Pushing value meals and 10-min food delivery to revive growth: Swiggy's Rohit Kapoor
Amid a slowdown in the food delivery market, aggregators are chasing the next phase of growth with Bengaluru-based
Swiggy
focusing on three areas to drive demand. These are expanding in
delivery-friendly categories
, targeting low-frequency users with value options and scaling its 10-minute offering to unlock new use cases, Rohit Kapoor, the company's food marketplace CEO, told ET in an interaction.
Rival Eternal's chief executive, Deepinder Goyal, also told ET in a March interview that its food delivery platform
Zomato
was planning to roll out multiple new initiatives to tackle the slowdown.
For the January-March quarter,
Swiggy
's food delivery segment marked 17.6% year-on-year growth in gross order value, narrowly missing the lower end of its 18-22% guidance.
Zomato
posted 16% growth.
"There's significant headroom for growth when you look at the broader market landscape. Even in major metros like Delhi-NCR or Bengaluru, penetration levels don't come close to global benchmarks. This isn't just about food delivery…it reflects a gap across the entire food ecosystem,' Kapoor said. 'The real issue lies on the supply side, not the demand side. It often appears to be a consumer problem because consumption trends and income data are easily tracked, but the supply constraints are far less visible."
Reviving growth in food delivery is crucial for Swiggy and Eternal, as both companies are investing heavily in their
quick commerce
businesses — denting the profits from food delivery, which remains their largest revenue driver.
Supply-side constraints
Kapoor underscored the need for more restaurants to open to address the latent demand for food delivery, which is increasing as a result of systemic long-term changes such as growing GDP per capita, increased participation of women in the workforce and evolution of eating habits.
But he also acknowledged the bottlenecks.
'Structurally it's very hard to open a restaurant. The constraints are very local in nature. It's getting better but still not there yet. The biggest acceleration in the food business has come on the back of aggregators,' he said. On one hand there are debates and discussions over commissions, while on the other, operation of cloud kitchens has become much more viable, he said.
Admitting the need for a greater level of dialogue between restaurants and aggregators over issues such as platform commissions, Kapoor said the architecture of economics has changed over time.
'I acknowledge there's a dialogue to be had, but like any industry, there's a normal curve…some players are deeply profitable, others are not. You have to look at the full picture. For instance, in a world without aggregators, opening a restaurant in Bengaluru meant a 2-3 km catchment area. Today, that's expanded to 10 km. The market has grown fourfold (for a restaurant) without a single rupee of added capex (capital expenditure),' he said.
To cover the whole of Bengaluru, restaurant chains would need to open 40 outlets if aggregators were not present, he said, adding that with the platforms, they could do it with 8-10 restaurants.
'There's a cost to delivery, and someone has to bear it because consumers aren't willing to pay the full price. It's a shared cost. The commission we charge is visible, but the loss we incur on delivery isn't,' Kapoor said. 'Our industry has two players, who are doing decently well, but it's not a supernormal profit situation at all.'
Next phase of growth
Online food delivery, which is present in around 700 cities in India, is unlikely to see further growth from geographical expansion, Kapoor said.
'The growth in food delivery will not come from geographic expansion anymore. It's there in roughly 700 cities already. The density of cities is increasing, which is a much bigger vector of growth,' he said. 'More and more categories will have to become delivery friendly. A few years ago tea or coffee wasn't a delivery friendly category but now the restaurant industry has figured it out.'
He also pointed out that the segment will find growth from a push towards value — something which Swiggy is experimenting on. 'The growth is not going to come from the highest frequency user ordering more. It is going to come from 'new-to-category' consumers or low frequency consumers,' he said. The company, which went public last year, has launched value offerings targeted at students and junior-level corporate employees.
Swiggy is doubling down on
10-minute food delivery
through its Bolt offering, where it aggregates restaurants doing quick delivery. Bolt, which now contributes 12% to Swiggy's food delivery volumes, is at the heart of the company's push for growth and market share in this segment, ET reported on May 12.
'Quick commerce has shown that anything you deliver fast has legs…and it has reshaped the expectation for everything else. If you look at food, it is as close to an immediate craving that you can ever have from a consumer standpoint and the supply side will have to figure it out,' Kapoor said. 'This opens up more use cases. It's still early days…quick food delivery is where quick commerce was four years ago.'
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