The culinary landscape in India is undergoing a seismic shift, driven by the rapid proliferation and widespread adoption of foodtech giants Zomato and Swiggy. However, this surge in food delivery platforms is poised to disrupt the sales trajectory of the quick-service restaurant (QSR) sector, including popular pizza and burger chains, according to a recent report by brokerage firm BNP Paribas.
The QSR Tracker report highlights the exponential growth of Zomato and Swiggy, with Zomato witnessing a remarkable surge in its average monthly active restaurant partners, skyrocketing from 61,000 in FY19 to a staggering 2.70 lakh by FY24. Similarly, Swiggy, on the cusp of its IPO debut, boasted 2.72 lakh active restaurants on its platform by the end of FY23.
This unprecedented scale of food delivery companies has not only expanded customer reach but has also facilitated greater visibility for smaller eateries. As a result, the report suggests a significant increase in the number of restaurants active on Zomato, reaching 51 times the total branded QSR stores in FY24, compared to 22 times in FY19. This trend is expected to persist, further fragmenting sales within the QSR industry and exacerbating the challenges posed by tepid demand and macroeconomic conditions.
At a segment level, the revenue growth for listed QSR companies witnessed a downturn of 9% year-on-year in Q4 FY24, contrasting with an 18% increase in FY23 for the same quarter. This decline is attributed to subdued demand, prevailing macroeconomic factors, and dwindling consumer spending.
Despite these headwinds, QSR companies remain resolute in their expansion plans, with industry majors such as Jubilant FoodWorks, Devyani International, and Restaurant Brands Asia steadfast in their pursuit to augment their foothold in the Indian market.
In response to the evolving landscape, both Zomato and Swiggy have introduced initiatives aimed at bolstering their restaurant ecosystem. Swiggy, for instance, unveiled ‘Smart Links,’ a marketing tool facilitating seamless redirection of customers from social media platforms to menu pages on the food delivery app. Similarly, Zomato introduced a daily payout feature for select restaurants, underscoring its commitment to enhancing the partner experience.
However, the competitive dynamics between Zomato and Swiggy have also led to certain challenges, including increased restaurant collection fees and the imposition of platform fees. Despite these hurdles, both platforms have demonstrated robust financial performance, with Zomato’s consolidated profit surging to INR 175 crore in Q4 FY24 and Swiggy’s operating revenue witnessing a commendable 40% growth in FY23.
As Swiggy gears up for its IPO, and with the food delivery market poised for exponential growth, the competition between foodtech giants and traditional QSR players is set to intensify. Against the backdrop of burgeoning smartphone penetration and rising online food ordering trends, the future of the food delivery market in India appears promising, with projections estimating 34.66 crore users by 2028, according to Statista.
