The 7% growth in food delivery volume during IPL 2023 was a far cry from the pre-pandemic growth of 44% and 52% recorded during the IPLs of 2019 and 2020, respectively
Redseer said that the modest numbers were a result of lower ad spends, as Swiggy and Zomato opted for muted campaigns during the IPL over ‘extravagant’ advertisements
Metro and Tier-I cities logged a growth of 6%YoY during the cricketing extravaganza, while Tier-II+ plus cities led the charts with 14% YoY growth
Reduced marketing spending in their quest to turn profitable weighed heavily on Zomato and Swiggy
during the recently-concluded Indian Premier League (IPL) 2023, with the companies seeing only a modest 7% growth in their respective food delivery business, as per a report by consulting firm Redseer.
Swiggy and Zomato opted for muted campaigns during IPL 2023 over ‘extravagant and attention-grabbing advertisements’, the report said..
“During the IPL seasons from 2017 to 2020, OFD (online food delivery) giants made a significant presence on prime-time television through their advertisements… These efforts even led to a spike of more than 50% in the IPL 2020 season. However, in the 2023 IPL season, there was a noticeable change in approach,” said Kushal Bhatnagar, associate partner at Redseer Strategy Consultants.
A cuisine-wise breakdown of numbers in the report revealed that the growth was led by sales of products such as biryani, desserts, north Indian food items and snacks.
The 7% growth in their food delivery business during IPL 2023 was a far cry from the pre-pandemic growth reported by these players. During the IPL season in 2018, Zomto and Swiggy clocked a volume growth in excess of 43% and followed it up with 44% growth in IPL 2019. In IPL 2020, the foodtech giants recorded a mammoth growth of 52%, which fell with a thud to 1% in 2021 as the second wave of the pandemic swept the country, which hampered the cricketing event.
Zomato and Swiggy saw 6% volume growth during IPL 2022 as markets opened and Covid-19 restrictions eased.
Despite the slowdown in growth during IPL 2023, Tier-II+ markets led to additional volume growth during the event for Zomato and Swiggy.
While matured markets such as metro and Tier-I cities logged a growth of 6% over the corresponding IPL period last year, Tier-II+ cities led the charts with 14% year-on-year (YoY) growth, the report said.
It also highlighted the limited impact of IPL discounts on ‘mature ordering behaviour’ in major cities and emergence of new use cases among ‘nascent food delivery users’ in Tier-II+ cities.
Profitability On The Mind
The subdued growth numbers coincide with consumer internet startups’ quest for profitability amid the funding winter and valuation cuts by investors.
Indian startups have been on a cost-cutting spree since last year, which has resulted in layoffs and sharp cuts in advertising.
The decline in ad spending was also visible in IPL 2023 as it saw reduced participation from startups.
Amid all this, Zomato and Swiggy have ramped up their focus on achieving profitability. Swiggy reported a loss of INR 3,628.9 Cr in FY22, up 2.2X YoY, while Zomato posted a loss of INR 971 Cr in FY23, down from INR 1,222.5 Cr in FY22.
Both the companies have also shut many of their underperforming verticals to cut costs.
While Zomato is aiming to report a net profit on a consolidated level in the next four quarters, Swiggy cofounder Sriharsha Majety recently said that the decacorn’s food-delivery business was in the black as of March March 2023, excluding employee stock option plans (ESOPs).
While the ongoing year is important for both the foodtech companies in terms of their profitability goals, the two seem to be well placed to make the most of their duopoly in the food delivery space. Together, they account for 90%-95% of share in the food delivery market which is projected to grow to $73.38 Bn by 2027.
