Swiggy raises $113M - Food delivery on the rise

In 2019, India’s food delivery market saw a steady growth of 16%, with online food orders crossing the mark of $2-billion. The industry sources expect the market to cross $17.2 billion by 2023. A major factor contributing to this rise is the array of lifestyle changes in Indian society over the past few years. The millennial generation with its ever-rising income increased internet consumption and longer working hours are fueling the growth of food tech start-ups.  

But while online food delivery continues to spearhead the growth of the food industry sector, restaurants do not see any key value proposition. Why, you ask? It’s because currently India’s ever-expanding food delivery pie is cut into two halves – Zomato and Swiggy. Ultimately, the restaurants have to side with a food delivery platform charging a lower commission. There is a huge gap within the food delivery industry leaving wide scope for new players to enter and take a large slice of the pie.

Let’s look at some recent developments in the food delivery space and how it has leveled the play field for various food delivery start-ups. 

Zomato Acquired UberEats  The Gurugram-based restaurant aggregator, Zomato recently acquired UberEats India. This acquisition happens to be the first big consolidation in the food delivery industry. The pioneer food delivery giant acquired UberEats India for around $350 million (Rs.2,485 crore). The all-stock transaction gives UberEats 9.99% shareholding in Zomato. 

“We are proud to have pioneered restaurant discovery and to have created a leading food delivery business across more than 500 cities in India. This acquisition significantly strengthens our position in the category,” Zomato CEO Deepinder Goyal said.

How does Zomato benefit from this deal? For starters, it gets UberEats’ business details and Uber’s delivery partners. This includes getting information about its customers, order histories and more. The Uber app users get redirected to Zomato for the next six months, which means Zomato gets a part of the market share. 

Currently, Zomato has partnered across 24 countries with 1.5 million restaurants and serves over 70 million users every month. It has over 0.1 million (one lakh) delivery partners. After the deal, its fleet will grow somewhere close to 0.2 million (2 lakh) delivery partners, thereby overtaking the next-in-line food delivery giant, Swiggy which has 0.15 million (1.5 lakh) delivery partners.

Commenting on the development, Dara Khosrowshahi, CEO of Uber, said "Our UberEats team in India has achieved an incredible amount over the last two years, and I couldn't be prouder of their ingenuity and dedication. We have been very impressed by Zomato's ability to grow rapidly in a capital-efficient manner and we wish them continued success."

Swiggy Raises $113M in Series I Funding Round Weeks after Zomato announced its acquisition of UberEats, Swiggy bulked up some ammunition of its own by managing to raise $113 million from the biggest venture capital for food delivery start-ups, Prosus Ventures. Its new valuation now stands at $3.6 billion, which is a little higher compared to its previous valuation which at $3.3 billion. So far, Swiggy has raised $1.57 billion.

Sriharsha Majety, co-founder and chief executive of Swiggy, said the start-up will use the fresh capital to invest in “new lines of business” such as cloud kitchens and delivery beyond food items and get on a “sustainable path to profitability.”

Swiggy’s restaurant partner base has also grown to over 0.16 million (1.6 lakhs i.e. 4 times growth) with over 10,000 restaurants being added every month. As per the marketing analysis of experts, its transaction numbers have grown nearly 2.5 times since last year.  

What the Future Looks Like According to DataLabs report by Inc42, by the year 2023, the Indian on-demand delivery space is estimated to become a $12.53 billion market. The exit of UberEats from India’s food delivery scene has pitched Zomato and Swiggy against each other creating a duopoly play. It will be very challenging for both the companies to reach profitability despite the brisk pace of business. 

While the two biggies continue to lock horns, it has opened up many opportunities for food delivery start-ups to fill the gap. While the major players focus on the affluent urban Indian population, start-ups can focus on regional food delivery services in an untapped area.

How Can I Do That? If you are looking to accelerate the growth of your food delivery business, we at Illuminz can help you do that. Our approach towards consulting with an innovative outlook makes us a coveted technology partner. Your ideas could be revolutionary, and the right execution could help create an impact that defines your growth variant. You can get in touch for a consultation and we can work on building a business model using a step-by-step approach while keeping you in the loop at all times. With the burgeoning demand for online food deliveries and finite supply of means for it, this could be your chance to grab the opportunity with both hands. 

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