India’s Swiggy announced that its flagship food delivery operation has turned profitable, surpassing publicly-listed rival Zomato on another key indicator a day before the firm reports its quarterly earnings.
The Bengaluru-based business, backed by Prosus Ventures, SoftBank, and Invesco, claimed it became profitable in March. Swiggy stated the expense does not include employee stock option charges.
“This is a milestone for food delivery globally, not just for us, as Swiggy has become one of the very few global food delivery platforms to achieve profitability in less than 9 years since its inception,” Swiggy co-founder and CEO Sriharsha Majety stated in a blog post.
Swiggy remains unprofitable. According to two sources, the startup’s Instamart rapid grocery delivery operation is losing over $20 million monthly after cutting Instamart spending in recent quarters.
Swiggy has made “disproportionate investments” in Instamart “given the attractiveness of the consumer proposition and its strategic importance,” but Majety said the “peak” of its investments is “behind us.”
“Globally, Instamart leads quick commerce. “We’ve also made strong progress on the business’s profitability, and we’re on track to hit contribution neutrality for this 3-year-old business in the next few weeks,” he said.
Swiggy’s Thursday update, a day before loss-making Zomato announces its profits, gives it much-needed momentum after at least two investors reduced its valuation in recent months. The $20 billion food delivery sector in India is at stake. Uber sold its India food delivery unit to Zomato, while Amazon left that sector late last year.
Indian food delivery platforms can profit from a market with tremendous development potential (~45% CAGR) due to low labor costs. Thus, Swiggy and Zomato might survive as a duopoly. “The India food delivery market has evolved from pre-2014 when it was plagued with many problems of unreliable delivery, high minimum orders, and poor restaurant selection,” Bernstein analysts noted last month.
“Food aggregators have invested in logistics (better delivery time, efficient routes, lower delivery costs) while cloud kitchens have focused on evolving consumption trends (demand for fresh, hygienic, and healthy meals).”