Uber eats acquired by Zomato

Zomato, a food delivery business, buys Uber food delivery business estimated to be valued at Rs. 2,492 crores (approximately). The change has already been displayed on the Uber Eat App. This deal will give Uber a stake of 9.99% in Zomato. The agreement was signed on 21 Jan 2020 and its customers will be shifted to the Zomato app from now onwards. Zomato is also a startup in the market which has created its presence across more than 500 cities in India, leading to dominating the Indian market with effective food delivery channels, whereas the Uber Eats managed to operate in 41 cities only. Uber said in its quarterly result announcements last year that the Indian food delivery business has been a drag for it.

In February last year, Uber was about to sell the business to Swiggy but the deal didn’t go off well. Uber relied heavily on discounting to attract and grab the customers but didn’t get the results as expected. Therefore, Uber had to take the decision to shutter or downsize the food delivery business in India. This could be the dominating reason for the discontinuation of operations of Uber Eats in the Indian Market. This acquisition is a trending example of consolidation in the global food delivery markets.

The Uber Eats launched in May 2017, lacked the ability to proliferate efficiently and had been suffering from losses and facing stiff competition from the big food delivery giants in the Indian market, namely Zomato and Swiggy. Hence, Uber failed to manage its food delivery business. The company started downfall when the two key executive Bhavik Rathod and Deepak Reddy, left the firm. Uber encountered a negative revenue of $107.5 million for its Uber Eats business in India between August and December of 2019.  With this deal, Uber can now focus on its rides business to achieve profitability by cutting losses from the food delivery business. This deal will affect the employees of Uber Eats as Zomato will not absorb them as part of the transaction.

This acquisition expected to grab a market share of 50-55% in the Indian market in terms of the number and values of orders leading to leaving Swiggy behind.  Uber Eats India had a higher market share in the Southern region of India like Tamil Nadu, Kerala, compared to Zomato covering 30% of the market which will now provide Zomato the opportunity to grab those uncovered markets leading to strengthening its base.

The Zomato CEO Deepinder Goyal said that this acquisition would lead to strengthening their position in the Indian Market, and he is looking forward to having a good satisfied customer base of leading the market in this category. He has also tweeted about the acquisition with the slogan “Together is better.” Dara Khosrowshahi, Uber’s CEO, added that the company would continue to invest in the local rides business which is the clear leader in this category.