SUBJECT NAME :- INTERNATIONAL BUSINESS

TOPIC :- ZOMATO – UBER EATS

ACQUISITION

DATE OF SUBMISSION :- 09-09-2020

SUBMITTED TO :- Dr. PURVI PUJARI

SUBMITTED BY :- BHAKTI CHAPHEKAR (03)

SHIWANI GORKHANA (12)

RUTUJA SANAP (39)

JAYSHREE WAGHERE (52)

SARIKA WAKSHE (53)

 Acquisition Of Zomato -Uber Eats

Introduction:-
Zomato:-
 Zomato was introduced to India in the year 2008 by Deepinder Goyal. In 2019
Zomato was located in over 24 countries and 10,000 cities. On the initial
stage of zomato Info Edge India was the major investor and shareholder with
57.9% share in Zomato. Info Edge India was the major shareholder in Zomato
till 2018; later in the third round of funding,
 Zomato raised over $210 million from Alibaba’s payment affiliate Ant
Financial. Ant Financial received an ownership stake of over 10% of the
company as part of the round, which valued Zomato at around $2 billion.
Zomato had also raised an additional $150 million also from Ant Financial
earlier in 2018.
 Zomato has acquired around 12 startups globally since 2014. This acquisition
includes a startup business that provided drones for an undisclosed amount;
to this Zomato had to say this will help them in improving technically by
delivering food through drones.

Uber eats:-
 Uber Eats is an American online food ordering and delivery platform launched
by Uber in 2014 and based in San Francisco, California
 UberEats was introduced by its parent company UBER in the year 2014. Uber
Technologies most commonly known as UBER is an American multinational
ride-hailing company offering multiple services from travelling from one place
to another.
 UberEatswas introduced in India in the year 2017 and by the end of 2018, it
was already in conversation with Swiggy to takeover uber eats. Uber had
faced a huge loss of $1 billion in the previous year as of in November and cut
a hundred jobs. Letting UberEats go would help Uber recover their losses in
the market.
 UberEatswas third in the race of food delivery apps in India. Swiggy was and
still is a huge market competitor. While Swiggy receives daily orders of 1.4
million every day; Zomato receives 1.2 million; whereas on the other side
UberEatsreceived only 4 lakh orders per day. Also, UberEats had did not
have much of the northern market but it had around 30% market hold on the
southern side.

● Brief History of Zomato and Uber Eats Acquisition :-

 Uber Eats parent company was founded in 2009 by
Garret Camp and Travis Kalanick. The company started
its food delivery in August 2014 with the launch of UberFRESH in California. The
platform was renamed as UberEats which started its operation in London in the year
2016. In August 2018, UberEats started its delivery fees depending on the range or
distance of the order placed.

# In the UK and Ireland, the delivery fees are based on the value of the order. In
November 2019, UberEats announced that it will deliver the food through drones by
summer of 2019. On January 21 Zomatoo acquired UberEats in the all-stock acquisition,
with UberEats gaining 9.99 per cent stake in Zomato.

 Zomato is an Indian restaurant and food delivery startup founded in the year 2008
by Deepinder Goyal. Zomato offers its services in 24 countries and in 10,000 cities. In
2011, Zomato expanded its delivery across India in Delhi NCR, Mumbai, Banglore,
Chennai, Pune, Kolkata etc.

● Zomato has acquired 12 startups globally. In July 2014 Zomato acquired the startup
Menu Menia. Zomato acquired Tongue stun in September 2018, a Bengaluru startup, for
cash and stock deal of 18 million dollars. Zomato also acquired Tech Angle startup in
Lucknow that worked on drones.

● Zomato acquired stocks of UberEats for a deal value of 350 million dollars on 21st
January 2020.

● On January 21 Zomatoo acquired UberEats in the all-stock acquisition, with UberEats

gaining 9.99 per cent stake in Zomato. Zomato is an Indian restaurant and food delivery
startup founded in the year 2008 by Deepinder Goyal. ... In July 2014 Zomato acquired
the startup Menu Menia.
● SWOT Analysis
● Zomato
● Strengths:-

1)Fast Expansion – It is appreciative that Zomato has expanded so fast. It is already in 24

countries and is expanding year on year.

