INDIA ONLINE FOOD DELIVERY MARKET
- Rapid digitalization coupled with a growing online consumer base and purchasing power of individuals has fostered the growth of Online Food Delivery Market in India
- In January 2021, Top 2 players Swiggy & Zomato recorded orders in volume of 1.8-2 million per day.
- Swiggy has introduced the Swiggy genie and Swiggy COVID care package along with grocery delivery services.
- Zomato has taken the company public with the first round of the IPO closing recently with 29.04 million equity bids.
- Amazon has started the food delivery service – Amazon Foods in Bengaluru delivering across 62 pin-codes throughout the city.
- College students, working couples and office goers are the key target audience of these food tech companies.
- Features that have contributed to the success of the online food delivery market in India are generating a code referral system, easy & user-friendly dashboard, social media integration, customer integration with push notification and cross-platform compatibility, etc
- Although the players are mainly concentrated in the urban regions of the country, with Bangalore, Delhi and Mumbai representing the three largest markets, vendors are now also targeting smaller cities, as they have strong growth potential.
- Furthermore, owing to the rising cases of COVID-19, some of the leading players like Zomato, Swiggy, McDonald’s Corporation and Domino’s Pizza Inc. have introduced contactless delivery services
Online food delivery assists individuals in ordering and receiving their desired food products at their doorstep. It involves browsing the website or application, selecting from a wide variety of available cuisines and making the payment through a variety of methods.
The website/application also intimates the user about the expected duration of food preparation and delivery. These features, in confluence with attributes such as ease, speed and precision of delivery, are increasing the demand for these services in India.
Variety in cuisines is one of the top reasons for recurrent use of online food ordering apps, followed by good discounts and convenience.
The online food delivery market in India is growing with the evolving lifestyle patterns and eating habits of Indians. The market is also witnessing growth on account of the increasing access to high-speed internet facilities and the boost sales of smartphones. This, in confluence with hectic working schedules and rise in disposable income for people, is propelling the online food delivery market growth in India, especially in urban areas.
Restaurants and cafes also find it profitable to sell their food through online mediums since it reduces a significant amount of operational overheads.
Moreover, the rising trend of the on-the-go food items and quick home delivery models that offer convenience, ready-to-eat options and cheaper food delivery service are escalating the demand for online food delivery services in the country.
The contactless food delivering services ensure that the food reaches the customer without being touched by bare hands and is delivered safely with adequate social distancing measures. This has alternatively proved to be favorable for the market as many people now prefer ordering food from their preferred restaurant instead of going out to eat.
INDIA ONLINE FOOD DELIVERY MARKET SEGMENTATION
By Platform Type
- Mobile App
By Payment Method
- Mobile Wallet
- Card Payment
- Cash on Delivery
- North India
- West and Central India
- South India
- East India
By City type
INDIA ONLINE FOOD DELIVERY MARKET DYNAMICS
|1||Q4-2021||Zomato announced its new platform ‘Zomato Wings’ to support financially for its restaurant partners to raise funds from investors through its platform.|
|2||Q3-2021||Reliance to set up battery swapping stations for electric vehicles transportation and also for the benefit of swiggy delivery providers, from its Jio’s-bp network.|
|3||Q3-2021||UberEats unveiled its new feature Mechant Stories in its app to display offers from the restaurants from merchants to its customers.|
|4||Q4-2021||Domino’s reduced its 30 minute delivery time to 20 minute in locations with the most store density across the country.|
|5||Q2-2021||Amazon food delivery expanded its delivery services to new locations in Bengaluru by covering key localities to reach customers.|
Order value for online food delivery apps is on the rise.
Customers ordering food online are spending about 25-30% more per takeaway, even as overall volumes continue to recover, touching about half of pre-Covid-19 numbers, according to food delivery platforms and restaurants.
The recovery in order volumes, coupled with increase in order value, has led to overall sales bouncing back by 60-65%. Some of the growth can also be attributed to promotions and discounts making a comeback.
