India’s Swiggy said Thursday its food delivery marquee has turned profitable, eclipsing its publicly traded rival Zomato on another key metric a day before the company is set to report its quarterly earnings.
The Bengaluru-headquartered startup — which counts Prosus Ventures, SoftBank and Invesco among its backers — turned profitable in March this year, it said. However, it doesn’t account for the cost of employee stock options in the cost, Swiggy said.
“This is a milestone for food delivery worldwide, not just for us, as Swiggy has become one of the few global food delivery platforms to become profitable in less than 9 years since its inception,” says Swiggy co-founder and CEO Sriharsha Majety. wrote in a blog post.
Swiggy is still not profitable on a corporate level. According to two people familiar with the matter, the startup is wasting more than $20 million a month on its instant grocery delivery company, called Instamart. This is after the company significantly reduced its spending on Instamart in recent quarters.
Majety confirmed that Swiggy has made “disproportionate investments” in Instamart, “given the attractiveness of the consumer proposition and its strategic importance”, but claimed that the “peak” of its investments is “behind us”.
“Instamart is one of the world’s leading players in fast trading. In addition, we have also made strong progress on the company’s profitability and are on track to achieve contribution neutrality for this 3-year-old company in the coming weeks,” he wrote.
Thursday’s update, a day before loss-making Zomato reports earnings, is much-needed momentum for Swiggy, which has seen its valuation lowered by at least two of its investors in recent months.
At stake is India’s $20 billion food delivery market, which has seen several consolidations and exits in recent years. Uber sold its Indian food delivery unit to Zomato, while Amazon left that company in the country late last year.
“Facing a market with high growth potential (~45% growth CAGR), Indian food delivery platforms are in a favorable position in achieving profitability given India’s low labor costs. So in the end, both Swiggy and Zomato could coexist in a duopoly market structure. The Indian food delivery market has evolved from before 2014, when food delivery in India was plagued by many issues with unreliable delivery, high minimum orders and poor restaurant selection,” Bernstein analysts wrote in a report last month.
“The food aggregators have invested in logistics (better delivery time, efficient routes, lower delivery costs), while the cloud kitchens have focused on changing consumption trends (demand for fresh, hygienic and healthy meals).”