Swiggy’s Delivery Business Achieves Profitability in Food Services Industry

India’s Swiggy announced that their main food delivery business has become profitable. This comes a day before the company plans to report quarterly earnings, which adds an indicator for their publicly traded rival Zomato. The start-up based in Bangalore has become profitable in March 2021. However, employees’ stock option costs are not accounted for in the company expenses. Swiggy CEO Sriharsha Majeti mentioned that Swiggy became one of the few global food delivery platforms to achieve profitability in less than nine years of existence.

Despite this, Swiggy isn’t yet profitable at the corporate level. The company still spends over $20 million every month on its grocery delivery business called Instamart. This information comes from two people familiar with the matter. The company has reduced its spending on Instamart in recent quarters. Majeti admitted that Swiggy had invested disproportionately in the Instamart service. He also wrote that Instamart is one of the leading companies in the global quick commerce space and that they have made great strides in terms of business profitability.

Swiggy’s recent update is shared on the eve of loss-making Zomato’s earnings release. This report provides much-needed momentum for Swiggy, which has had its valuation cut by at least two of its investors in recent months. The market for food delivery in India is worth around $20 billion, and several consolidations and exits have taken place in recent years. Companies such as Uber sold their Indian food delivery unit to Zomato, while Amazon exited the Indian business in late 2020.

According to Bernstein analysts, India’s food delivery market can have high growth potential and can lead towards profitability considering India’s low labor costs. Therefore, both Swiggy and Zomato may coexist in a duopoly market structure. However, Indian food delivery has unreliable delivery, high minimum orders, and inappropriate restaurant choices, which the companies have to tackle. Food aggregators have invested in faster delivery times, efficient routes, and lower delivery costs. Meanwhile, cloud kitchens are focused on evolving consumption trends, such as the demand for fresh, hygienic, and healthy meals.

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