The rise in order value is because larger quantities are being ordered with many families now working from home. Known brands among restaurants with a set hygiene protocol, as well as the launch of home-delivery by many of these premium restaurants who were earlier strictly dine-in have further helped in gaining the trust of an average consumer regarding safety and hygiene concerns.
The upward swing comes in a quarter where Zomato and Swiggy saw a significant dip in orders to less than 3,00,000 per day in April as restaurant supply and overall customer demand cratered during the Covid-19 induced lockdown.
The average order value on food delivery platforms was about Rs 320 pre-Covid-19 and has since increased to Rs 420 on an everage. This trend is anticipated to last for another three to six months at least. However, it is difficult to forecast this continuing trend once the health crisis situation improves in the country in the upcoming years.
With the relaxation in lockdowns and mandatory practices, India was hit by the second wave of the pandemic from the starting of April, as many people anticipated. Due to the second wave, lockdowns were again set in place as a result of which businesses in all the sectors suffered again.
The online food delivery app Zomato in the month of April 2021, introduced a new priority feature, it will prioritise the deliveries relating to the pandemic. It allows the users to check the option if the delivery is related to an emergency situation during checkout and payment. The app during the last lockdown also introduced the feature of contactless delivery, where the delivery partner will keep the parcel on a clean surface outside the delivery location. Due to the pandemic, restaurant owners saw a decrease of 30% as people again started to avoid going out and ordering food.
The food delivery app Zomato’s initial public offering (IPO) has also opened in July 2021. The IPO received 29.04 billion equity bids as the final count on the closing day which were against the size of the IPO being only 719.23 million. The company raised INR 4,196 crore from numerous institutional investors for an anchor book allocation. The shares allocated to anchor investors were 552.17 million equity shares at the price of INR 76 per share.
Swiggy, another food and grocery delivery app, has recently raised funding worth $1.25 billion in a round led by Prosus and SoftBank Vision Funds. The company is now valued at $5.5 billion and making strides in acquisitions and investments within the company. They are set to uplift their grocery delivery business Instamart, Supr Daily and the pick up service Swiggy Genie.
In addition to uplifting the grocery delivery services, Swiggy has also started a special COVID care package named ‘Swiggy Suraksha’ to provide support for the delivery agents and their families.
A structural change in restaurant options
Premium restaurants and food aggregators both have adopted online delivery services now in an effort to continue its operations amidst the pandemic. The adoption of online delivery by these premium restaurants is being called a structural change, adding a new category of its own, as most fine dining eateries do not expect footfalls to pick up anytime soon.
In Delhi, popular dine-in restaurants are now contributing about 5% to Zomato’s overall food delivery sales from the city. Swiggy has seen a similar uptick from premium restaurants and hotels as the company has partnered with close to a 100 luxury properties from hotel chains such as ITC Hotels, Hyatt and The Hilton across major cities.
Some of these hotel chains have tailored their offerings with a delivery-specific menu to ensure that the overall experience is best suited for home delivery as an endeavour to ensure that customers continue to enjoy their favourite cuisine through an outreach dining experience in the comfort and safety of their homes.
Recovery in Smaller cities
Migration of white-collar workforce to their hometowns, too, has resulted in a change in buying patterns and geographies and alternatively contributed to the rising demand of these food delivery platforms.
According to Zomato, with more and more professionals and students moving back to their families, orders from smaller towns and cities are leading the growth compared to the metros. This upsurge is seen more in towns closer to metros. For instance, Mysuru has seen about 120% rise in order volumes compared to the pre-Covid-19 levels in the last few months.
INDIA ONLINE FOOD DELIVERY MARKET DRIVERS
Favourable Changes in lifestyle patterns
With rise in dual-income families, especially in urban India, the way people live and consume different products and services has changed drastically in recent times. This generation sees both parents working and able enough to make individual purchase decisions with changes in routines, lifestyle and food habits.