2)Number of users – Zomato has a huge number of users using their app. At the same
time, the site also has 90 million visitors a month approximately. With so many users
following the app and site, there are more reviews and hence more chances to find
better restaurants.

3)Focused approach – The brand has a very focused approach and has always tried to
bring the most of out of its unique offering. It is well connected with restaurants and
regularly takes feedback from customers as well as restaurants. This focused approach
has also helped the brand image and reputation of the firm.

4) Excellent Funding Available :Zomato has picked multiple rounds of funding over the
years and because it is now so well established in many countries, there is a lot of
funding available for the app.

5) Multiple acquisitions – Zomato has acquired multiple companies most of which are
software or technology related.

6) Fantastic marketing – You can find Zomato working for its own marketing offline as
well as online. Its print ads are hilarious and make an immediate connect with the
audience. It is strong on Social media marketing and uses a combination of ATL and
BTL strategies to attract and retain customers.

● Weakness:-

1)Security issues for the app – A major issue for Zomato in the past has been some
security issues due to which the app was hacked and at least 17 million users data was
copied. Such security issues are a nightmare for internet companies.

2)Still a lot of expansion required – Considering that the app has established in 24
countries, there is good expansion. But at the same time, the app has been started 7
years back and with the amount of funding available for Zomato, the expansion can be
much faster. It is allowing other services to establish themselves in this niche before it
reaches their country.

● Opportunities:-

1) Further expansion – The number 1 opportunity for Zomato is to expand to more

countries and establish its base faster. Service industry has a major problem that services
can be copied very fast and very easily. As a result, it is critical for Zomato to establish
and expand itself faster.

2) More acquisitions – There are and were many small players in this space. Zomato
can acquire several of its competitors and at the same time, it has to keep an eye on the
tech industry and acquire any tech innovation it can get its hands on to keep on rising.

3) Cloud restaurants – Zomato is coming up with the concept of Cloud restaurants

wherein restaurants will not have to get a physical space to actually sell their products.
Instead, they can sell from Zomato.

4) Adoption of the internet and Smartphones – There is a huge increase in the

adoption of Internet across developing and underdeveloped countries as well. Similarly,
adoption of smartphone has also increased. Thus more and more orders and research
about restaurants can happen online instead of through physical visits.

● Threats:-
1)Market followers and challengers – In the service industry, it is very easy to replicate
the success of another service product or offering. Similarly, marketing followers and
challengers can slowly take away the market share of Zomato.

2)Contaminated Food:- If somehow your food is contaminated and it makes people sick
at once, then it is not something that you want. Because it would create negative
marketing of your business and spread panic among the public. Even it happens at once;
people won’t order for the delivery of your food again. It doesn’t matter how well
established your brand is.

3)Economic Downturn:- Economies across the world are going through a very rough
period because of the current pandemic circumstances. The unemployment rate is higher
than ever. It means that people have less money to buy expensive food. People are
barely feeding themselves to survive

4) Lack of clear rules and regulations- Changes in government policy can easily affect the
business model.

● Uber Eats

● Strengths:-

1) Unique offers:- Best offers(Changes as per brealfast,lunch & dinner festival special
offers. Eg:- briyani offers. pay only 50 % on select restautants, time based offers (4 to 7
pm), tea time offers with 40 to 50 %, breakfast time offers like breakfast@29

2) Simple User interface(UI) :- Uber Eats app has simple user interface.

● Weakness:-
1) Losing first-mover advantage:- UberEats marked its launch in 2017, but by then,
players such as Zomato and Swiggy had already set their feet in the food delivering
market and were already wrestling their way to the top. Hence, when UberEats
started from ground zero, its competitors were already halfway to the top and this
created immense pressure on Uber’s delivery platform.

2) Diversified business model :- Uber had expanded into India with its main focus on
cab-hailing business, which constitutes most of its business. Even today, the additions
Uber is doing relate to the core mobility ambitions in the country. So even though
Uber launched UberEats amid much fanfare, the focus couldn’t be as strong as other
foodtech only players.

