Acquisition of Indian operations of Uber eats by Zomato in 2020
Zomato is a restaurant search and discovery service founded in the year 2008 by Deepinder Goyal and Pankaj Chaddah. The story of Zomato started when the founders noticed that people had no idea about the restaurants that were functional in the neighbourhoods.
Hence, they thought that it would be great to list all the restaurants on the web, along with their menus. Initially, they launched the app as Foodiebay in 2008. But in the year 2010, they decided to rebrand it as Zomato.
Currently, Zomato has its headquarters in Gurugram, Haryana, India. It delivers food and provides information about restaurants also. Zomato is being operated in 24 countries, including India, Australia, the United States, etc.
About Uber Eats
In the year 2017, Uber Eats started running its operations in India. The food aggregator then had partnered with over 200 restaurants across 30 cities in India. It was reported that in October 2018, Uber Eats served nearly 3.5 million orders per month.
It was in the third spot in the food delivery market in India after Swiggy and Zomato. However, according to the Ministry of Corporate Affairs Filings, the platform wasn’t doing so well financially. It incurred a loss of INR 762.5 crores in the year 2019. Uber eats also incurred operating losses.
Acquisition of Uber Eats by Zomato
Uber Eats, much like Foodpanda, never was in the race to become a dominant player in food delivering service. It took nearly three years for Uber Eats to realize that entering a market at the growing stage is tough.
The competition between Swiggy versus Zomato resulted in the loss-making for Uber Eats to the extent that it became a piece of baggage for the parent company, i.e.dew Uber. Uber Eats never managed to gain many restaurants or customers in the Indian market, despite the company’s ride-hailing. The business dropped down with the average net revenue by 0.4% by the end of 2019.
On 21st January 2020, Zomato, the online food delivery and restaurant aggregator platform announced that it had acquired the Uber Eats business in India for Rs.2485 crores. The move is aimed to cut the losses incurred by Uber Eats.
The deal gave Uber a 9.99% ownership in Zomato. Uber Eats, in India, will discontinue operations and the users of the Uber Eats apps will be directed to the Zomato platform. Zomato’s founder and CEO Deepinder Goyal said that this acquisition would strengthen their position in the market. However, the CEO of Uber, Dara Khosrowshahi, stated that Uber will now focus more on its ride-hailing business in India, which competes with its rival Ola.
Benefits of acquisition
The acquisition has benefited both the brands as well as consumers in certain ways, as mentioned below :
• Zomato has been in a dead heat fight with Swiggy for the top situation in India’s online food-delivering business. The acquisition of Uber Eats has strengthened Zomato’s position in the segment.
• Uber Eats had been suffering huge losses due to the competition. By selling the brand to Zomato, it will now be in a better financial position.
• AFter the acquisition, Uber can now focus more on its prime business, i.e. ride-hailing business.
• Also, the exit of a player from the market will give Zomato a chance to capture the market with more customers.
• As Zomato continues to expand into newer markets, discounts and more offerings will be there to acquire consumers. Therefore, the consumers can enjoy meals at lower prices.
• Uber Eats had a more robust network in small towns and the southern region which will now get in the hands of Zomato. It will help Zomato to reach more customers.
Zomato was an ongoing business when Uber Eats entered the market. The parent brand of Uber Eats is Uber, the ride-hailing business brand. Due to the existence of two strong competitors, Uber Eats never got a chance to capture a good position in the market, and the brand incurred losses as well as operational losses.
Uber Eats is acquired by Zomato for an all-stock acquisition deal.
Zomato has expanded to 550+ cities after this deal with a commitment to operate with excellence. This deal will provide great offers to customers, and it will be most beneficial to them. The stock deals are done by companies dealing in the same line of business.
The deal will help Zomato become number one in the food marketing and supplying business. Also, Uber can now invest its money in better growing businesses. However, the competition between Zomato and Swiggy will continue to be intense.
Edited by Prakriti Arora