Strategy Implementation of

Zomato

Submitted To:
Prof. Namita Shah

Submitted By:

Name SAP ID Roll No

Ishant Gupta 80101180223 A021
Advait Kulkarni 80101180369 A035
Arushi Kumat 80101180376 A036
Hasmit Rajput 80101180534 A048
Ayushmn Sikka 80101180641 A056
Garima Singh 80101180648 A057
Table of Contents
Food Tech Industry ................................................................................................................................. 3
Overview ............................................................................................................................................. 3
Zomato ................................................................................................................................................ 4
Strategic Shift .......................................................................................................................................... 5
Realigning business segments ............................................................................................................ 6
Strategic Shift Analysis ............................................................................................................................ 6
Delivery ............................................................................................................................................... 6
Dining out............................................................................................................................................ 7
Sustainability ....................................................................................................................................... 8
Functional Analysis ................................................................................................................................. 9
Learnings ................................................................................................................................................. 9
Interactive Control System ................................................................................................................. 9
Meeting Strategic Risks ..................................................................................................................... 10
Leadership in Zomato ....................................................................................................................... 10
Risk ........................................................................................................................................................ 11
Recommendations ................................................................................................................................ 11
Food Tech Industry

Overview
The Indian food tech sector is currently on rise. From daily order volume of 3.7 lakh in 2017, as
analysed by RedSeer Consulting, the number has increased to 15 lakhs as of September 2018. Clearly,
the appetite for food tech is growing, not just of consumers but investors, too. After a phase where
start-ups such as Tiny Owl, Yumist and Dazo were forced to shut down operations, things are now
beginning to look up. In the last six to eight months, many smaller players have come in, while cab
aggregators have extended their services to the food aggregation space. With Ola acquiring
Foodpanda and Uber launching Uber Eats, the competition has intensified in the market. Swiggy is the
market leader in the food aggregation space, clocking roughly six lakh daily orders (industry estimate),
while Zomato is not far behind with close to 5.2 lakh daily orders. The more established players,
Zomato and Swiggy, have also been expanding their footprints. Zomato, in particular, is eyeing the tier
II-III cities for growth.

No matter how encouraging the trend, the fact remains that loyalty evades the food tech space.
Consumers flock to the platform offering the best deals or discounts. According to industry
estimates, a discount of 20-50% is prevalent in the market, amidst which it is very difficult for
aggregators to command a loyal base.

Food aggregators get a lion’s share of their revenue through the commission charged on orders.
Depending on the order size and the city, aggregators charge 15-30% commission to the restaurant
preparing the food. Some of them have started hosting cloud kitchen networks to get an upper
hand. Consider the Swiggy Access programme — which allows its restaurant partners to set up
kitchen spaces in areas where they don’t have a presence. Furthermore, these platforms have been
working on bringing down operational costs by making one rider deliver multiple orders on the same
stretch, charging restaurants for discounts and charging customers for delivery for small ticket
orders.
Delivery is outpacing the overall restaurant industry growth. Restaurant industry is estimated to
be USD 56 Billion and the delivery industry is pegged at USD 15 Billion. Casual Dining (44%)
dominates the organized segment while QSR is one of the fastest growing segments.
Within delivery, online medium is gaining traction. Online food delivery grew at a staggering pace
of 150% to reach USD 300 Million in GMV terms in 2016. Online food delivery players handled on
an average 1,60,000 orders in a day with and average order value of USD 5.
Top 5 cities in India contribute >85% of the overall order volume currently. Bangalore, Delhi NCR,
Mumbai, Hyderabad and Pune contribute ~40% to the GMV of Indian e-tailing industry and these
cities are the top contributors for other verticals too.
Large share of young working population with high disposable income and easy access to internet
through web/mobile has accelerated the growth of online medium in these cities.

Zomato
Zomato has been in business for 10 years now, but in the past year it has diversified into areas
where its competitors are yet to make inroads. Its entry into the supply chain business could be a
game-changer if it succeeds. Zomato Founder and CEO Deepinder Goyal is a man on a mission. He
wants people to stop cooking every day. And in an era where wallet-conscious consumers are also
more health-conscious and concerned about the quality of the food they eat, he knows it’s not an
easy sell. And then there’s competition in the form of Swiggy, UberEats, FoodPanda, etc. Those
challenges, however, seem par for the course.

Deepinder Goyal sums up their ambition when he says, “It isn’t only about delivery or listings or the
supply anymore - it is about everything (related to food and food delivery).”

