Swiggy, the food-tech startup that is now a unicorn, is all set to acquire Uber Eats, the food delivery business by the ride-hailing company Uber. The deal, if finalised, would give the food-delivery firm a stronger hand to take on its competitor Zomato. According to a report in the Economic Times, Swiggy‘s deal with the ride-hailing firm is in final negotiation round and is expected to close by next month. According to reports, this would be basically a share deal, which will give Uber 10 per cent of stake in Swiggy.
Not a bad deal for Uber, we would say, as it really needed to realign its focus. Uber is in stiff competition with Ola in its ride-hailing business. If Uber divests or exits from food delivery distraction, it could consolidate and focus on its primary beat that is on a fast lane to growth. Both the firms have been at loggerheads since San Francisco-based Uber entered India in 2013, two years after Ola was founded. Recent reports suggest that Indian startup Ola could be inching ahead with Uber getting oddly distrait in fighting Zomato and Swiggy.
Apart from Swiggy, Uber was also reportedly in talks with Zomato, which apparently didn’t work out.
Why it makes sense for Uber
Uber Eats was a success for Uber, it did take off well however, the did burn a lot of cash for discounts and advertising to make it popular. The company grew seven-fold between September and December 2018. Despite all the shine, Uber Eats was behind Swiggy, valued at $3.3 billion, the market leader by a substantial margin. Swiggy delivered 8 lakh orders a day in December 2018, while the second largest Zomato was at 6.5 lakh. But Uber Eats delivered just 1.5 lakh orders in December. This data was not encouraging.
The deal is signed, it would be in line with Uber’s strategy to cut down on losses as it prepares for a IPO at a valuation of $120-150 billion.
Arch rivals Zomato and Swiggy have been competing for the top slot in the food-tech segment hottest sectors for growth with Swiggy emerging as a winner by the end of 2018. Currently, Swiggy is in more than 44 cities and is planning on international expansion (though we cannot confirm this report). Business model for Swiggy is that the Indian unicorn charges between 15-40 per cent in commission to restaurants and for smaller orders, customers pay an additional delivery charge of around Rs20-Rs30 depending on the city.