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Is UPI killing Cadbury Eclairs?

Created on 03 Nov 2022

Wraps up in 6 Min

Read by 291 people

Updated on 28 Mar 2023

Mentos…Dimaag ki batti jala de!

Well, you might just argue that it didn’t quite light up the brilliant minds of the UPI makers as they began on a journey to crush the toffee industry. Confused? Here’s an explainer: 

We all know the hassle of not having ₹2 or ₹5 change in our pockets when we go to a local kirana store or the paanwala around the corner of our street.

Do you remember which chocolate you got in return as chhutta from the shopkeeper? Maybe an Eclairs? Or an Alpenliebe? Or a Mango Bite? Well, the list goes on! 

Let’s face it, no one likes to be handed toffees every time. Additionally, it seems that inflation has pumped up the chhutta game. Now, shopkeepers sometimes don’t have change for an amount of ₹10! Now, you wouldn’t want to trade a Dairy Milk bar every time you made a small purchase, right? Thanks to UPI, now you only pay for what you want. 

Running behind in the race? 

The confectionery industry as a whole grew at a CAGR of 6.6% between 2017 and 2021. A further breakdown of the confectionery industry into the chocolate confectionery, sugar confectionery and gum segments suggests that the sector witnessed subdued trends during the period.

While the chocolate and sugar segments registered a marginal CAGR of 7.1% and 6.8%, the gum segment saw an even lower CAGR of 2.8% in terms of volume between 2017-2021

India’s top five sugar confectionery companies accounted for a 51.6% market share in 2021, with Parle Products Pvt Ltd at the top with a 15.9% share, followed by ITC Group at 15.2%, Mondelez International Inc at 7.9%, Perfetti Van Melle Group at 7.6% and DS Group at 5%. 

Toffees, caramels and nougat ruled the market with the highest retail sales, the segment experienced a CAGR of 6.7%. Boiled sweets followed with a 5% CAGR in sales. Pastilles, gums and jellies recorded the lowest overall sales, but the sector grew at a rate of 11.4%.

What seems to be the hurdle?

We have savoured these toffees for as long as we can remember. But times change. In the latest debate, some people are saying that the invention of the mighty UPI has crushed the toffee industry.

Ummm, surprising? Here’s an Insider: With the advent of digital payments, people now pay the exact amount of purchases through online payment, which leaves no scope of selling toffees in the garb of chhutta

With that being said, UPI is practically everywhere, from your cabs to your LPG booking, and it can definitely reduce the margins of shopkeepers as the ₹2 and ₹5 changes amount to a huge figure at the end of the day. With no more balance in transactions, there will be no concept of chhutta left! 

Rise of UPI and Fall of Toffee?

UPI, launched in 2016, is a system that bundles multiple bank accounts into a single mobile application. It merges several banking features, seamless fund routing & merchant payments under one hood.

UPI gave impetus to the Digital India initiative by aiming to reduce cash-based transactions. According to data by NPCI, the volume of UPI transactions grew rapidly from 14.56 crore in Dec 2017 to 456.63 crore in Dec 2021.

However, it was not a happy ride for the confectionery industry, which registered subdued growth, as shown above, during the same period. But is it wise to draw a correlation between the two?

While some have argued that the business model of the toffee industry was never based on the inefficiency of people to pay change, Abhishek Patil, founder of GrowthX, doesn’t agree. He claims, “Before UPI, shopkeepers would shamelessly trade toffees for loose cash, a transaction that wasn’t happening the other way round. With UPI, all of this stopped. People paid the exact amount that was due with no scope for change, ultimately eating up the daily toffee sales.”

According to him, popular candy brands such as Mondelez, Mars, Nestle, Perfetti Van Melle, Parle & ITC reported a steep decline in sales in 2020.

A fairly simple answer, yet unconvincing of sorts. 

Chhutta was not the only source to sell their toffees, but is it enough to uproot the business model of these companies? We’re not sure. To add more weight to our uncertain assumptions, we decided to dig into some headlines: 

1) Parle Products, a leading retailer of Kismi Toffee, Orange Bite, London Derry, and Mango Bite, registered a marginal CAGR of 0.4% in the confectionery market from 2017 to 2021. It stopped selling the 50-paise variant of these chocolates because business just wasn’t profitable in a 50-paise toffee in 2019. So, UPI was not the reason behind declining production. 
2) DS Group, the maker of the much-loved Pulse candy, registered growth in profits and profit margins in 2021. 
3) Lotte also reported record profit in 2021-22.  

By 2023, as UPI transaction volume grows to over 6,000 crore, the indigenous payment platform is set to account for more than 50 percent of India’s digital payments.

It’s a hurdle relay race, damn it!

When I talked about Alpenliebe, Mango Bite or a Kismi, for that matter, you must have been hit by a wave of nostalgia. Exactly my point! The dying trend of these toffees is not attributable only to the invention of UPI but to other converging trends as well.

I agree that an Indian Diwali would be incomplete without the Cadbury ‘Celebrations’ pack, but lately, various other brands have stepped foot in the Indian market and are satisfying the taste buds of consumers.  

As Indians become increasingly health conscious, they move further away from sweet and sugary products to healthier alternatives. While the Indian manufacturers are starting to re-make their products, the international brands are already a step ahead. With their mix of international flavours and premium experience, the international brands are giving the local brands a run for their money. 

Let’s look at some of the trends shaping the growth trajectory of global brands: 

1) Hershey’s syrups and spreads sold like hot cakes during Covid as people took up baking to avoid boredom. It introduced its chocolate bar flavours in the form of mini chocolate bites in the same flavours, thus taking care of affordability. 
2) Lindt chocolate bars replaced local brands as a premium gifting option with a number of international flavours. 

A major catalyst seems to be the chains like Laduree, House of Candy and Chocolate Kingdom, which are taking over traditional toffees as their kiosks and stores pop up in every nook and corner of malls, airports and other public places.

House of Candy boasts more than 200 stores across India and has also collaborated with names like Haldiram and Hamleys to supply its confectionery products, thereby expanding its customer base. Moreover, these brands offer premium and attractive gifting options, which is luring away consumers from purchasing local chocolates.

Wrapping Up

The confectionery industry is taking a hit, but it won’t be long before Indian manufacturers completely remodel their offerings to cater to the mix of Indian and international flavours. For now, let’s give the ‘UPI killing toffee’ debate a rest. 

Interestingly, the toffee joke has been in the news before when the RBI released a document specifying the number of notes and coins of each denomination issued since 1970 in terms of billions of rupees. The figures revealed that the production of ₹1, ₹2 and ₹5 coins/notes have grown at a negligible rate during the 1970-2010 period.

Now, this does point out the irony of the toffee joke: Seven years ago, people wondered if toffees would be the new legal tender since they were so frequently handed out by shopkeepers in lieu of small change. 

And look how the tables have turned! 

Going by this trend, I wonder whether our future generation will ever know ‘Melody itni chocolaty kyun hai?

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Deb P Samaddar

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If people could be named after idioms, Deb would be called "I'm all ears." His brain is a storehouse, ever overflowing with derelict information. So, while most things he talks about are as useless as occasion-less greeting cards, everything he writes has the potential of bagging you multiple diplomas!

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