Swiggy Instamart Apes Zepto With Instacafe Pilot In Bengaluru

In another category expansion, Swiggy Instamart is piloting Instacafe to deliver pre-made food and snacks along with groceries through its dark stores in certain pockets of Bengaluru.

Instacafe follows similar experiments by the Bengaluru-based delivery giant after the foray into ecommerce with Swiggy Maxx and Minis, its D2C discovery platform. 

According to a Swiggy spokesperson, “Buying pre-made food and snacks along with groceries in-store is fairly common. Instamart’s Instacafe is a similar online food counter with fast-moving snacks that are great additions to the grocery baskets of users and are delivered in minutes along with other items on Instamart. Instacafe has been live in a couple of locations on Instamart since last year.”

Sources in the company clarified that the Bengaluru launch follows a similar pilot in Hyderabad last year. The company is said to have started piloting Instacafe in Bengaluru in March this year.

The development was first reported by Moneycontrol, which claimed Instacafe currently sells unbranded food items sourced directly by the dark store managers. Instacafe offers pre-made snacks including puffs, baos, cold coffee, cookies, tarts, and more, with pricing ranging from INR 59-INR 150. Swiggy Instacafe is currently said to have about 60 stock-keeping units (SKUs), which are only available in Bommanahalli and Bellandur areas in Bengaluru. The report added that Instacafe buys food items in bulk and supplies them to dark stores, however, Inc42 could not independently verify this claim. 

The Instacafe pilot is reminiscent of quick commerce rival Zepto’s Zepto Cafe, which was launched last year. It must be noted that Zepto Cafe has gone for a hybrid approach, with a mix of branded pre-made food as well as non-branded food items. 

Swiggy’s Instamart dark stores are operated by independent sellers, as previously reported by Inc42, and the company only provides support for these sellers in selecting the right location as well as the relevant technology on the backend to accept orders from Instamart. 

As such, Instacafe may not be available in all locations where Instamart is currently operational.  For instance, Inc42 was not able to access Instacafe in Bengaluru in either Bommanahalli or Bellandur. The service is likely to be restricted to a select number of users at the moment. 

Swiggy’s Profitability Push

The Instacafe launch comes a few days after a Swiggy spokesperson told Inc42 that Instamart was on track to become “unit economics positive in a few weeks”. 

This claim came on the heels of Swiggy’s cofounder and CEO Sriharsha Majety saying that Swiggy’s food delivery business has achieved profitability as of March 2023 (excluding ESOP costs). The company did not provide any further details on these claims.  

Meanwhile, two of Swiggy’s investors have marked down the decacorn’s valuation in recent weeks. Baron Capital marked down the fair value of its investment in Swiggy which brought its valuation to $7.3 Bn, while earlier Invesco nearly halved Swiggy’s valuation from $10.7 Bn to $5.5 Bn in another markdown exercise.

It remains to be seen how the addition of Instacafe changes the unit economics situation for Instamart. Besides Instacafe, Swiggy has piloted Maxx in parts of Bengaluru to accept orders for larger items typically found on ecommerce marketplaces, including electronics and other high-value products. 

Outside of Instamart, Swiggy has spent significant resources in integrating Dineout within its app and expanding it to several cities. The company is said to have spent $150 Mn-$200 Mn to acquire Dineout from Times Internet to take on Zomato and its dining-out business.

But in its push for profitability, Swiggy has chopped off some businesses from its operations. It sold its kitchen infrastructure business Swiggy Access to Kitchens@ and also shuttered the meat & fish category and brought it under Instamart with curtailed offerings.

Quick Commerce To Quick Cafes

Archrival Zomato also forayed into the category of pre-made food delivery with Zomato Instant last year but has since revamped it to a homecooked tiffin-style meal delivery service called Zomato Everyday. So far though, Zomato’s quick commerce app Blinkit is yet to enter the ‘cafe’ space. 

Meanwhile, Reliance-backed 7-Eleven has also started deliveries of premade food items in certain parts of the country but its coverage area is currently unclear. Reliance Retail acquired rights for the famed Japanese convenience store brand in 2019 and has been scaling it up gradually. 7-Eleven India’s social media pages show maximum coverage in Mumbai, with customers able to order products via Swiggy and other apps. 

Of course, with the launch of Instacafe, the quick commerce battle seems to be shaping up into a convenience store turf war. Can Instacafe prove to be Swiggy’s trump card in the battle against Blinkit and Zepto? 

(Edited by Nikhil Subramaniam)

Update note | May 23, 2023; 11:20 AM

• The article has been edited after publishing for clarity

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