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Daily news and analysis about the food tech revolution

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Swiggy, Zomato Expand Delivery Services to Groceries and Beyond in India

Swiggy, one of India’s biggest food delivery services, announced this week it has raised $43 million as part of its ongoing Series I round. The round was led by existing investor Tencent, and new investors Ark Impact, Korea Investment Partners, Samsung Ventures and Mirae Asset Capital Markets. it brings Swiggy’s total funding to date to $1.42 billion and values the company at $3.6 billion, according to TechCrunch.

The round is also part of Swiggy’s ongoing efforts to expand its business from restaurant food delivery to include other items, including grocery, laundry, and other household items. The company says it will use the new funds to address market gaps in those areas.

Pre-pandemic, Swiggy was already headed in this direction. Two services, Swiggy Stores and Swiggy Go, launched in 2019 to deliver grocery, medicine, house keys, and many other items to customers within a one-hour timeframe.

With cases of COVID-19 on the rise worldwide, the company isn’t alone in branching out from restaurant meals — more services that traditionally peddled only restaurant food are widening the range of products they can deliver. DoorDash recently expanded its food delivery capabilities to include convenience-store items from 7-11, Wawa, and other such places. Postmates has a delivery partnership with Walgreens through which customers can get wellness products, medicines, and general household items. 

Those examples are in the U.S., though. In India, expanding into new delivery categories could give Swiggy a competitive edge at a time when the entire country is on lockdown and most business is disrupted. However, Swiggy’s biggest competitor, Zomato, has also gotten hip to the potential profitability of delivering more than just restaurant meals. The service just announced Zomato Market, which identifies nearby grocery stores delivering goods and delivers items.

Zomato also bought Uber Eats’ business in India earlier this year, creating a two-man race in the India food delivery market. With 1.3 billion people in the country on lockdown right now, there are plenty of customers to go around. Post-pandemic, whenever that is, the market may become more of a race to see which service can better prove profitability.

Indian Delivery Service Zomato Launches Relief Fund for Restaurants

Zomato, one of the largest third-party food delivery services in India, announced this week it has launched a fund to support restaurants whose business is impacted by COVID-19. All sales of Zomato Gold memberships in April will go into the Zomato Gold Support Fund, according to a blog post from the company. Proceeds from the fund go towards “restaurant housekeepers, cooks and servers in these uncertain times.”

Zomato Gold is the service’s premium membership pass that gives customers “buy one get one free” deals on purchases. For the month of April, customers can purchase a one-year membership to Zomato Gold for ₹1200 (~$16 USD) or extend an existing membership another year for the same price. Those that do, get an additional year of Zomato Gold for free.

The company notes that anyone receiving these funds will not be required to pay them back (something that’s not been the case with every third-party delivery service’s COVID-19-related offers).

India is currently in the midst of a three-week-long lockdown — the world’s largest — with all factories, markets, shops, houses of worship, and other public spaces closed for the country’s 1.3 billion people. Like other countries around the world, restaurants can continue operating for delivery, but that puts many in-house employees out of work for the time being. 

“Restaurant workers face a twofold setback, many have modest backgrounds, and coming from small towns, are stranded away from their homes,” Gaurav Gupta, the cofounder and COO of Zomato, wrote in the company’s blog post. “And a cash-strapped industry is struggling to provide sustenance for them and their families as business comes to an abrupt halt.”

Gupta recently noted that the Zomato Gold fund is currently happening in India and the UAE. 

Zomato Buys Uber Eats’ India Business for $206M

Uber Eats has sold its India business to food delivery giant Zomato for $206 million, according to an AsiaTechDaily article. The deal was first announced in January, though at the time financial terms were not disclosed. This official price tag on the deal comes from Uber’s latest filing with the US Securities and Exchange Commission.

The deal gives Uber a 9.99 percent stake in Zomato. It also dictates that Uber will shutter its Eats business operations in the Indian market and that its Eats restaurant customers there will become part of the Zomato ecosystem.

From AsiaTechDaily:

Uber said in the filing that the estimated fair value of the consideration received is $206 million, which includes the investment valued at $171 million and the $35 million of reimbursement of goods and services tax receivable from Zomato. 

