor in some candy companies’ declining revenues. The parent company of Pulse candy, SG group, had a growth in profits in 2021, and the company’s profit margin also increased.

(SG group saw an increase in Net profit Margin)

Similarly, the stock price of Sampre Nutritions Ltd, the company that owns the Eclairs candy brand, is at a record high.

(Sampre Nutritions Ltd stock is trading at lifetime high)

Moving on to Lotte India, the company behind popular brands like Coffee Bite, Lacto King and Lotte Eclairs reported record profit in the FY 2020-21. 

Correlation is not causation

Even though the point of contention right now is toffee instead of change, candies are much more than that. One of the major target markets for candy makers is India, which has about 444 million of its population under 18. Children purchase sweets, chocolates, snacks, and other items on demand rather than in return for change. 

TechSci Research‘s data indicates that the Indian candy market had a valuation of $1643.64 million in FY2020 and that it would increase at a CAGR of 15.40% to reach USD 3661.68 million by FY2026.

Certainly, the implementation of UPI may have curbed the practice of palming off toffees as change, but that’s a positive development rather than cause for concern. However, some kirana stores AIM spoke to claimed that individuals continue to round off the amount and purchase candies in its place. Overall, UPI is not destroying the sweet sector.