Indian online food delivery market to hit $8 billion by 2022 - GulfToday

Indian online food delivery market to hit $8 billion by 2022

Zomato-750

Zomato has acquired Uber’s food delivery business in India last week.

Rapid digitisation and growth in both online buyer base and spending will help India’s online food industry to become a $8 billion market by 2022 − growing at a CAGR of 25-30 per cent, a new report said on Tuesday.

The report by Google and Boston Consulting Group (BCG) revealed that variety in cuisines (35 per cent) was one of the top reasons for recurrent use of online food ordering apps, followed by good discounts and convenience.

“Food tech has now made its presence in greater than 500 cities in India and with consumer confidence growing, there are new opportunities for the players to ‘win with the consumer’ in an evolving market,’” said Roma Datta Chobey, Director-Travel, BFSI, Classifieds, Gaming, Telco & Payments, Google.

Peer or network advocacy (52 per cent) played a critical role in drawing people to try online food ordering for the first time.

This was followed by advertisements (19 per cent) that emerged to be a strong driver in metros and among the higher income groups across the country.

“Overall online spending in India is rising rapidly and expected to grow at 25 per cent over the next five years to reach over $130 billion,” said Rachit Mathur, Managing Director and Partner, India Lead of BCG’s Consumer & Retail Practice.

“Riding on the wave of rapid digitization and steadily growing consumption, the reach of Food Tech companies has grown six times over the last couple of years and will continue to increase further,” Mathur added.

Zomato and Swiggy currently dominate the online food delivery market in India. Zomato last week announced it has acquired Uber’s Food Delivery Business in India in an all-stock deal of nearly $350 million and Uber will have 9.99 per cent stake in the Deepinder Goyal-led food delivery platform.

The Google-BCG report also suggested that consumers have common impediments that hinder adoption.

A fifth of the respondents stated a lack of trust in the app as the main barrier to usage.

Delivery charges (18 per cent), food quality concerns (13 per cent) and lack of customization (10 per cent) are other reasons why customers have, so far, not experimented with online food ordering.

“Interestingly, these observations vary based on the maturity of the market. While delivery charges is the top reason for not ordering food online in metro cities; in Tier I cities, lack of trust in apps (29 per cent) is the primary roadblock,” the findings showed.

“Food tech startups have revolutionized the way Indians eat. Ordering food online is now a habit. There is large headroom to increase reach, engagement and usage frequency for food tech apps,” said Abheek Singhi, Senior Partner and Managing Director at Boston Consulting Group.

Meanwhile Uber has sold its online food-ordering business in India to local rival Zomato in exchange for a 9.99 per cent stake in the startup backed by China’s Ant Financial, limiting its exposure to a crowded market where it has struggled to grow.

The all-stock deal is likely to push Zomato to the top position in India’s food delivery market, ahead of Swiggy, which counts China’s Tencent Holdings as an investor.

Zomato - valued at around $3 billion after raising money from Alibaba affiliate Ant this month - said Uber Eats in India will discontinue operations, and direct restaurants, delivery partners and users to the Zomato platform from Tuesday.

“India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business,” said Dara Khosrowshahi, Uber’s chief executive officer.

Uber Eats in India accounted for 3 per cent of the business’ gross bookings globally, but more than a quarter of its adjusted EBITDA loss in the first three quarters of 2019, the US ride-hailing firm said.

Uber Eats, which also pulled out of South Korea earlier this year, said it will continue to operate in Bangladesh and Sri Lanka.

While this is the first large acquisition in the Indian online food delivery market, deal activity has been heating up globally. Earlier this month Dutch firm Takeaway.com pipped investment company Prosus to buy Britain’s Just Eat for 6.2 billion pounds ($8.1 billion). In December, Germany’s Delivery Hero agreed to buy South Korea’s top food delivery app owner Woowa Brothers for $4 billion.

Agencies

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