Uber’s exit from the Indian market leaves just two companies competing for food delivery dominance: Zomato and its key rival, Naspers-backed Swiggy, which is India’s number one food delivery service according to estimates. Both companies process roughly half a million more orders daily than Eats had been doing in India. 

The Indian market won’t stay a duopoly for long, though. Just days ago, Amazon announced it plans to enter the Indian food delivery market with a service that would be offered as part of either its Prime Now or Amazon Fresh platform. Said service could launch as soon as this month. While the company’s entry into the market wouldn’t be a complete breeze, given both Swiggy and Zomato’s popularity, if anyone has the deep pockets and operational prowess to crush that duopoly, it’s Amazon.

Amazon aside, the Zomato-Uber Eats deal is also another step in the food delivery industry’s move towards further consolidation as these cash-burning services back out of loss-making markets. India isn’t the first market where Uber Eats has shuttered its services. In 2019, the company got out of South Korea, where Woowa Bros.’ Baedal Minjok has a 75 percent marketshare. Also in 2019, Postmates shuttered its Mexico City office.

Elsewhere, UK-based Just Eat merged with Takeaway.com to form one of the largest food delivery services in the world, and Woowa Bros. itself was bought by Delivery Hero at the end of December. These, along with the Uber Eats-Zomato deal are certainly not the last we’ll hear of mergers, acquisitions, and closings, as consolidation in the food delivery space continues. 

Newsletter: Consolidation Is Imminent for Food Delivery, Plus Customize is Coming to NYC

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If 2019 was the year restaurant food delivery companies went mainstream, 2020 is shaping up to be the year mergers and acquisitions whittle the competition among these third-party services down until just a couple companies emerge victorious.

Case in point: this week, Uber announced it is selling its Eats business in India to Zomato, a local rival that processes at least half a million more orders per day in that country than Eats does. Uber’s exit from the Indian market leaves just two major players: Zomato (which Uber will have a small stake in) and Swiggy, who also has access to deep pockets thanks to backing from investment firm Naspers.

And that news is just the latest in a series of announcements that all suggest acquisitions and mergers are the fuel pushing further consolidation worldwide in the crowded food delivery space. The ongoing bidding war over UK-based service Just Eat looks to finally be at an end, with Takeaway.com, who originally planned to acquire the company, coming out as the winner. The combined entity of Just Eat and Takeaway.com would form one of the largest food delivery companies in the world. In the States, Postmates has reportedly been exploring a sale instead of its planned IPO (which still hasn’t happened). A Wall Street Journal report from earlier this month said Grubhub had hired financial advisors to consider “strategic options including a possible sale” — though Grubhub denies the claim.

Uber’s motivation in the Zomato deal is in part all about cutting back on loss-making operations as the cash-burning business comes under increasing pressure to prove profitability over the next year. On that score, the company isn’t alone. Postmates shuttered its Mexico City operations in December. Deliveroo closed up shop in Germany last year. In 2018, Delivery Hero sold its German operations to Takeaway.com. And Uber itself ended its Eats business in South Korea last year.

Consider all that activity the tip of the proverbial iceberg. Most delivery companies are currently in the same boat as Uber, where investors are applying pressure to show the food delivery model can in fact be profitable and not just burn through money. So it’s safe to say that many services will continue shutting down or selling loss-heavy operations around the globe over the next several months and opening the door to further consolidation.  

At-home Indoor Farming Is Suddenly the New Black

There’s a new trend afoot in the connected kitchen: vertical farms built specifically for the home and meant to be used by your average consumer. 

Ever since CES, when major appliance-makers like LG and GE showed off flashy vertical farming concepts for the consumer kitchen of the future, here at The Spoon we’ve gotten a seemingly endless series of pitches and news announcements about this indoor-farm-to-table concept. The idea is simple: make an indoor farm that ranges anywhere between a flowerpot and a bookshelf in size, outfit it with accompanying technology that automates much of the actual work around growing the plants, and sell the product to consumers for, in most cases, under $1,000.

In the last several weeks alone, Rise Gardens, the Planty Cube, Miele, and many others have shown off products that hit these marks. But while there’s a lot of excitement (bordering on hype) around growing salad greens in your own kitchen, the still-nascent market hasn’t yet hit the point where the questions start to sprout up. Are these farms really as easy to use and automated as companies say? Can they actually save people money? Can individuals with a terrible track record when it comes to gardening (me) grow something that actually tastes good?