In the past 15 months, Zomato has created a presence for itself beyond food delivery into eating
out, food pickup, and even the supply chain.

A year back, it announced Zomato Gold, its subscription programme, which allowed customers to
get steep discounts and free dishes at a long list of restaurants. Its loyalty programme, Piggybank,
was launched in July this year. Two months later, it acquired TongueStun for $18 million to enter the
canteen aggregation place. In October, it acquired WOTU, a raw materials and ingredients supplies
platform for restaurants, now rebranded as HyperPure.

Zomato started life as a restaurant review platform. In the decade that followed, it has repeatedly
upped the ante in food tech. In 2015, it ran a small pilot in delivery and then plunged in full time into
a space where rival Swiggy had the first-mover advantage. Zomato has stayed away from the cloud-
kitchen model that Swiggy started, much to the dismay of several restaurant partners.

Today, Zomato is present in over 10,000 cities across the globe with over 1.4m active restaurants on
the platform. They are the market leaders in restaurant search/discovery in 19 of the 24 countries
they are in, and have 70m monthly active users on their platform. They have 5m new user
registrations and 11m app installations (Android + iOS), every month.
User engagement has grown very well — they received 16m user reviews and photos in March’19,
compared to 4.5m in March’18.

Food delivery in India is creating an entirely new market; 70% of the regular users in Kolhapur had
never tried food delivery in their life (even over a phone call), and Zomato was the first food delivery
experience of their lives. All the marketing investment they made in FY19 will bear fruit in FY20 and
beyond — when they realise the LTV (Lifetime Value) of the users that they have acquired.

Strategic Shift

Zomato believes its ability to cross-sell its several offerings to a customer brings a high chance of
success at capturing them at any point of the food chain.

Of the 1.4 million listings that Zomato has globally, about 1,50,000 are from India. In India alone, the
platform sees 22 million users come on board every month who haven’t tried the delivery service
yet. It is this opportunity that Zomato is looking to convert, even if only a fraction, to scale its food
delivery business.
Every month, about 5% (of the 22 million new users) try out delivery and that is a no-cost acquisition
for Zomato. So, for them, (food-delivery) is not a standalone business. This comes from the
ecosystem benefit they have. Industry sources peg Zomato’s monthly cash burn at $23-25 million on
food-delivery alone, but the ad business’ monthly revenue of $6-7 million helps trim the company’s
total burn to $17-18 million.

It is this synergy that Zomato is looking to tap into while launching new products and business lines
centred around food, both on the delivery front and in the dine-out segment.

While Zomato’s diversified play helps tap customers, on the supply side the company is looking to
incentivise restaurants to be loyal to the platform. Through HyperPure, Zomato sources pesticide-
free clean ingredients including meat, vegetables and consumables for restaurants, accruing a profit
margin of almost 15%. Zomato sources ingredients from Farmer Producer Organisations (FPOs) and
has also begun commissioning farmers to grow produce specifically for the platform.

While HyperPure may seem like an extended business-to-business initiative, it would serve to lock
restaurants to Zomato over the long-term. That is because restaurants that use clean produce from
Zomato get identified accordingly on the platform with a sticker or a notification. That drives quality
perception, which in turn would drive core demand

Realigning business segments

Three years ago, advertising represented 100% of Zomato’s revenue and focus. Today, Zomato is
largely a transactions company - 85% of their revenue in March’19 was driven by transactions. In that
spirit, they realigned their business to the core tenets of the food industry. They have stopped
considering advertising revenue as a standalone P&L last year, and now think of their business as a
combination of three key large pillars — Delivery, Dining Out, and Sustainability.

Strategic Shift Analysis

Here’s how Zomato has fared in each of the three lines of business in FY19:

Delivery
Delivery revenue for FY19 is $155m compared to $38m in FY18 (4x annual growth). It now contributes
~75% to total revenue, up from ~55% in FY18. Zomato now operate the service in over 200 cities in
India, up from 15 cities in FY18; and have made nearly 33m deliveries in March’19 (~7x y-o-y growth).
Over 100k restaurants are listed in India, generating an annual run-rate GMV of over $1.5bn ~94% of
these deliveries are fulfilled by their ~180k strong active delivery fleet. Unit economics of the food
delivery business have come a long way. Zomato now lose Rs 25 per delivery, compared to Rs 44 per
delivery in March’18. Their last mile cost per delivery is now Rs 65, compared to Rs 86 in March’18.
The key driver metric of unit economics — number of deliveries per rider per hour has gone up to 1.4
from 0.9 last year. Important note – some high density neighbourhoods in larger cities are already unit
Economics positive. So are, some Tier-3/4 cities.