The demand for quick access to food and one with affordable rates is on the rise. Time crunches and an increasing need to spend quality time with the majority of nuclear families living in India reaching out for fast food or takeouts to save time and energy that would otherwise go into cooking up a meal at home every day of the week. The key to its success is the easability and convenience it offers to its target consumers.
Keeping in line with the above point, there has been an astounding increase in working women. Working women end up spending most of their productive hours juggling between commuting from home or at work, therefore there is very less time to cook full blown meals at home, all by themselves.
Alternatively, working women typically spend a large amount of their disposable income on buying takeouts or eating out. This is again a key demand-driver for the food tech companies in India.
As of 2019, millennials accounted for about 60% of the overall user base of the online food delivery market. This can be attributed to the rising disposable income in the hands of millennials who prefer spending on this luxury, now seen as an essential service. Also, millennials prefer ordering food online since it provides them with a variety of options to choose from and is easy to handle and saves time and energy on cooking at home.
With a population of over 1.2billion, India is undeniably one of the biggest consumer markets in the world today. Moreover, 50% of this population fall under the age of 25, and the rest before the age of 35 years; making India among the youngest population in the world too. Most of the fast food demand comes from the age group between 18-40 years.
Further, the Indian middle-class demographic is expected to only increase in the near future, therefore Young India’s appetite is one of the key drivers for demand in the food and beverage industry on the whole.
Promising Income and Consumption Levels
With an increasing number of young Indians being productively employed in lucrative industries, sectors like IT services have contributed in improving the living standards of people and left more money in the hands of the people to spend on alternate means. The World Bank has reported a staggering 50% increase in per capita income since 2006 until now.
Thus, Urban India sees a visible change in the social setting, which further fuels the advancement of online food delivery service in India. Higher disposable income is also a key driver for other subcategories of food products and delivery services.
The major players operating in India online food ordering and delivery markets are currently focusing on their geographical expansion across various regions of the country.
Bengaluru acquired the highest quantity of online meals delivery orders, accounting for around 20 percent of the entire market share among other cities followed by Mumbai, Pune, Delhi and Hyderabad.
Food tech has now made its presence in more than 500 cities in India and with purchaser self-assurance growing, there are new opportunities for the market players to establish their market standing in an evolving market.
Word of mouth or community advocacy performed a critical function in drawing humans to attempt online meals ordering for the primary time. The trend of choosing one player over its contemporary was observed by means of advertisements that emerged to be a robust driving force in luring consumers in metros and amongst the better income groups throughout the country.
INDIA ONLINE FOOD DELIVERY MARKET SIZE
India online food delivery market size was estimated at ~$300M or 2,100 Crores INR but FY 2020 and FY 2021(estimated) earnings are estimated to grow at double digits.
By 2026, the market could grow to $XXM at –XX% CAGR
Presently, Swiggy and Zomato are dominating the food delivery market with almost 90% of the market share. In January 2021, they recorded orders in volume of 1.8-2 million per day. The market has experienced a growth and recovery of approximately 75% after the pandemic. However, the growth is also based on the increase in the prices and value of orders by a sharp 40% increase.
RECENT ACQUISITIONS AND INVESTMENTS
|1||Q4-2021||Swiggy||Swiggy invested $700 million in Instamart which provides express grocery deliveries to expand its quick commerce business to compete with its rivals.|
|2||Q4-2021||Faasos||Faasos’ company Rebel Foods acquired some stakes in Biryani Blues.|
|3||Q3-2021||Foodpanda||Foodpanda is partnered with Mumbai based Rebel Foods for the development of its business in Southeast Asia regions.|
|4||Q2-2021||BOX8||ET Medialabs provides its digital marketing and marketing analytics services to the BOX8 in its social media to promote its business and marketing.|
|5||Q4-2021||Dunzo||Reliance in talks to raise funding for the Google backed hyperlocal delivery startup Dunzo.|
|6||Q4-2021||Domino||Domino’s partnered with Revolt Motors to transform its pizza delivery motorcycles to electric two wheelers to support zero emission delivery. Revolt will supply its flagship model RV300 for Domino’s.|
Zomato has acquired over nine small delivery chains spending over millions and has invested in several sectors like the Food Tech, Facility management Tech and Logistics Tech.