The next several months should provide some answers to these questions. 

Customize Is Almost Here!

That’s a wrap for this week. But before I go, here’s a quick reminder that we’re gearing up for Customize, our first NYC event. Personalization is changing everything from restaurants to grocery stores to our own kitchens, so join the Spoon team and our amazing group of speakers on February 27th! Just use the special Spoon subscriber discount code THESPOON15 for a 15% discount off of tickets. 

Keep growing,

Jenn


Uber Sells Its Eats India Business to Rival Zomato

Consolidation in the food delivery sector continues. Today, Uber said it was selling its Eats business in India to local rival service Zomato, according to an article from TechCrunch. The deal, which is valued between $160 million and $200 million, is effective immediately. 

The two companies have been in talks since November of 2019. With the deal, Uber will own a 9.99 percent stake in Zomato. It will shutter all operations in the Indian market, with Eats customers and restaurants becoming part of Zomato. According to TC, some Eats employees will have the option to join Uber’s ride-hailing service. The rest will be let go.

For Uber, a big part of the motivation behind the sale is to cut back on loss-making operations as it struggles to reach profitability by 2021. The company’s Eats business launched in India in 2017 but faces strong competition not just from Zomato but also another local service, Prosus-backed Swiggy. Both those competitors fulfill well over 1 million orders each day, while Uber Eats only does about half a million. 

The move to shutter operations in India is similar to Uber Eats’ decision in September 2019 to shutter operations in South Korea, where Woowa Bros.’ food delivery service Baedal Minjok owns 75 percent of the market share. 

Meanwhile, both competition and consolidation worldwide in the food delivery sector continues to intensify. In Europe, Uber Eats will have to contend with Just Eat and Takeaway.com, two companies merging to become one of the largest food delivery services in the world. Deliveroo is also a major competitor in that market. In the U.S., Uber Eats still lags behind DoorDash and Grubhub in terms of marketshare. 

All of these companies face an increasing amount of pressure to become profitable. And given the trend towards consolidation happening of late, India might not be the last market Uber Eats bows out of in the near future. 

Uber Is in Talks to Sell Its Uber Eats Business in India to Zomato

Food delivery service Zomato is in talks to buy Uber Eats’ India business, sources familiar with the matter told TechCrunch. The deal values Uber Eats’ India business at $400 million currently, and the rideshare giant would potentially be able to invest $150 to $200 million in Zomato.

The deal comes as Uber Eats struggles to stay competitive in India, where it is currently the number three player behind Zomato and Prosus-backed food delivery service Swiggy. Uber Eats currently makes roughly half a million deliveries each day, while its competitors each do well over 1 million orders daily.

Uber has been in talks with Zomato since November of this year. 

India isn’t the first country Uber Eats has backed out of. In September of this year, the company shuttered its business in South Korea, citing “competitive pressures” most notably from Woowa Bros.’ Baedal Minjok food delivery service. (The South Korean market got a further shot of consolidation last week when Woowa announced plans to acquire Delivery Hero for $4 billion.)

Uber posted over $1 billion in losses on its most recent earnings call, where it also noted that its Eats business was still losing enormous amounts of money. In India, the company projected a negative revenue of $107.5 million for Uber Eats between August and December of this year, according to TechCrunch. The company also announced layoffs, which included Uber Eats team members, in October. 

Uber and Zomato are still finalizing terms of the deal, which could go through before the end of this year. The $150 to $200 million investment would give Uber a sizable stake in the Zomato and therefore entry back into India’s food delivery market. The combined forces of Zomato and Uber Eats would make for the largest food delivery service in India, ahead of Swiggy.

Swiggy Goes Beyond Food Delivery With New Service Swiggy Go, Expands Swiggy Stores

Today, India-based delivery service Swiggy took a few steps beyond the food world by launching Swiggy Go, an instant pickup and drop-off service that will deliver everything from laundry to house keys.

Swiggy Go is similar to another service, Swiggy Stores, which the company launched in February of 2019 for delivering household items like groceries and medicine within a one-hour timeframe. It’s also another example of a food delivery company branching out from restaurant food in an effort to become a kind of delivery superpower that can get any item to any person in major cities.

