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Zomato-Uber Eats deal to up appetite of global investors

, ET Bureau|
Last Updated: Jan 22, 2020, 10.49 AM IST
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The National Restaurant Association of India (NRAI) said the acquisition will have little or no impact on the broader food delivery space, given that Uber Eat’s share in the overall delivery pie was minuscule.

Highlights

  • Zomato acquired Uber’s food delivery business in India in an allstock transaction on Tuesday.
  • Smaller restaurant owners, who were on Uber Eats, complained about the app being abruptly shut down with no prior communication.
  • Zomato is incentivising Uber Eats customers with a 50% discount on their next three orders.
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BENGALURU: The competitive dynamics in India’s food delivery market is expected to remain largely unchanged with Zomato’s acquisition of Uber Eats India, restaurant partners and analysts told ET. The deal could, however, be a positive signal for global investors who were waiting for consolidation in the industry before making large bets in the highly competitive and cash-intensive sector, investors said.

Zomato acquired Uber’s food delivery business in India in an allstock transaction on Tuesday, which gives the ride hailing major a 9.99% ownership in the Gurugram-headquartered company. Uber Eats will, however, continue to operate in Sri Lanka and Bangladesh. “This year we are going to be tested on how well we execute and retain our market leadership in terms of customer service, operating efficiency and in terms of size of our business, in that order,” Deepinder Goyal, founder and CEO, Zomato said in an internal email to employees. ET has a copy of the email.

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The National Restaurant Association of India (NRAI) said the acquisition will have little or no impact on the broader food delivery space, given that Uber Eat’s share in the overall delivery pie was minuscule. “Over the last one year, Uber Eats has been a very marginal player in the whole game, with Swiggy and Zomato dominating 90% of the market,” said Anurag Katriar, president, NRAI.

However, within hours of the deal being announced, smaller restaurant owners, who were exclusively on Uber Eats, complained about the app being abruptly shut down with no prior communication.

“We have minimum guarantee tie-ups with Eats, and it looks unlikely that Zomato will get us onboard with the same terms,” said a restaurateur requesting anonymity. Brands that were exclusive on Uber Eats included London Bubble Co, Bohri Kitchen and Bombay Biryani. People in the know said shutting the Eats app immediately may not translate into Zomato getting more than 70% of the company’s customers. Zomato is, however, incentivising Uber Eats customers with a 50% discount on their next three orders in a bid to convert those customers into transacting users, which will lead to a spike in volumes.

“Profitable and sustainable business models are starting to take centrestage, with market leaders attracting a vast majority of investments, which will inevitably lead to consolidation in the space,” said Ankur Pahwa, Partner - EY.

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