- The delivery giant’s major acquisition was of Uber Eats in the month of January of last year for $206 million.
- Now the company has acquired the sports facility Fitso to expand its revenue streams in a deal worth up to $13.7 million.
- The company has acquired a number of companies till date including New Zealand based MenuMania for INR 5 crore, Urbanspoon for $50-60 million, Bengaluru based Runnr for $40 million, TongueStun food for $18 million and the drone startup based in Lucknow TechEagle innovations in 2018 but has now backed away from the deal.
- The company has invested approximately $120 million to acquire a stake of 9.3% in Grofers.
Swiggy has also started to deliver groceries, essentials and also started a pick up service Swiggy Genie. The company has made over four acquisitions and investments in several sectors such as Video creation apps, Food Tech, Artificial intelligence apps and many more. Some of the notable acquisitions by swiggy are listed below:
- The company acquired an AI startup company Kint as an Acqui-Hire where they have retained the team working in the company just to uplift the production and sales.
- It also acquired Scootsy, an on-demand delivery service primarily based in Mumbai in a deal worth INR 50 crore.
- The company acquired a grocery delivery company called SuprDaily to expand its delivery fleet. The company is speculated to invest $100 million in the company as an expansion investment.
- Swiggy food delivery platform has started grocery and household essential delivery in 125 cities after partnering with leading retailers known as Swiggy Instamart.
|1||Q4-2021||Swiggy||Swiggy records a positive growth of revenue with 56% year on year due to rise in food delivery business during Covid-19 second wave in India and also part of revenue contribution from its grocery delivery acquisitions Supr Daily and Instamart.|
|2||Q4-2021||Zomato||Zomato made INR 1,420 crore revenue in the second quarter with a loss of INR 430 crore, a 149% growth in year over year.|
|3||Q4-2021||Rebel Foods||Indian cloud kitchen company Rebel Foods operates 450 kitchens in 10 countries and has raised $175 million with $1.4 billion valuation from its investors to turn into a unicorn company. Rebel Foods also owns Faasos, an online food ordering platform.|
|4||Q4-2021||BOX8||BOX8 raised $40 million series D funding from Tiger Global and also rebranded itself as EatClub brand.|
|5||Q4-2021||Dunzo||Dunzo’s revenue increased to 67% of INR 46 crore in the financial year 2021.|
There have been some signs of consolidation in a market which has undergone several shifts in terms of strategies and operating procedures. The market share certainly belonged to the two top startups in the online food delivery space, Swiggy and Zomato.
The food delivery portal Zomato supplied its services in approximately 500 cities in India employing over 200,000 delivery agents. Swiggy once recorded more than 1.5 million orders per day compared to Zomato’s 1.3 million orders per day.
Swiggy has sanctioned an IPO deal worth $800 million from a clutch of new investors and has started the door-to-door essential and personal commodity delivery service named Swiggy Genie.
Even though UberEats, a relatively new player in the Indian market, managed to make a sizable dent in the market in terms of daily orders, it was ultimately taken over by zomato.
The online delivery giant Amazon, launched a new food delivery service in Bengaluru in May of 2020. The food delivery has now widened its scope and delivers across 62 pin codes that cover most of the key localities. The service offers food delivery from over 2,500 hygienic and popular restaurants and cloud kitchens. The prime members on Amazon receive the delivery free of cost while others pay about INR 20 for their orders.
