Last week, even as foodtech giant Zomato readied plans to cull 13% of its workforce, Hyperpure, the company’s business-to-business grocery vertical, opened its first warehouse in Mumbai. 

With this new warehouse—a 10,000 sq ft building that the company says can be expanded 3X as demand grows—the farm-to-fork supply business entered its third city. Hyperpure has been operational in Bengaluru and Delhi since 2019. It supplies fresh ingredients to some 7,500 restaurants in the two cities, claims Himanshu Kalra, Hyperpure’s business head, in an emailed response to The Ken

Now, even as India slowly crawls out of the almost two-month-long lockdown that paralysed trade, Zomato is stepping on the Hyperpure accelerator. The service is now live in Mumbai’s neighbouring city of Pune as well, with a warehouse similar in size to the one in Mumbai. 

Over the coming weeks, Zomato also plans to launch the service in Chandigarh and Hyderabad, Kalra said, establishing a presence in six cities. By the next quarter, it intends to increase this to twelve cities. 

The increased emphasis on Hyperpure comes at a time when Zomato’s core offering of food delivery has been hobbled. Many restaurants have closed—either temporarily or permanently—due to the pandemic-induced lockdown. Customers, too, are wary of ordering in. As a result, Zomato and its rival Swiggy have seen order volumes fall by 70-80%. 

Demand for Zomato’s crown jewel—its Gold membership program, which is largely predicated on dining out—has fallen off a cliff too. Zomato CEO Deepinder Goyal announced an extension of Gold memberships for existing customers by an additional six months in India and eight other countries. 

Hyperpure, on the other hand, is a rare window of opportunity in otherwise dark times. Zomato is expecting a 2-3X jump in demand for the service due to supply chain disruptions caused by Covid-19, a Zomato executive said. They declined to be named as they weren’t authorised to speak with the media. 

Pays to be organised

The decline in restaurant revenues will hit unorganised food producers the hardest due to a drop in bulk demand, according to a note from ratings agency Crisil

Crucially, unlike Zomato’s food delivery business, which is still a loss-making proposition, Hyperpure makes money on each order, several former and current executives said. Kalra confirmed this. 

This is because Hyperpure sources produce in bulk straight from farmers. It then sells directly to restaurants across categories like meat, packaged foods, fruits, and groceries. By cutting out distributors altogether, Zomato’s procurement costs dip, and it is able to pass these savings on to restaurateurs while still protecting its margins. 

Its arch-rival, Naspers-backed Swiggy, is looking to do something similar. It launched Swiggy StaplesPlus in Bengaluru a few weeks ago after running a pilot in Mumbai about three months ago, setting the stage for another showdown between the two.

AUTHOR

Abinaya Vijayaraghavan

Abinaya is a Bengaluru-based writer, covering the sprawling and exciting world of Indian e-commerce. When she is not trying to understand alpha sellers and complex supply chains, she enjoys travelling and playing badminton. Abinaya was previously a reporter at Reuters.

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