Uber couldn’t do what Ola did – instead joins hands with Zomato to leave behind Swiggy

• Zomato acquired UberEats in an all stock deal.
• The deal which gave Uber a 9.9% stake in Zomato, will also bring Zomato’s market share to 55%, ahead of Swiggy.
• Uber’s rival in India – Ola has understood that the food delivery business is not its game, and moved to cloud kitchens.

The Zomato-UberEats deal, which was reportedly signed at 3 am on January 21, would have resulted in a not-so-good morning for Swiggy.

The deal which gave Uber a 9.9% stake in Zomato, will rise its market share to 55%, sources told Business Insider. This will allow Zomato to become the top player in the game, dethroning Swiggy.

Zomato, which had monthly transaction volumes of 40 million will add UberEats’ 10 million users. This leaves Swiggy behind - which had around 42 million monthly users.

“This acquisition significantly strengthens our position in the category,” said Deepinder Goyal, Founder and CEO, Zomato.

As of June 2019, Swiggy was ahead of Zomato in transactional volumes with a 36.4% share, according to Data intelligence and management platform KalaGato. Back then, Zomato had just 23.78% share. Swiggy and Zomato are both present in over 500 cities and towns in India.

Earlier this month, Zomato had raised $150 million which brought its value up to $3 billion. The deal had also seen one of Zomato’s earliest investors InfoEdge diluting its stake.

The Uber-Zomato deal took months in the making. “Those who believe that Zomato has lost the battle to Swiggy, would do well to remember that Zomato operates in multiple countries and has built a different niche by focusing on Gold, which has found phenomenal success with diners,” Aman Kumar, Chief Business Officer at KalaGato had said in June.

Uber in its IPO filing in April 2019, had pegged Zomato and Swiggy as threats to its India business. In the filing, mentioning its offering UberEats, the company said that it competes with the Zomato and Swiggy, who have a “substantial market-specific knowledge and established relationships with local restaurants, affording them significant product advantages.”

Uber’s rival in India – Ola has understood that the food delivery business is not a game that’s easy for new entrants. It too had been struggling with food business. It had acquired Foodpanda in 2017, after its own tryst with food delivery – Ola Cafe, failed. Ola Cafe shut down operations in just a year after it was launched in 2015. In May 2019, it shut down Foodpanda as well.

So Ola did what Uber couldn’t do – pivoted to the cloud kitchen business and has started building its own brands under Ola Foods.

See Also:
Ola is shedding flab and getting a makeover as it rides to a big-bang IPO in 2 years