HIMANSHU PARIHAR 211510023747

UBER EATS COMPANY OVERVIEW

By the end of 2019,

Uber Eats India
accounted for only
about 3% of the
The platform was
UberEATS parent company’s global gross
renamed as UberEATS In January 2017,
company was founded bookings but was
which started its UberEATS started its
in 2009 by Garret Camp bleeding more than 25%
operation in London in operation in India.
and Travis Kalanick.  of its EBITDA,
the year 2016.
projected at
₹2,197crore
(approximately $308.6
million).

An Evolving Market
• The entry of Uber Eats into the Indian market in 2017 raised eyebrows right from the start. How was it planning to break the stronghold of established and popular players like
Swiggy and Zomato?

• Uber Eats followed much the same strategy as any other food delivery company would in a competitive market; predatory pricing through deep discounting for customers, high
commissions for restaurants and generous wages for riders.

• This strategy might have worked had Uber Eats had a sustainable profit model, but it didn’t. Uber Eats burnt through investor cash, a development that was equally true for Zomato
and Swiggy.

• The extremely price-sensitive Indian market was only loyal till the discounts continued, which translated to Uber Eats needing to have deep enough pockets to soak up the
accumulating losses. At some point, the offers and coffers dried up.
ZOMATO COMPANY OVERVIEW

Zomato offers its

services in 24 countries Zomato acquired
Zomato is an Indian Zomato has acquired 12
and in 10,000 cities. In Tongue stun in Zomato also acquired
restaurant and food startups globally. In
2011, Zomato expanded September 2018, a Tech Angle start-up in
delivery startup founded July 2014 Zomato
its delivery across India Bengaluru start-up, for Lucknow that worked
in the year 2008 by acquired the startup
in Delhi NCR, Mumbai, cash and stock deal of on drones.
Deepinder Goyal. Menu Menai.
Bangalore, Chennai, 18 million dollars.
Pune, Kolkata etc. 

Zomato History of Acquisitions

• In July 2014, Zomato made its first acquisition by buying Menu-mania for an undisclosed sum.
• The company pursued other acquisitions including lunchtime.cz and obedovat.sk for a combined US$3.25 million.
• In September 2014, Zomato acquired Poland-based restaurant search service Gastronauci for an undisclosed sum.
• In December 2014, it acquired Italian restaurant search service Cibando.
• Zomato also acquired Seattle-based food portal, Urbanspoon, for an estimated $60 million in 2015.
• Other acquisitions of 2015 include Mekanist in an all-cash deal, [55] the Delhi-based startup MapleGraph that built MaplePOS (renamed Zomato Base), and NexTable, a US-based
table reservation and restaurant management platform.
• In 2016, the company acquired Sparse Labs, a logistics technology startup, [59] and the food delivery startup, Runnr, in 2017 (renamed from Roadrunnr when it acquired TinyOwl in
2016).
• In September 2018, Zomato acquired Bengaluru-based food e-marketplace, TongueStun Food, for about $18 million in a cash and stock deal.
• In December 2018, Zomato acquired Lucknow-based startup, TechEagle Innovations, that works exclusively on drones, for an undisclosed amount. Zomato claimed that the
acquisition will help pave the way towards drone-based food delivery in India, building technology aimed at a hub-to-hub delivery network
 DEAL OVERVIEW
WHAT ZOMATO HAS IN THE DEAL
• The benefits for Zomato with this purchase are clear; an expanded
delivery network and capacity by onboarding Uber Eats’ large network
of delivery partners, estimated to be 65,000 riders, without burning too
much cash.
• An additional benefit is the potential to strengthen its position in terms
of the number of restaurants on its platform, especially in South India,
where Swiggy holds sway.
• However, this factor is likely to have only a limited impact,
considering that in the 40 odd cities where Uber Eats had a presence,
Zomato already has almost 85-90% of restaurants on its network. In
other words, it gets to add only 10% of Uber Eats’ unique set of
restaurants.
• Zomato’s recent funding of ₹1,067crore ($150 million) from ANT
Financial would certainly have driven the timing of this acquisition.
• Zomato will probably be quick off the blocks in moving Uber Eats
customers to its platform by dishing out free subscription offers and
restaurant discounts.
• Large acquirers acquire a smaller company so as to provide speedy and
efficient services at a lower cost. Zomato is a larger organisation than
Uber Eats and both operated in the same line of business but Uber was
not able to influence the market. 
• Zomato will also have greater negotiating power with restaurants
which will reduce the losses. 
WHY UBEREATS HAD TO GO FOR THIS DEAL
• Uber was running in loss for a few years and its CEO Dara Khosrawasahi
said that the company will only operate in the market where it will be in
the No. 1 position.
• Zomato and Swiggy were ahead of UberEats in India, which is why we
sold it to Zomato. It has pulled back its business from Vienna and South
Korea because it was running in losses and it was not in number 1
position.
• Uber was a competitor of Swiggy and Zomato which already have well-
established market relations with local restaurants and they are able to
respond quickly to changes in the market such as technological change,
etc.
• As per industry estimates, UberEats has 5 per cent of overall global
booking in online bookings for food delivery.
• In December 2019 UberEats made a huge loss of 107 million dollars.
• The deal also gives Uber 9.99 per cent of ownership in Zomato which
will be valued at 3 billion dollars. This deal will give Uber a chance to
recover at least the initial investment in India.
• Moreover, the purchase price that is given by Zomato in buying UberEats
can be used by UberEats in growing other businesses. 
 Why UBER EATS FAILED ?

