With UberEats in the bag, Zomato breaches Swiggy’s stronghold on food-delivery business in South India

Sunny SenJan 21, 2020 13:52:21 IST

The battle for a bigger share in South India’s online food-ordering space just got spicier.

With Zomato acquiring UberEats, the Gurgaon-headquartered company will finally have a decent presence down south, a market dominated by Bengaluru-based Swiggy. Zomato on 21 January announced it had acquired UberEats in an all-stock deal, where Uber gets 9.99 percent stake in the Indian startup.

“(The deal) was not about market expansion… It was about market consolidation,” said a Zomato executive on the condition of anonymity. “The deal makes us the clear leader in the food delivery space.”

The deal, which the Economic Times says is worth $350 million, values Zomato at $3.5 billion.

Both Swiggy and Zomato have a presence in 550 cities, but their markets are different.

Zomato is strong in the north, which accounts for almost 70 percent of the 36 million orders it gets in a month, company sources said. It is the other way round for Swiggy, with the south contributing to about 70 percent of the 42-45 million orders it services in a month.

Sixty-five percent of UberEats’ 10 million orders came from the south. Put UberEats and Zomato together and the count for southern India can go up to about 14-15 million orders a month. According to a second source, UberEats had 30 percent of the market share in the south, second only to Swiggy, which dominated the market with 55-60 percent share. Zomato was a distant third.

Zomato and Swiggy are in merger talks. Image: Getty

The competition in Indian online food delivery space is only going to get fierce as the market grows. The market will be worth $12.53 billion by 2023, according to DataLabs by Inc42. UberEats will add muscle to Zomato’s fight.

Lunch and dinner counted for the bulk of Zomato orders but UberEats was strong in the breakfast and snacks segments, said the Zomato executive. And, South India loves its breakfast, especially when it is ordered online.

“The deal creates a duopoly in the market and the competition will be between Zomato and Swiggy, especially now, with Zomato making inroads into the South,” said Sanchit Vir Gogia, chief analyst and founder of Greyhound Research.

Without considering customer overlap, the UberEats deal clearly puts Zomato ahead. The country-wide combined order volume of Zomato and UberEats will be 46-47 million, while for Swiggy it will be 42-45 million.

When talks to sell UberEats began, Swiggy was in the running. “But they were asking for an unrealistic price, so we decided to expand on our own,” said a Swiggy executive on condition of anonymity.

Swiggy scaled up to expand its presence in South India, the reason why it was eyeing UberEats. “That advantage is lost now,” the Swiggy executive said. “The deal will also not affect our market-share position. There are overlapping users for UberEats and Zomato.”

It remains to be seen who will lead the lucrative but fiercely competitive food delivery space, but Satish Meena, a senior analyst with Forrester Research, said Swiggy would continue to be the leader despite Zomato bagging UberEats.