Swiggy, the prominent food delivery business in India, announced on Thursday that it has achieved profitability, surpassing its publicly listed competitor Zomato in another significant measure, just a day before Zomato’s quarterly earnings report. The Bengaluru-based startup, backed by Prosus Ventures, SoftBank, and Invesco, disclosed that it became profitable in March of this year, while excluding employee stock option costs from its expenses. Swiggy co-founder and CEO, Sriharsha Majety, emphasized the significance of this milestone, stating in a blog post, “This is a milestone for food delivery globally, not just for us, as Swiggy has become one of the very few global food delivery platforms to achieve profitability in less than 9 years since its inception.”
However, it’s important to note that Swiggy, at the company level, is still not profitable. According to insiders familiar with the matter, the startup is currently burning more than $20 million per month on its instant grocery delivery business, Instamart, even though it has significantly reduced its expenditures on Instamart in recent quarters. Majety acknowledged that Swiggy has made substantial investments in Instamart due to its appealing consumer proposition and strategic importance, but he reassured stakeholders that the peak of these investments is now in the past. He further stated, “Instamart is one of the leading players in the quick commerce space globally. In addition, we’ve also made strong progress on the profitability of the business and we’re on track to hit contribution neutrality for this 3-year-old business in the next few weeks.”
This update, shared ahead of Zomato’s earnings report, provides Swiggy with much-needed momentum, particularly as its valuation has recently been reduced by two of its investors. The competition between Swiggy and Zomato revolves around India’s $20 billion food delivery market, which has witnessed several consolidations and exits in recent years. Uber sold its Indian food delivery unit to Zomato, while Amazon exited the food delivery business in India last year.
According to analysts at Bernstein, both Swiggy and Zomato have the potential to coexist in a duopoly market structure, given the high growth potential of India’s food delivery market and the low labor costs in the country. The report highlights how food aggregators have invested in logistics to improve delivery time, efficient routes, and lower delivery costs, while cloud kitchens have focused on meeting evolving consumption trends, such as the demand for fresh, hygienic, and healthy meals.