3) Lack of cash for burn:- UberEats hasn’t received much investment from its parent
company and has been investing in the business from within. Hence, with limited
funds, the company hasn’t been able to match up the heavy discounts by Zomato and
Swiggy.
4) Slow growth:- Being a late entrant with limited resources, UberEats has been slow in
its growth, be it expansion or investments. The company has been able to operate in
only 44 cities against Zomato’s 500 cities.

● Opportunity:-
1) Learning:- Learn from other market players’ mistakes to innovate

2) Expansion:- Uber Eats is available in over 6,000 cities across 45 countries. It can
expand more.

● Threats:-
1) Competition:-Competitive food delivery industry, UberEats is a new entrant, trying to
get users to download yet another food-delivery app could be risky.

2) Lack of clear rules and regulations- Changes in government policy can easily affect
the business model.

3) Economic Downturn:- Economies across the world are going through a very rough
period because of the current pandemic circumstances. The unemployment rate is
higher than ever. It means that people have less money to buy expensive food.
People are barely feeding themselves to survive
.
4) Contaminated Food:- If somehow the food is contaminated and it makes people sick
at once, then it is not something that people want. Because it would create negative
marketing of business and spread panic among the public. Even it happens at once;
people won’t order for the delivery of food again. It doesn’t matter how well
established the brand is.
● Pros & Cons After the Alliances

● Pros (Advantages):
1) Market Power :-
Large acquirers acquire a smaller company so as to provide speedy and efficient services
at a lower cost. This will help Zomato gain competitive benefits from Swiggy as the
combination of Zomato with Uber Eats will help increase its share to more than 50 per
cent of the market, pulling it ahead of Swiggy. Resulting in Zomato becoming number
one in food marketing and food supply or in other words as the megastar of the food
business.

2) Financial Gain :-
Zomato acquired stocks of UberEats for a deal value of 350 million dollars on 21st
January 2020. Zomato will also have greater negotiating power with restaurants which
will reduce the losses. 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.

3) Expansion :-
After the alliance of Zomato would now be able to penetrate deep into the southern part
of India where it lagged behind, as UberEats already had a stronger foothold there.
Zomato would now also be onboarding UberEats’ 500 exclusive restaurants, while also
gaining access to the latter’s business details, including its customer information, order
history, etc. And yes, Uber being its shareholder could also give a strong boost to its
brand in the years to come.

4) Competitive Advantage :-
Zomato – Uber Eats transaction as beneficial to the long-term sustainability of food
delivery in India. Acquisition of Uber Eats should drive incremental value to Zomato as it
gains a competitive position in key states and markets and increases its consumer base
without many of the associated fixed and short-term variable costs needed for growth.
Uber will also benefit as an investor as it has (so far) in the other markets where it has
exited but retained an equity stake.

5) Less Competition :-
For Zomato, buying the distant third player helps it consolidate the market and puts it
ahead of its arch-rival Swiggy. It is one less competition for the company to deal with."
Zomato acquired Uber Eats for an all-stock acquisition deal. This deal will provide great
discounts to customers and it will be the most beneficial to them. The stock deal is done
by the companies operating in the same line of business. Resulting in Zomato becoming
number one in food marketing and food supply or in other words as the megastar of the
food business.

● Cons (Disadvantages) :-

1) Less Discount Offer :-

Nonetheless, even as Zomato focuses on curbing losses and improving unit economics,
the current deal may not help in cutting discounts and losses overall. Discounts may be
reduced when there is no competition. As long as Zomato and Swiggy are fighting it out
for the same customers, it will be difficult for either of them to drop discounts in the
short term at least. “Volumes won’t matter because per delivery if you are losing money,
what will volumes get you.

2) Slowdown the Growth :-

Importantly, for sectors like e-commerce, food delivery, etc. which are under pressure for
unit economics, the average size of the transaction matters and that is not going up. The
average ticket size for food delivery platforms remains around Rs 300. Now, if the
transaction size remains small, it becomes tricky to extract unit economics from it even
as such platforms go down the food chain to the customer base with lower affordability
quotient. “This industry will make a lot of sense if the transaction size was Rs 500-600
which is not the case.

