There was a time when startup investor wisdom decreed it difficult, if not impossible, for Indian startups to compete with and win against global majors looking to expand into their domain in India. The Uber of India would be Uber, and the Amazon of India would be Amazon. On 21 January, when food tech major Zomato announced its acquisition of Uber Eats’ Indian business, that thinking went out the window.
According to a stock exchange filing made by Zomato shareholder Info Edge, the deal was an all-stock transaction, giving Uber a 9.99% stake in Zomato. Effective immediately, Uber will discontinue its food delivery operations in the country and redirect restaurants, delivery agents and app users to Zomato. Severance packages have been offered to the 250 employees still at Uber Eats India, with the added option to apply for other openings within Uber India.
The deal represents a reversal in fortunes that few saw coming when Uber Eats launched in the country, circa 2017. At the time, it was expected to leverage Uber’s popularity to displace incumbents Zomato and Swiggy. Indeed, when Uber Eats launched in India, it was part of an important strategic initiative for Uber worldwide.
According to its IPO filings in March 2019, Uber Eats was catering more than 15 million meals a quarter, partnering with over 220,000 restaurants in 500 cities worldwide. In a subsequent financial update, Uber had said that Eats was hitting a revenue run rate of nearly $400 million per quarter and growing at more than 100% year on year. “The company hopes to keep expanding to be the first or second-place service in every market”, Uber CEO Dara Khosrowshahi had said.
But at least in India, that never happened.
Uber Eats never bettered its position as the #3 runner in India’s food delivery race. Instead, Zomato and Swiggy forged ahead, their appetites seemingly insatiable. The signs that Uber had given up the ghost in this battle have long been evident. Reports of Uber Eats India being up for sale but unable to find a buyer have swirled around for well over a year. The question, then, is what finally turned Zomato’s head? And, perhaps more importantly, what does this mean for the foodtech duel Swiggy and Zomato find themselves locked in?
To answer those questions, we need to retrace Uber Eats’ journey to obsolescence in India.
Apples and Oranges
For Uber, adding food delivery on top of its core ride-hailing service was a representation of the “power of the Uber platform”. It wanted to leverage the large base of Uber drivers to offer new services to the hundreds of millions of users who were already active users of the ride-hailing app.
While this “super app” idea is fine on its own, the failure of Uber Eats in India shows that the devil is in the details.