With Piggybank, loyalty program for food delivery, users save up to 10% of their total amount. 2m+
users across 17 cities in India have collectively saved a staggering Rs 260m+. In the long term, we stay
committed to not competing with restaurants — and we will help the best food operators build larger
businesses in every way we can. But at no point will we compromise our neutrality as a platform.

Here are some interesting nibbles about our India food delivery business:

Dining out

Zomato Gold has partnered with over 10,000 restaurants globally to offer either 1+1 on food, or 2+2
on beverages, allowing users to get more bang for their buck each time they dine out. Zomato Gold
will continue to be a program that constantly provides benefits that are uniquely designed for users
who see great value in frequently dining out. As on 31 March 2019, Zomato had over 1m active
subscribers of Zomato Gold globally compared to 170k active users as on 31 March 2018. Zomato has
recently launched Zomato Gold in 4 new cities outside of India — Jakarta, Manila, Auckland, and
Beirut. The number of subscribers who signed up for Gold in the first 15 days of launch in all these
cities exceeded the number of subscribers we added in Bengaluru in the first 15 days.

Last year, Zomato also extended the vision of better food for more people to the workplace. Through
a digitised platform, currently active in seven cities, food@work by Zomato serves 125,000 meals a
day, partners with 300 caterers and serves 70 companies. Zomato has also partnered with Tier–1
caterers like Elior and Voila to the cash-and-carry segment providing better compliance and food
safety. Food@work has revolutionised cafeteria management by introducing more choice as well as
an app to simplify the purchase process for employees. People are increasingly going online to book
tables. Our reservations service is now offered in eight countries across 16,000+ restaurants. Over 1m
diners in India are reserving tables on Zomato every month.

Zomato has organised Zomaland — a food carnival, a first-of-its-kind across the world, in Delhi,
Bengaluru and Pune. The vision is to champion the restaurant industry — and create a showcase of
the best culinary talent available in a city to our users. Zomaland hosted larger than- life attractions,
street performances, a stellar line-up of music artists and DJs, along with a dedicated zone for the little
ones. Attended by 120k people collectively, featuring over 200 of the best restaurants, it was the
perfect opportunity for more people to discover new culinary delights, as well as enjoy some of their
old favourites.

Sustainability

Hyperpure was launched in August 2018 to supply fresh, clean ingredients to restaurants. This first-
of-its-kind initiative uses an end-to-end technology-driven platform custom-built to provide online
access to fresh and clean food ingredients to restaurants. In February 2019, a 30,000 sq. ft warehouse,
built to serve 4,000 metric ton capacity per month, was launched in Bengaluru to cater to 2500
restaurants every day. An even larger 40,000 sq. ft. warehouse in Delhi was launched in March’19.

Restaurants buying ingredients through Hyperpure are recognised through a ‘Hyperpure Inside’ tag
on Zomato, allowing users to trust that the food they are eating is made using fully-traceable, high
quality ingredients.

Zomato is also helping farmers develop better crops that are pesticide and chemical-free, providing
them assured demand cycles and better pricing throughout the year. Hyperpure is solving a number
of supply-chain problems and simultaneously building a more ecological model with plans to
integrate rainwater harvesting, and composting for waste.

According to Zomato, the worth of monthly orders booked through HyperPure had touched $5
million but the lack of enough farms to provide clean supplies has delayed the delivery process.

The plan is for HyperPure to supply all sorts of ingredients, including grains and white labels, to not
just restaurants but large corporate houses and catering agencies as well.
Functional Analysis

Zomato has a very complex structure hence if there is an attempt to draw the span diagram we can
see that they have the levers more or less exactly similar to mature organisation. Hence they need to
think carefully about how to have an appropriate span of control which can help them fix problem.

There are 3 major functions in Zomato:

 Operations
 Marketing
 Human Resource

These 3 functions are being replicated in every vertical of Zomato’s business. So having a perfect
span of levers across this functions and across different verticals will help in the growth of the
organisation.

In 2018, it was found that Zomato delivery guy was found tampering with food that he was assigned
to deliver. This created the spark on social media which impacted the Zomato’s reputation and
status. This clear shows that span of accountability was actually very low and it required a very
immediate solution but still they failed to do. Instead they went on with more decorative solution
such as tape and boxes. They should have helped the delivery guys with more intense training and
they should have helped them to inculcate their values in them.