3) Brand Damage :-
Swiggy and Zomato will try to attract the customers after the acquisition of Uber Eat
with discounts, offers and subsidies and this will be their ongoing strategy. Restaurants
who are already with Zomato will give a gold offer to their customers such as dining out
and delivery. But restaurants will lose their bargaining power. Also, 100 employees will
be reallocated or laid off due to acquisition. Uber Eats will cease to exist as a separate
brand locally and users on its platform will be redirected to Zomato’s app. Zomato will
not absorb Uber Eats’ team in India.
● CURRENT SCENARIO AND FUTURE SCENARIO

● Current scenario:

● In November 2019, UberEats announced that it will deliver the food through drones
by summer of 2019. On January 21 Zomatoo acquired UberEats in the all-stock
acquisition, with UberEats gaining 9.99 per cent stake in Zomato.

● Zomato is an Indian restaurant and food delivery startup founded in the year 2008
by Deepinder Goyal. Zomato offers its services in 24 countries and in 10,000 cities. In
2011, Zomato expanded its delivery across India in Delhi NCR, Mumbai, Banglore,
Chennai, Pune, Kolkata etc.

● Zomato has acquired 12 startups globally. In July 2014 Zomato acquired the startup
Menu Menia. Zomato acquired Tongue stun in September 2018, a Bengaluru startup, for
cash and stock deal of 18 million dollars. Zomato also acquired Tech Angle startup in
Lucknow that worked on drones.

● Zomato acquired stocks of UberEats for a deal value of 350 million dollars on 21st
January 2020. Currently, Zomato has partnered with 1.5 million restaurants across 24
countries and serves more than 70 million users every month.
● Zomato has been in a neck and neck battle with Swiggy for the top position in India’s
online food-delivery business. Acquisition of Uber Eats barely strengthens Zomato’s
position in the segment, but it certainly gives it an advantage over its rival in terms of the
customer data that it acquires from Uber.

● Also, the exit of a player from the market will give Zomato greater negotiating power
with restaurants, which could translate into lesser cash burn and reduced losses going
ahead. Zomato’s purchase of Uber Eats also indirectly brings Softbank into India’s food-
tech space. Earlier, Softbank had been in talks with Swiggy for a significant investment,
but it did not come to fruition.
Zomato has introduced “on time or free delivery” — meaning, if a consumer opts to pay
an additional Rs 10 on select restaurants, he/she is guaranteed free order if it is not
delivered within the promised time.
Zomato – Uber Eats transaction as beneficial to the long-term sustainability of food
delivery in India. Acquisition of Uber Eats should drive incremental value to Zomato as it
gains a competitive position in key states and markets and increases its consumer base
without many of the associated fixed and short-term variable costs needed for growth.
● FUTURE SCENARIO:

● Zomato CEO Deepinder Goyal said that the company touches 25 million customers
every week and is all set for 10x growth in 5 years. Zomato is on the verge of cracking its
maiden profits said founder and CEO Deepinder Goyal. Goyal also said that they are all
set to grow 10x in the next five years. Zomato's profits have come on the back of its rapid
expansion into new cities that has not only brought in more business to establidhed
outlets and 'dark kitchens' but has also created thousands of jobs.
● The company can "make a profit any month" it wants but right now is focused on
expanding the food delivery business, he said. "We touch 25 million customers every
week, generate 0.5 million jobs directly, indirectly. We are all set for 10x growth in 5
years," said Goyal. "Our losses per month have come down by 50 per cent in the last
three months. We are still investing heavily in the food delivery business which has
grown 6x in the last year, and is now present in more than 500 cities,"
Goyal said that Zomato delivers orders from around 250,000 restaurants and hundreds of
'dark kitchens' where restaurant food is cooked but no restaurant exists. Besides bringing
business to restaurants and 'dark kitchens', most of which do not have their own delivery
service, Zomato is also creating direct employment through riders, he said.

● CONCLUSION:

Zomato acquired Uber Eats for an all-stock acquisition deal. This deal will provide great
discounts to customers and it will be the most beneficial to them. The stock deal is done
by the companies operating in the same line of business.