Is UPI the boon or bane of the F&B industry?

Recently in a discussion with colleagues, we stumbled across the topic of the emergence of UPI (Unified Payment Interface) payments and how the toffee and candy business has been suffering as a result. At the outset, while it may seem vague, think about this: remember when shopkeepers would return back toffees instead of change with the age-old excuse "chutta nahi hai"? Is it starting to make sense now?

As we understand a large amount of money previously collected on a cumulative level that the vendors and shopkeepers are losing out on with the advent of cashless payments, we can't help but be grateful to the second-handed boons it has bestowed upon the Food and Beverage Industry. The days when your parents would hand you out some cash to get something from the local grocery stores and the shopkeeper would share a few candies with you instead of paying back the residual amount are way past us. And what must have felt like a lottery to you as a kid was in its true sense adding on to a pool of backhanded money that the giving party was accumulating, almost at a recurring rate.

In his LinkedIn post, the founder of GrowthX—an e-learning platform—Abhishek Patil wrote, "Before UPI, shopkeepers would shamelessly trade toffees for loose cash, a transaction that wasn't happening the other way round. These small amounts over the days did wind up becoming large sums of money, as accepted by many buyers in studies. 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."

As demonetization loomed upon the length and breadth of this country paving the way for the much-in-use and 'hip' mode of online payment getting a step closer to cashless, secure transactions, the liberty that the vendors have been explicitly exercising to hand out products worth a rupee or two has come to a screeching halt. In an Economic Times report, an expert from the market research firm IMARC pointed out that kirana stores providing toffees or candies instead of small change was a "big sales route" for candy companies. "But with the digital payment ecosystem getting more prevalent, confectionery makers have to find a way to stay relevant," the expert said.

However on the other side of the coin is Deepak Shenoy, CEO of Capitalmind, who pointed out in his tweet about Lotte's annual report. "I don't really think UPI is killing the toffee business. Seems like a figment of imagination. Here are the results of Lotte India, which is largely a boiled candy manufacturer," he added: "Their annual report says they were hurt in FY21 from schools shutting down. FY22 was bumper sales."

Additionally, the mode of UPI payments tackles the cons that come with card-based transactions. Restaurants and other eateries, big or small, in order to support debit or credit card transactions are required to pay an annual fee of nearly Rs. 6000-10000 or a commission per transaction for the machine. With UPI, all that one needs to do is download an app. And as frequently seen, maybe pay a rupee or two to get your QR code printed and pasted on the wall. Between the cashless trend and the risks associated with keeping cash in-store, more and more businesses are happily giving into the trend. The F&B industry, being a customer-heavy industry, has readily accepted the newer modes, reflecting a seamless transition from the older ways to new ones. And it cannot be denied that with the adoption of credit cards, UPI, and online payment practices, the consumption rate and overall spending potential of an individual has shot up, as also stated by Rachit Mathur, Managing Director and Partner; India Lead of BCG's (Boston Consulting Group, a global management consulting firm) Consumer & Retail Practice. In his words, "Overall online spending in India is rising rapidly and expected to grow at 25% over the next 5 years to reach over $130 billion."

The start of a new system comes with its own set of pros and cons, a fact we can't deny. However much a section of the industry has complained about the fall in sales there have also been significant and noticeable positives noticed too. To summarise we can point out and focus on the benefits viz a viz the categorical decrease in accounting errors, faster checkout process, and definitely the time that is saved in the process.

Keeping these points in mind, maybe UPI is a boon after all. And not just for the food industry. Don't you think?