• To build strategic partnerships with restaurants it offered partners with a far lower commission than it's competitors. As per various reports, this commission is lower than 15%-20% than
what Swiggy and Zomato take from their clients. For more customer acquisition, it offered 20%-50% deep discounts.

• This deep discounting model was on surface was a huge success as within 2 years of its launch since May 2017 it was able to get on board 60,000 riders delivering food from 26,000
restaurants spreading across 40 cities. Uber Eats India reached an order size of 9 million per quarter within 2 years. However, this model was becoming economically unfeasible for Uber
Eats. It is estimated that Uber Eats was losing around $1 per order surmounting to $ 9 million per quarter loss (Excluding overheads cost).

• These extreme losses were a big drag to Uber's global profitability. In it's last concluded earnings call Uber's CFO Nelson Chai said, "Without India, ANR (adjusted Net revenue) would have
been 11.1% which now is 10.7%. So, India has a drag impact of 0.4%". On the other hand, the customer acquired with this deep discount model was also extreme value seekers with very
low order size. Thus, customers acquired were not very loyal to Uber Eats and were very frequent to change.

• Despite being one of the most valued startups these huge losses were becoming very difficult for Uber to digest. It was desperately looking for a buyer to offload its loss-making division to
achieve the vision of being profitable by 2021.

SYNERGIES

• The synergies are more from the standpoint of India business because right now it is about Uber Eats India. Zomato is present outside India also in a few countries and that Uber
Eats is also present in many more countries.

• Now that Uber Eats and Zomato have joined hands, all the restaurant partners of Uber Eats also will come into the fold of Zomato, the riders will come into the fold of Zomato.

• The most important thing from Zomato’s standpoint is also that certain geographical synergies — certain cities where Uber Eats was doing much better particularly in the southern
part of our country, that business is shifting back to Zomato — that is going to be very important.

• Uber Eats gets a 10 percent stake in Zomato as part of the all-stock deal. Added to that Info Edge's share in Zomato will now drop to 23 percent.
 BARRIERS

• The UberEats acquisition showdown has been in the works since December 2019, and Zomato has finally managed to consolidate the $4.2 billion food
delivery market, by acquiring UberEats in an all share buyout.

• In exchange for 9.99% stake in Zomato, and a consideration of about $300-350 million, Zomato has managed to whittle down the number of dominant
market players in the food delivery sector to just itself and Swiggy, while managing to grab a foothold in Southern India as well.

• Prior to the move, the market shares of the companies were dispersed with Swiggy having the average lead. Post the acquisition of UberEats, Zomato
expects, as per their CEO’s interview, to gain approximately 20% new users on a monthly active basis and manage 25% extra orders, with an expectation of
about 80% of UberEats’ user base to shift to Zomato.

• Prior to this, Swiggy maintained its position as the leading player by not only offering food deliveries from big restaurants but also small ones operating in
the unorganized restaurant segment. On the other hand, Zomato focussed on increasing its repeat user rate through its subscription, Zomato Gold, and other
exclusive products.

THE FUTURE ROAD MAP

• Even though Uber Eats is not part of the Indian food delivery market anymore, its 9.99% share of Zomato still gives it a say in the company’s India
operations even as it is unlikely that it will invest more cash into the company. Also, let’s not forget Amazon’s ambitions of entering the Indian market
with its food delivery service.

• It will be interesting to see how intense the rivalry between Swiggy and Zomato will get and how it could affect their position in the market. With new
players like Reliance and Amazon likely to enter the market, 2020 could be a ground-breaking year for food delivery in the country.
 THANK YOU !

Reference:

• https://www.techsciresearch.com/news/4565-zomato-acquires-india-operations-of-uber-eats-in-an-all-stock-transaction.html
• https://www.linkedin.com/pulse/zomato-acquires-uber-eats-strategic-disinvestment-deepesh-dargar/
• https://edtimes.in/with-zomato-and-ubereats-coming-together-what-will-happen-to-the-cost-of-your-food-and-food-delivery/
• https://blog.ipleaders.in/acquisition-by-zomato-of-uber-eats-analysis/
• https://en.wikipedia.org/wiki/Uber_Eats
• https://ww2.frost.com/frost-perspectives/zomato-acquires-uber-eats-india-highlighting-global-consolidation-trends/