In India, Swiggy competes most closely with another food delivery service, Zomato, but adding non-food items to its delivery capabilities means it will also now be competing with Google-backed concierge service Dunzo, who operates in a handful of cities in India.

Food tech investment in India in general is heating up. In August, ecommerce startup FreshToHome raised a $20 million Series B round. Amazon said in July it is planning to launch a restaurant-delivery service in the country later this year, and Zomato successfully tested a drone pilot this past summer.

It’s possible Swiggy’s sudden move into non-food items is an effort to stand above the rising competition levels in India and become the go-to service in India not just for restaurant meals but for anything a person could want conveniently dropped at the front door. That may be necessary as heavyweights like Amazon — a name basically synonymous with conveniences — plans its moves in the country.

We’re seeing a similar trend start to take shape here in the States: last week, DoorDash announced it is working with Mercato to delivery groceries in 22 different states. It could be only a matter of time before Dashers start dropping non-perishables at your door, too. The next big question is, Will other third-party delivery services do the same?

Swiggy Go is currently available in Bengaluru. The company said it plans to expand the service to over 300 cities. Meanwhile, Swiggy stores will be available in all major metro areas by 2020.

Zomato Successfully Tests Drone Food Delivery in India

Indian food delivery service Zomato successfully tested its drone program this week, bringing the world one step closer to getting their dinners dropped off by air.

From the Zomato blog post announcing the test flight:

We met all our parameters and were able to cover a distance of 5kms, in about 10 minutes, with a peak speed of 80 kmph, carrying a payload of 5 kgs – using a hybrid drone – fusion of rotary wing and fixed wings on a single drone.

As Zomato points out, for a crowded city like Delhi, congested streets and sidewalks make fast food delivery near-impossible. Drones, on the other hand, can fly high above the masses of people and cars to zip across town and deliver a hot meal before it gets cold.

Zomato’s news came on the same day Uber Eats announced it was looking to fire up its drone delivery program this summer in San Diego, and a week after Amazon said it would begin commercial drone delivery within months. For its part, Google’s Wing division has already been testing drone delivery in Australia, and earlier this year got FAA approval do to commercial drone delivery in the U.S.

Zomato, like Uber Eats, isn’t focusing on drone delivery to your front door. Zomato said that instead it would create a launch facility near a cluster of restaurants, and then drop off at a hub near densely populated areas. From there, presumably either a person or a rover robot would make the last mile drop off to the customer. This hub and spoke model has the advantage of requiring fewer flight paths that need regulation/supervision. 

I’ll admit that I was initially skeptical about drone delivery. The rules and regulation around them are complex and still being worked out. Drones make lots of noise. And if a drone malfunctions, it can crash into buildings or worse, plummet from the sky and injure people.

But every company getting into the drone business is obviously aware of this and going to great lengths to publicly highlight their safety protocols. The Zomato blog post made a point of this as well, writing:

The final design of our drone is lightweight, and treats safety as a top priority. It has inbuilt sensors and an onboard computer to sense and avoid static and dynamic objects, overall making it more efficient for autonomous flights. Although being fully automated, each drone is currently being tested with (remote) pilot supervision to ensure 100% safety. Over time, as we have more data, we might not need remote pilot supervision.

If safety protocols and flight paths can be worked out, then drones do provide an efficient way for restaurants to make deliveries in big cities.

Zomato Acquires TechEagle Innovations for Drone Delivery of Food in India

Restaurant discovery and food delivery app Zomato announced yesterday that it has acquired drone developer and fellow Indian startup, TechEagle Innovations. Terms of the deal were not disclosed.

Zomato currently works with 75,000 restaurants to deliver food in 100 cities in India. With the TechEagle acquisition, Zomato plans to build out a network for aerial food delivery in its home country. Food delivery is playing an increasingly important role for the company, and has jumped to 65 percent of Zomato’s revenue in December from 35 percent back in January of this year.

Now the company is looking to take its food delivery business sky high. Literally.

