News Analysis

Zomato’s Uber Eats buy could create a duopoly, but there’s always the threat of foreign giants’ entry

Sangeetha Chengappa Bengaluru | Updated on January 21, 2020 Published on January 21, 2020

Uber Eats’ India market share is estimated at 15 per cent   -  THE HINDU

Zomato’s acquisition of Uber Eats India in an all-stock deal may appear to have created a duopoly in the $4.6-billion domestic food-tech market but it is early days yet, say analysts and industry watchers.

Prior to this acquisition, Swiggy and Zomato were the two largest brands with an 80 per cent market share. Uber Eats had a 15 per cent market share and the remaining was shared amongst multiple smaller niche players including FreshMenu, Eat.fit, Ola Foods and Rebel Foods, which has 11 brands including Faasos, Behrouz and Lunch Box. Many of these niche players are listed on both Swiggy and Zomato.

A $120-million market which recorded 40,000 orders a day in 2015, food-tech has grown at a strong CAGR of 150 per cent into a $4.6 billion market, recording 30.3 lakh orders per day as of December 2019, per RedSeer Consulting estimates.

While there seems to be no imminent competition for both Zomato and Swiggy, there is no saying what will happen in the near future, say industry observers BusinessLine spoke to.

GOJEK’s move

For instance, Indonesia-headquartered GOJEK, an on-demand provider of food delivery, transport and multiple lifestyle services on a single app, which is the largest food delivery app in South-East Asia with over 400,000 merchants, could foray into the India market soon.

Go-Ventures, the investment arm of GOJEK, had invested $5 million in Rebel Foods last year.

Additionally, GOJEK, which has a development centre here, expanded its India operations with the acquisition of AirCTO, a Bengaluru-based AI recruitment platform last June and opened its second engineering and product development centre in Gurugram.

To add to this, the impending entry of e-commerce giant Amazon, with its deep pockets, into the online food delivery service market in India could change the dynamics in the industry with a whole new pecking order emerging.

“Considering the food delivery space is still young, along with the segment’s stickiness, and given its frequency and repeat rate, and despite this consolidation that has happened with Zomato acquiring Uber Eats India, it will continue to be a competing ground for both existing and potential upcoming players. I say this because of the depth and size the market still has from a serviceability perspective,” observed Ankur Pahwa, Partner at EY.

However, in the short run, the industry dynamics will maintain status quo and the interest for companies to innovate in the space with multiple adjacent offerings will continue to be high, he said.

While Deepinder Goyal, founder and CEO of Zomato, claims that the acquisition of Uber Eats makes Zomato the undisputed market leader in the food delivery category in India, an analyst who tracks the food-tech space said it remains to be seen who is the market leader because Uber Eats India’s customer base is not exclusive — it overlaps with both Swiggy and Zomato.

Bridging the gap

“With the acquisition, Zomato will be able to bridge the gap in the top 10 cities which contributes to 65 per cent of the industry’s order volumes, because Uber Eats has largely operated only in the larger markets,” said an analyst.

While Swiggy is present in 520 plus cities, Zomato is present in 550 plus cities. Currently, of the total industry order volumes of 3.3 million orders per day, Swiggy does about 1.4 million and Zomato does about 1.1 million, which is bound to increase with the acquisition of Uber Eats.

However, the real challenge ahead for existing and new entrants to the food delivery service space would be to expand the market by getting more people to order food online.

Published on January 21, 2020
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