It is a tough time to be in the restaurant business.

For instance, take La Casa, a quaint restobar in a sleepy enclave in Bengaluru’s Jayanagar area. For over thirty years, La Casa survived the vicissitudes of the notoriously whimsical restaurant business. But it couldn’t survive three months of the Covid-19 pandemic and downed its shutters earlier this week. The story is the same across India; thousands of restaurants and bars have halted operations temporarily or shut down for good.

Against this backdrop, one might assume that things are equally grim for other entities in the food chain. Like food delivery startups.

But you might be surprised.

Foodtech major Zomato seems to be not just surviving but thriving. In its recent performance “ report report Zomato Mid COVID-19 Performance Report Read more ”, Zomato claimed that the pandemic had accelerated its “journey to profitability”. The company’s chief executive officer (CEO), Deepinder Goyal, said that while business levels were admittedly lower, Covid-19 “has positively impacted the health of our business—we seem to have gained 2-3 years along this vector.”

Goyal further said that he expected the company “to make a complete recovery in the coming 3-6 months while continuing to maintain tight control on costs/profitability”. Zomato also announced that it had reinstated all the salary cuts that employees had voluntarily opted for earlier this year in the wake of the pandemic.

What explains this seemingly stellar performance?

Food delivery startups could have benefitted from the pandemic as customers, who could no longer dine out, chose to order in more frequently. Or this could also be a sign of an “emerging duopoly in food delivery” as some observers pointed pointed Medianama Zomato acknowledges emerging duopoly in food delivery as unit economics improve Read more out, alluding to Zomato and Swiggy being the last two players left standing.

If that were indeed the case, one would expect Swiggy to be in the same boat as Zomato, benefiting from the same tailwinds and business dynamics. But that’s not so.

After laying off laying off Entrackr Swiggy to lay off hundreds of cloud kitchen staff as it shuts down kitchens Read more more than a thousand employees and scaling down its cloud kitchen operations a few months ago, Swiggy laid off laid off Entrackr Swiggy lays off around 350 employees as order numbers stay flat Read more more than 350 team members earlier this week.


Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

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