In a press announcement (courtesy of The Hindu Times), Zomato Founder and CEO Deepinder Goyal said, “We are currently at the early stage of aerial innovations and are taking baby steps towards building a tomorrow wherein users can expect a drone to deliver the food they ordered online. We believe that robots powering the last mile delivery is an inevitable part of the future and hence is going to be a significant area of investment for us.”

Goyal’s words come just a couple of months after it was uncovered that Uber wants to greatly accelerate its own drone food delivery ambitions for Uber Eats, potentially coming to market as soon as 2021. And this summer, Amazon re-emerged in the drone delivery discussion with a patent for in-flight recharging of drones.

But up until this point, Uber and Amazon have been all talk–with good reason. Here in the U.S., regulations around drone and commercial drone operations have yet to be defined. Issues around where drones can fly, safety measures, noise ordinances and even infrastructure still need to be worked out. I’m not familiar with regulation in India, but Quartz reports that a pizzeria launched delivery by drone four years ago, only to have it abruptly halted by local authorities over permissions and security threats.

Four years is a long time in the tech world, and Zomato seems to be undaunted. Even if it is just “baby steps” at this point, the TechEagle acquisition is a concrete move towards food delivery flying overhead. Success in India, however, won’t guarantee global success, as Zomato will still have to navigate the patchwork of drone laws that will emerge in each country.

Cloud Kitchens: Why Some Restaurants Are Ditching Everything But The Kitchen

A restaurant with no tables, no chairs…no customers.  Sound strange? It could be the future of dining.

We’re talking about “cloud kitchens,” a new concept in restaurants–mini-kitchens that only cater to online food delivery orders.  No dine-in and no customer take-out either, just online order delivery.

A recent trend beginning to take hold in certain regions, particularly India, cloud kitchens are emerging to economically meet the growth in online food ordering.

With more people ordering online delivery, and fewer going out to eat, many restaurants in India struggle to stay above water, especially given the high costs associated with the traditional restaurant model like premium real estate and wait staff.

Several chains in India have shut down their traditional restaurants and are transitioning to cloud kitchen, or kitchen-only operations.   Because cloud kitchens do not serve customers on-premise, there are huge savings in renting in non-premium locations, and a cloud kitchen can function in just around 300 sq ft of space, much less than a restaurant that needs to accommodate dining space.

Spring Leaf Retail and TMA Hospitality Services, both fast food retailers in India, have begun converting traditional restaurants to cloud kitchens in order to cut costs and meet transitioning customer preferences.

Food aggregators are also getting involved in cloud kitchens.  In January online food aggregator Swiggy launched its first cloud kitchen, “The Bowl Company,” and in March Zomato also entered the cloud kitchen market.

Zomato’s cloud kitchen project, dubbed Zomato Infrastructure Service (ZIS), aims to help restaurant owners to start a cloud kitchen without the infrastructure cost.  Zomato will create kitchen pods, each housing up to four different mini-kitchens, which restauranteurs can then rent space in.

With Zomato providing the real estate and the equipment, the restauranteur can just walk in and start cooking.  To further cut costs, Zomato is using its data to identify recently closed restaurants from which it acquires kitchen equipment at deeply discounted prices.

Walk in, walk out, no commitments

Zomato wants to eliminate start-up barriers for restaurants.  They’ve done this by absorbing infrastructure costs and also by not locking owners into long-term commitments.  Restaurants can leave at anytime if they aren’t making money.

Zomato will charge restauranteurs a percentage of their revenue, but there will be no fixed costs associated with the service.  Restaurants will also pay a fee for additional services rendered by Zomato including order lead generation and advertising.

Shared resources

These cloud kitchen pods not only eliminate infrastructure costs and high rent, but promote shared delivery personnel to offset delivery costs.

Zomato will also offer a front where customers can select dishes from different restaurants, and have them delivered in the same order. Kind of like a virtual food court where consumers can pick from multiple restaurants, all located in one (online) location.

It was not stated whether the restaurants needed to co-exist in the same pod to be packaged in the same delivery, but it is assumed that this will be the case.

ZIS was launched in early March, with the first pilot kitchen set up in Dwarka.  This is anticipated to be the sole location initially, with plans to begin building additional kitchens mid-year based on results of the pilot.  Zomato has stated it is their goal to have 100 of these locations by year-end 2018.