The company recorded an adjusted Ebitda, or operating, loss of Rs 38 crore, excluding its quick commerce business Blinkit. Adjusted operating loss, which excludes interest, tax, depreciation and amortisation, was Rs 272 crore a year earlier.
The improvement in the operating performance comes even as Zomato’s management acknowledged a slowdown in the food delivery business after Diwali, with total orders falling.
“We have seen an industry-wide slowdown in the food delivery business since late October,” chief financial officer Akshant Goyal said. “This trend has been seen across the country but more so in the top-8 cities.”
Rival Swiggy’s chief executive Sriharsha Majety in a recent note to employees informing them about layoffs also said that there had been a slowdown in the food delivery business.
Goyal, however, said green shoots are visible in the early part of the current quarter and that the worst is behind in food delivery.
Discover the stories of your interest
Chief executive Deepinder Goyal echoed the same and said the slowdown in the food delivery business is temporary in nature and that the long-term opportunity remains “large and exciting”. He cited macro slowdown for the mid-market segment and a boom in both dining out and travel in the premium end as a few of the factors causing the slowdown in food delivery.Zomato’s gross order value rose just 0.7% last quarter to Rs 6,680 crore.
The company said its improved margin in the quarter was aided by increasing average order value for the food delivery business.
Despite the slowdown, the company said it turned adjusted Ebitda positive in January 2023. The management also reiterated that the company was on track to achieve operating breakeven by the second quarter of FY24.
Zomato’s adjusted revenue grew 66% to Rs 2,363 crore for the quarter ending December 31. Adjusted revenue includes income from operations, such as commissions from restaurants and advertisement revenue, and delivery fee.
In the calendar year 2022, the number of customers who ordered more than 50 times grew 50% from the previous year to 2.7 million. The number of customers ordering more than 100 times (two orders every week) increased by 70%, CEO Goyal said in his earnings presentation.
The company said in less than a month it has been able to get more than 900,000 people to subscribe to the Zomato Gold programme.
Reintroduction of the loyalty programme does not challenge its projection of achieving operating breakeven by the second quarter of FY24, as it has already factored in potential losses related to Zomato Gold in the forecast, the company said.
The company said that the new programme is more sustainable for customers, restaurant partners, as well as its revenue and profitability.
“The short-term negative impact of Zomato Gold (due to free delivery benefit) will be offset by improvements in other revenue and fixed & variable cost drivers,” CEO Goyal said. “In the long term, we believe we will be able to make the Zomato Gold programme itself profitable.”
Loyalty programmes are becoming a crucial lever of growth for food delivery giants. Swiggy has been making changes to its Swiggy One programme, with the minimum order value for free delivery being increased and restrictions being made on how many devices can be logged in using one account.
The monthly active users of Zomato’s food delivery business grew 13% on year to 17.4 million at the end of the past quarter, though sequentially there was a marginal drop from 17.5 million customers.
Zomato said it would relaunch the 10-minute delivery business, Zomato Instant, under a new name Zomato Everyday in the coming weeks. “We believe that this is a large opportunity in a market like India and is relatively untapped currently,” CEO Goyal added.
Senior-level exits
In recent months, Zomato has seen exits at the senior level including cofounders like Mohit Gupta and Gunjan Patidar, who was also its chief technology officer. Senior executives like Rahul Ganjoo and Siddharth Jhawar have also quit since late last year.
CEO Goyal said the company is currently not looking to replace them by hiring anyone from outside, despite its strategy of “continuous lookout for great talent”.
“…we don’t have the need to fill these two spots (of Patidar and Gupta). Being in ‘continuous lookout for great talent’ is an attack tactic, not a defence tactic,” he said.
Blinkit’s average order value drops
Zomato’s quick-service business, Blinkit, saw its gross merchandise value rise 18% quarter-on-quarter to Rs 1,749 crore, whereas its revenue jumped 27% to Rs 301 crore sequentially. Despite its average order value dropping from Rs 568 the previous quarter to Rs 553, every other key metric – total order, average monthly transacting customers and average gross order value per day per dark store – increased.
Quick-commerce companies are attempting to increase the average order value (AOV) by nudging customers to order in bulk and also by adding more categories.
“The slight downward pressure on AOVs might be a result of the slowdown where customers are preferring to buy smaller packs instead of larger ones,” said Albinder Dhindsa, CEO of Blinkit. “Overall, however, the last quarter was the highest ever in terms of new and returning customers.”
Dhindsa said several dark stores have turned profitable, and that the company is looking to increase its dark store count by 30-40% in the next 12 months by adding more such stores in existing and newer cities.
Hyperpure
Zomato’s fresh fruits, vegetables, and packaged goods supplies business, Hyperpure, saw its revenue grow 169% year-on-year to Rs 421 crore in Q3. Its adjusted operating margin improved three percentage points from the prior quarter to a negative 13%.
Zomato CFO Akshant Goyal said the business will continue to focus on growth over profitability and that the more than twofold jump in revenue can be attributed to its integration with Blinkit.
ET reported on July 18 about how Zomato’s is integrating both businesses by shutting down warehouses and merging its technology and operations. Hyperpure gets better bargaining power with suppliers with the combined demand of both Blinkit and its traditional restaurant supplies business.
Deepinder Goyal said there is a path to clear profitability for Hyperpure as its oldest city, Bengaluru, is near profitable.
The company in a stock exchange filing also said Douglas Feagin, the nominee of China’s Ant Group on its board, resigned from his position of non-executive, non-independent director.