Deal focus: Swiggy reinforces for Indian food fight

When customers order dinner online and home delivery is late, the first course of action is to call the aggregator, which in turn calls the restaurant, which in turn calls the third-party logistics operator. The drivers often cannot be contacted. The food’s gone cold and no one knows where it is. It’s chaos. 

This common scenario has led to the demise of more than a few food ordering apps and last-mile delivery companies in the competitive Indian market. Rising to the top of the heap at the moment is Swiggy, an online food ordering platform backed by several domestic and international VCs. It has just raised a $210 million Series G round led by Naspers and DST Global. 

The deal is said to value the company at $1.2 billion and establish it as about twice the size of its closest competitor Zomato. The secret behind Swiggy’s hegemony is understood to be a focus on reducing customer frustration around late deliveries. It does this by avoiding third-party partners in favor of a network of some 30,000 efficiency-incentivized delivery people using their own motorbikes under the Swiggy name.   

“In India, if you want to be number one in food delivery, the food has to be on time every time and you have to control the logistics,” says one investor in the company. “The question has always been, why is Domino’s delivery business 50 times the size of Pizza Hut when the pizza is no better – it’s just because Domino’s gets there in 30 minutes every time.”

Swiggy will use the fresh capital to recruit delivery staff, tweak its artificial intelligence-powered dispatch software, and continue its marketing push into India’s smaller cities, which have proven surprisingly successful expansion zones. The company must also ready itself for battle: food delivery in India is considered a winner-take-all arena, and Zomato raised $200 million from Alibaba Group earlier this year. 

They are fighting over a fast-growing market driven by lifestyle changes among more affluent millennials and increased economic participation from women. Meanwhile, stagnancy in urban infrastructure development and an ongoing mobile revolution are supporting outlooks that India has a lot of room to grow in food delivery. 

As a result, Swiggy has grown its business from about 1,000 orders a day inn 2015 to around 650,000. The key to longevity when growing at this rate is to know when to slow down and tighten up the fleet, because as many of the failed players in the Indian delivery space can attest, everything depends on maintaining quality standards in logistics. 

“It is very much an execution game, unlike in e-commerce where you can give a 10% discount and the customer doesn’t mind waiting a few more days for delivery,” says the investor. “In the food market, getting a few rupees off doesn’t mean you’re willing to wait another 45 minutes to eat. When you do that in food, the cohorts you get are so unfaithful, the minute the discounting stops, they all go away.”  

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• Topics
• South Asia
• Technology
• Consumer
• Expansion
• India
• Naspers
• TMT
• DST Advisors
• Growth capital