Learnings

Interactive Control System

Interactive Control System reinforces the importance of the interactive system, which circumvents
problems and aims to provide answers to management elements that were not considered in the
previously developed strategic planning process. Thus, the interactive control concerns the system
that involves managers in the decisions of subordinates; this system’s focus of attention is on the
aspects of control that do not routinely appear in information systems.

Interactive systems of control are used to guide the informal strategic process, forcing the
involvement of staff in organizational issues. It has been used to promote interchange between top
management and other hierarchical levels, and a mechanism for interaction and permanent dialogue
between the members of the organization.

In Zomato, Culture was developed among senior management and junior management in a way that
they can approach each other and openly discuss about the problems that they are facing. They also
discuss about the company strategy and senior management team take the opinion of their employee.

They also have yearly event where Zomato ask their employee about innovative extension that they
can make in their current business. The selected team gets the chance to develop that idea along with
the business development team. So they need to carry this form of organisational culture because this
will be a very useful strategy in the long term. If employees within organisation are getting creative
and helping managers, then they should be able to help organisation to grow.

Meeting Strategic Risks

Zomato is the key player in online food delivery that focuses on providing more options and the best
restaurants to have food delivered from. Therefore, to sustain in the competitive market, Zomato
needs to focus on its vision and provide the services they are best known for i.e. availability of quality
restaurants.

A Zomato delivery boy - riders, as the company calls them - was caught on camera opening food
packs meant for delivery and eating out of them. The man eats from one pack, levels the food so it
looks untouched, and seals the pack back. He then goes on to do the same thing with two other
parcels. Finally, he tapes the packs shut and takes off to deliver these packs. This was the biggest risk
that company had faced in recent part but they took the ownership of the problem and fixed that
problem. So a company can expect risk from any front and they should be ready to face the problem
and fix it. This was mentioned as the core value in the credo of the Zomato i.e. taking ownership of
everything.

They have beautifully placed the strategic boundaries and they have made sure that every employee
is in line with company’s values. Because they have clearly stated that they wanted to do everything
related food the employees can take the liberty to start something in different vertical and stay
focus on the company’s goal.

Leadership in Zomato

Zomato, a company believing in a start-up culture follows a Democratic Leadership. The entire team
working at Zomato i.e. the leadership team to the new hiring they do, the focus is on building a brand
wherein everyone is free to express their views and add to the growth at their own individual levels.
The CEO, Mr. Deepinder Goyal has continuously displayed the qualities of turning imaginative product
ideas into successful brands such as creation of Zomato Gold, creation of an optimized channel
wherein Zomato has been able to successfully drive down per customer costs. Also, Zomato is working
on a new initiative Zomato Infinity, again connecting different hotels with Zomato Gold. The
leadership team also displays qualities of managing different organizations under Zomato i.e. their
delivery part, the Hyperpure initiative etc. Also, the leadership team focusses on building their team
with motivated individuals with a zeal to work in a start-up environment rather than hiring individuals
with glorified degrees. They wanted to build cultural company.

Risk

• Operational Risk- Risks associated with the demand for the solutions that Zomato is offering
- Risks related to service delivery and customer relations, adaption of Zomato products with
the country consumer base.

• Political & Legal Risk-Different business laws and regulations in every country, these could
be around subsidies, government incentives, labor laws

• Technology Risks-Technology adoption, its usage, these risks include cyber-attacks,

disruptions in infrastructure and loss of data.

• Environmental Risks - Though the sort of product offering Zomato has the environmental
risks are not directly associated but as an aggregator to the food industry, it has to ensure
that credibly partners are listed on their platform who do not process such risks

• Financial Risks- For a business like Zomato when working in a global market the currency
value, Asset valuation, Foreign taxation, Exchange rate, Inflation and transfer pricing play an
important role in deciding the profitability of the company in that market.

Recommendations

 Build a core profitable system which will be able to sustain the future cash burnings
 Food delivery has been the one that is contributing majorly towards Zomato’s revenue but
the control on last mile delivery is not very effective. So they need to redesign their fleet
management function to make it more accountable and more responsible for their work
 To Call off partnership with PayTM and Ant financials as this might restrict their options of
future growth
 They are expanding too fast and too thin on global scale than their expected rate which
means they might be at a risk of damaging their name in the effort to be a first mover
 They should move their reliance on the sustainability part from the business, i.e.
procurement to restaurant, because they have the profit margin of nearly 15%.
 Explore the option of cloud kitchen as Swiggy has already made moved in this area