India is following global trends in food delivery. There is a tight race this developing, with Swiggy taking the top position for its relentless expansion. Backed by investors Naspers, DST Global, Meituan-Dianping, and Coatue Management, Swiggy received a new $210 million capital infusion in June 2018. Consequently, Swiggy became the 11th startup unicorn in the country as it surpassed the $1 billion valuation mark. The company’s value by June 2018 was around $1.3 billion making it the leader in the food delivery business in India
Continual Growth For Food Delivery Business in India
Swiggy acquired smaller premium on-demand delivery firm Scootsy from Mumbai for $8 million on August 2. This is the second acquisition for the four-year-old company and is considered as the 11th M&A (mergers and acquisitions) in the food delivery business in India since January 2017.
Swiggy has the majority of the market share, with Zomato, another food-delivery business in India, coming to a close second with a $1.1 billion valuation. Both are the top players in India, and both are looking into consolidating for growth. Smaller companies, on the other hand, are looking to exit as they can’t scale up. Swiggy delivers an average of 500,000 orders every day using a fleet of 55,000 delivery agents. Within just a couple of months, its fleet and reach grew exponentially from just about 40,000 in June, which covered about 35,000 restaurants.
Scootsy, on the other hand, facilitates about 2,000 orders a day with its 700 delivery agents. An average order for Swiggy is at Rs 350, about $5, while Scootsy’s average order value is Rs 750, or about $11. With both combined, Swiggy can play into the mid-level and premium-level markets better than any of its rivals. This gives Swiggy a huge advantage over its competitors as it captures a market share that was previously outside its patron category.
Swiggy quickly burns through funding to maintain its place in the market. Therefore it has initiated a third round of talks with new and existing investors to raise more funds. It is expecting to reach a new valuation between $2.3 and $2.5 billion. The raise will be in the range of $250-$500m based on various sources. It held talks with an esteemed clutch of investors—SoftBank, General Atlantic, and other undisclosed Chinese hedge funds. Its previous investors still hold the largest stake in the company, at about 23%. Swiggy is the most capitalized food delivery business in India.
These investment talks spurred after Zomato was reported to be in advanced negotiations with investors Ant Financial and Temasek. Zomato could then increase its firm’s value to $2 billion. Just in February, it raised $200 million with Ant Financial and had a valuation of $1.1 billion.
Swiggy will soon be doubling down on discounts to increase its customer base while growing its reach in other cities. It also plans to establish a whole suite of services on top of its delivery services. In July it announced that it plans to roll out hyperlocal delivery operations. This is a highly focused strategy on vendor partnerships and specific geographical areas, fostering convenient commerce within small communities.
Swiggy Acquires Scootsy
Food delivery firm Swiggy made a strategic acquisition of on-demand delivery firm Scootsy, on August 2nd. It is an all-cash deal—valued at under $8 million—Scootsy’s brand name is being retained. The business provides approximately 2,000 orders each day via 700 delivery agents across its food and non-food delivery operations. On the other hand, Swiggy delivers about 500,000 orders per day and has a fleet size of 55,000 across India.
In other news, Foodpanda, which is backed by cab aggregator Ola, is in the last leg of talks to acquire Mumbai-based cloud kitchen player Holachef. The beleaguered company shut down operations several months ago. Given the company’s poor financial health, Foodpanda may have to adopt a more detailed and hands-on approach. This may include placing its executives to turn around the dying business model and make it operational.
Booming Food Delivery Industry in India
Apart from Zomato, Swiggy has a whole roster of competitors. A ride-hailing company, Ola, which acquired FoodPanda is in the final talks to also buy Holachef. Uber’s Uber Eats has also been in service for over a year. Google is also in on the game with its Areo food delivery service, which launched in India in April 2017.
Food delivery in India is at its apex. By August 1, the amount raised in the food technology industry, which includes delivering, producing and selling, reservations and restaurant reviews reached $480 million. This is three times more than the $135 million the industry earned in 2017.
With so much interest from investors, it is an industry that will only keep on exceeding targets and expectations in the coming years.