Industry Overview: Online food delivery Industry

India's online food delivery industry is experiencing a meteoric rise. In just a few years, it has
ballooned from a market valued at $7.4 billion in 2023 to a projected behemoth of $43.78 billion
by 2024, signifying a growth trajectory exceeding a staggering 100%. This phenomenal
expansion can be attributed to a confluence of factors. A young, digitally adept Indian population
with ever-increasing smartphone penetration and internet access is a key driver. Busy lifestyles
and a growing preference for convenience are further propelling the popularity of app-based food
ordering.

Within this dynamic market, homegrown giants Zomato and Swiggy reign supreme. These
platforms leverage a platform-to-consumer model, where they act as intermediaries, taking
orders from customers and facilitating delivery from restaurants. This approach offers a wider
selection of restaurants for consumers and eliminates the need for individual delivery setups for
restaurants, creating a win-win situation. Looking ahead, experts predict continued robust growth
as internet connectivity expands further and delivery platforms embrace new technologies to
enhance efficiency and customer experience. This, coupled with India's inherent love for diverse
cuisines, positions the online food delivery industry as a potential goldmine in the years to come.

Overview of Companies:

UberEats parent company was founded in 2009 by Garret Camp and Travis Kalanick. The company
started its food delivery in August 2014 with the launch of UberFRESH in California. The platform was
renamed as UberEats which started its operation in London in the year 2016. In August 2018, UberEats
started its delivery fees depending on the range or distance of the order placed. In the UK and Ireland, the
delivery fees are based on the value of the order. In November 2019, UberEats announced that it will
deliver the food through drones by summer of 2019. On January 21 Zomatoo acquired UberEats in the
all-stock acquisition, with UberEats gaining 9.99 per cent stake in Zomato.

Zomato is an Indian restaurant and food delivery startup founded in the year 2008 by Deepinder Goyal.
Zomato offers its services in 24 countries and in 10,000 cities. In 2011, Zomato expanded its delivery
across India in Delhi NCR, Mumbai, Banglore, Chennai, Pune, Kolkata etc.
Zomato has acquired 12 startups globally. In July 2014 Zomato acquired the startup Menu Menia. Zomato
acquired Tongue stun in September 2018, a Bengaluru startup, for cash and stock deal of 18 million
dollars. Zomato also acquired Tech Angle startup in Lucknow that worked on drones.
Zomato acquired stocks of UberEats for a deal value of 350 million dollars on 21st January 2020.

Zomato’s motive behind the acquisition of Uber Eats

Large acquirers acquire a smaller company so as to provide speedy and efficient services at a lower cost.
Zomato is a larger organisation than Uber Eats and both operated in the same line of business but Uber
was not able to influence the market.
This will help Zomato gain competitive benefits from Swiggy as the combination of Zomato with Uber
Eats will help increase its share to more than 50 per cent of the market, pulling it ahead of Swiggy.
Zomato will also have greater negotiating power with restaurants which will reduce the losses.
The discussion was going with the soft bank to consider Swiggy as Food Tech or Food Hub but now,
after the acquisition of Uber Eats by Zomato, Zomato will become the Food Tech or Food Hub in the
food market.

Why Uber agreed to sell

Uber was running in loss for a few years and its CEO Dara Khosrawasahi said that the company will only
operate in the market where it will be in the No. 1 position whereas, Zomato and Swiggy were ahead of
UberEats in India, which is why we sold it to Zomato. It has pulled back its business from Vienna and
South Korea because it was running in losses and it was not in number 1 position.

Uber was a competitor of Swiggy and Zomato which already have well-established market relations with
local restaurants and they are able to respond quickly to changes in the market such as technological
change, etc.

As per industry estimates, UberEats has 5 per cent of overall global booking in online bookings for food
delivery. In December 2019 UberEats made a huge loss of 107 million dollars.

The deal also gives Uber 9.99 per cent of ownership in Zomato which will be valued at 3 billion dollars.
This deal will give Uber a chance to recover at least the initial investment in India. Moreover, the
purchase price that is given by Zomato in buying UberEats can be used by UberEats in growing other
businesses.

How the deal will affect the customers, employees and restaurants
Swiggy and Zomato will try to attract the customers after the acquisition of Uber Eat with discounts,
offers and subsidies and this will be their ongoing strategy. Restaurants who are already with Zomato will
give a gold offer to their customers such as dining out and delivery. But restaurants will lose their
bargaining power. Also, 100 employees will be reallocated or laid off due to acquisition.
Advantages after Merger:
Increased Market Share: Zomato gained a significant boost in market share, consolidating its position as
the leader in the Indian online food delivery market. This combined entity controlled over 50% of the
market, putting them ahead of competitor Swiggy [1].

Enhanced Bargaining Power: With a larger customer base and wider reach, the merged entity gained
greater leverage when negotiating with restaurants. This could potentially lead to lower commission fees
for restaurants and potentially more competitive pricing for customers [2].

Operational Efficiency: By combining resources and streamlining operations, Zomato potentially reduced
redundancies and improved overall efficiency. This could lead to faster deliveries and potentially lower
operational costs [2].

Reduced Competition: The merger essentially eliminated a major competitor in Uber Eats, leading to a
less fragmented market. This could have benefited both Zomato and Swiggy by allowing them to focus on
improving their services rather than just competing on discounts to acquire customers [3].

Improved Restaurant Selection: With Uber Eats' customer base integrated, Zomato could offer a wider
variety of restaurants to its users. This would cater to more diverse palates and potentially increase overall
user satisfaction.

Delivery Network Optimization: Combining delivery networks could lead to a more efficient allocation of
delivery personnel. This could result in faster deliveries, especially in areas where one delivery service
might have been lacking.

Data and Technology Sharing: Both companies possess valuable data on customer preferences and
restaurant trends. Sharing this data could lead to a more personalized user experience with targeted
recommendations and potentially even quicker order processing.

Technological Innovation: Increased resources from the merger could fuel investments in technological
advancements. This could involve areas like automation, AI-powered order prediction, or even drone
deliveries, further enhancing customer convenience.

Global Expansion Potential: A stronger, combined entity might be better positioned to explore
international markets, potentially giving them a competitive edge when expanding beyond India.
Conclusion
Zomato acquired Uber Eats for an all-stock acquisition deal. This deal will provide great discounts to
customers and it will be the most beneficial to them. The stock deal is done by the companies operating in
the same line of business. Resulting in Zomato becoming number one in food marketing and food supply
or in other words as the megastar of the food business. Moreover, Uber Eats can invest their money in
other growing business.