Big food chains such as Domino’s pizza, KFC, Pizza hut, McDonald’s retain the restaurant-to-delivery services. They give an option of placing orders directly on the restaurant’s server or on any third-party apps like Zomato or Swiggy. These apps perform the platform-to-consumer distribution. During the lockdown, such food chains and big restaurants/cafes offered to deliver through their own restaurant valets which also decreased the market for food delivery giants but increased the restaurant’s revenue.
Long road ahead to Profitability
Both the companies have spent ample amounts of money trying to lure people with enticing discounts for far too long now. And as a consequence, they are yet to turn profitable (as of FY2019).
While Swiggy made losses of around 2300 crores ($ 313 M) , Zomato posted losses of close to 1000 crores ($ 136M). This despite the fact that both are approximately making the same kind of money in terms of revenues of around 1000 crores.
Zomato, however, is slowly shifting its focus to recovery from losses as compared to Swiggy who nearly doubled its loss margin from the previous year.
Difference in strategy
Swiggy and Zomato have now become synonymous with food-delivery and yet it seems as if both startups have very different ideas on how they plan to conquer the market.
Swiggy is comfortably the platform with a higher number of daily orders with over 1.5 million daily orders, to Zomato’s 1.2 million. A lot of this can be attributed to the growth patterns of the two companies. While Swiggy chose to continue to align its expansion in 2019 with the delivery and logistics side, Zomato has expanded to the media space by boosting its advertising wing and even adding a streaming service.
Zomato. It’s trying to be a one-stop-destination for foodies across the country. Whether one wants to order in, go out for a meal, or simply browse through restaurants, Zomato is the preferred app. Zomato’s focus is on food and food alone. And it wants to capture the whole value chain — from restaurant discovery to delivery.
Swiggy instead is focusing on their delivery ecosystem to explore new categories like groceries, medicines etc. They are even using their delivery personnel to run errands for people who don’t have the time to do it themselves in the form of Swiggy genie. And considering they already have huge manpower at their disposal, they can easily expand into the B2B space as well. It’s like running errands for other businesses instead of consumers. The only difference is that this area is still relatively unexplored.
So yes, Swiggy is looking beyond the food space, whilst Zomato is only talking about food. Granted both companies have their eyes set on achieving a path to profitability, but it’s clear that they are beginning to adopt very different strategies to get to the end goal.
Both companies have spent crazy money on applying different marketing strategies through a variety of media in order to engage with consumers at large and remain relevant in the rapidly changing market scenario.
On a standalone basis, Zomato increased its advertising promotional expenses 14.16X reaching INR 1214 Cr ($ 165 M) in FY19. Notably, this makes up to 39% of the company’s total expenses for the year. In comparison, Swiggy’s advertising cost was INR 776 Cr ($ 105M). This is 36% less when compared to Zomato.
Swiggy targets the demographic profile of 18-35, easily accessible through smartphones, are digital savvy and looks towards such platforms to satisfy their needs. With new ads and digital campaigns on twitter, instagram and social media websites, both swiggy and zomato have made relatable commercials. Swiggy informs its customer base about the different marketing strategies through the Ad-campaigns. For instance, they started the no-minimum order campaign and super-fast delivery feature.
Similarly, Zomato tries to include the new technologies introduced in the market to connect to the younger tech savvy generation. They posted on twitter where 3 cups of coffee are placed exactly as the different camera lenses are placed in the new iPhone 12. They also tend to emphasise on digital marketing by posting direct statements on twitter and other social media platforms in an attempt to relate to the working class people. The company has spent nearly INR 1326.6 crore on advertising and sales promotion by March of 2020 alone.
The similarity between the two is that both know how to reach out to their target audience, their main motive being food and they’ve also succeeded in passing this message through different content whether its video sharing or creative image content. They offer pure entertainment and engage with their audience through different social mediums and that is their biggest strategy.
Indulging in this ever growing advertisement war over different media has however proved to be favourable for both the company’s and their ads have been received very well by the audience and further contributed to the popularity of the two apps among new as well as existing consumers.