No, UPI alone is not behind the fall in candy sales in India

A debate is currently going on about whether the adoption of the Unified Payments Interface or UPI has contributed to a sharp fall in candy sales in India. To help your memory a bit, remember how many shopkeepers use to pass on candies to customers instead of tendering exact change citing a lack of coin/s with most buyers unwillingly accepting them. That, however, has changed in the latest trend, as per many on social media, with Indians relying on UPI to pay for the smallest of purchases. 

For starters, it is true that candy or toffee sales in India slumped in recent years – falling from 7 per cent of turnover till the 1990s to merely around 3 per cent by the mid-2000s. But, the widespread usage of the UPI for payments isn’t the primary reason for falling candy sales. 

Zee Business spoke to leading manufacturers to get to the bottom of it and discovered interesting trends that tell multiple factors like shutting down of telephone booths, the outbreak of Covid, and the preference of consumers for chocolates are responsible for the fall in candy sales. 

What were the major blows to the candy industry?  

According to Marketing leads from the leading confectionary companies the candy industry flourished in India between the 1990s till mid-2000s when branded toffees were sold at 50p – Re 1 per piece and local candies were even available at 10p – 50 p per piece.

“During PCO and coin crunch period sugar confectionery used to contribute 12% of his total tonnage and 7 per cent of turnover, which died down by almost half post PCO era,” recalled Anirban Basu who was a frontline Sales Executive of Nestlé.  

He mentioned that when the PCO was in full form in India, Nestle used to sell more than 8 per cent of sugar confectionaries per month, whereas the sales touched as low as less than 3 per cent per month at a time after the fall of the PCO business. According to him, branded confectionery is sinking as consumer preference is changing towards chocolates and premium imported confectionery. 

Marketing executives of Parle also acknowledged that the market of candies was affected as candies stopped being the replacement for coins in grocery stores and other departmental stores.  Although the company figured out some other ways to generate revenue, Covid hit the industry badly.

On one side, while sale has been impacted due to the fast acceptance of technology like UPI, on the other hand, new avenues have popped up, according to the sales heads of many companies. The lockdown during the pandemic had an impact on the sales of confectionery. “Before the pandemic, students used to spend daily some amount of their pocket money on buying confectionaries on their way to school. But since the schools were shut during the pandemic, sales of out-of-home categories like confectionery got affected,” said Krishnarao S Buddha, Senior Category Head, of Parle Products.

How has the profit margin pattern changed?  

Be it leading market players like Parle, and Nestle, or small-scale manufacturers, both acknowledged the fact that they hardly manufacture 50p candies these days. Moreover, even if they manufacture, the share of profit coming from those low-cost candies has gone down considerably.

“The profit margin has not been affected as we have focused on manufacturing candies and chocolates costing Rs 5 or more. Children these days want to have bigger candies or chocolates. Their tastes have changed,” added Martina Jaiswani, founder of Kamco Chew Food, a candy industry based in Indore. But the marketing team also acknowledged that previously, if the sale of low-priced candies (50p and Re 1) contributed around 60 per cent to the total profit of the company a few years ago, now it has changed. These days such candies contribute to around 40 per cent of the total profit generated by the company.

Even the marketing team of Parle seconded the opinion. “Previously, the confectionery priced at 50p or less used to contribute to more than 70 per cent in profit but now the candies available at 50p don’t contribute more than 20 per cent to the total profit. One key reason for this change is the rapid transition to Re.1/- price point from the 50p price slot,” said S Buddha.

No impact on profit margins  

Emerging channels like E-commerce and Quick Commerce have more than filled up for the expansion and increase in consumption of confectionery. According to the leading brands, it has been observed that more and more consumers have started consuming confectionery in-home and as a dessert as well, opening yet another avenue for growth in sales of confectionery. For example, if people preferred buying a single one-rupee candy previously, now they prefer ordering the entire packet online.

“The éclair business was a part of our business that delivered good growth. However, in the past as a strategic business decision, we consolidated our product portfolio, focusing only on our core confectionary business, within which we continue to innovate and renovate our portfolio,” said Nestle India spokesperson.