Last week, Zomato – one of the two leading food delivery platforms in India – announced their Q1 FY 2024 (i.e. Apr-Jun 2023) results.

For the first time, Zomato registered a group level profit of INR 20 million (US$ 240k), thanks to deferred tax of INR 150 million (US$ 1.8 million). The share price (Zomato is traded in NSE in Mumbai) shot up once as much as 20% during the two trading days, showing investor excitement over the news.

This is to the contrast of Uber, which reported a net income for the first time last week too. Its share price actually dropped 6% following the news, as investors worried about missing revenue target and competition in ride hailing.

Some of our thoughts on Zomato hitting profitability:

1. We see some commentaries especially on Twitter mocking this ‘profitability’ – as it is recorded thanks to deferred tax and is by itself meagre. However, if you look at Zomato’s earnings over the past 8 quarters, you will see a consistent improvement in the margins which eventually tipped over;

2. As we have argued in our Food Delivery Platforms in Southeast Asia 2022, food delivery platform profitability is attainable through volume, density and operational efficiency. For leading platforms in each region, there is no secret source but relentless focus on operations to squeeze out the efficiency. Grab is doing that in Southeast Asia, and Zomato in India – both are showing steady and consistent margin improvements;

3. You can also refer to Food Delivery Platforms in Southeast Asia 2023 report (yes we do it annually) for an updated assessment of the platforms in Southeast Asia, as well as global benchmarks;

4. Prior, the only large scale food delivery platforms profitable over multiple periods are Meituan in China and Woowa Brothers in Korea. While both are in highly urban, affluent and high pressured East Asia, their paths to profitability slightly differ. Meituan builds huge volume on very thin margins, and earns additional profits from that vast customer base through lower frequency and higher margin use cases (i.e. advertising, hotels etc.); while Woowa taps into a market which was already highly organised with chains already comfortable paying for advertising and conversion;

5. We have been covering Meituan extensively through TheLowDown, a case study, and multiple Momentum Academy briefings;

6. Back to Zomato, one thing you would notice is that its food delivery customer base – currently at 17.5 million (monthly transacting users) – is actually quite small compared to the >1.4 billion population of India. In comparison, Grab, which operates in Southeast Asia whose population is less than half of India’s, has twice the amount of monthly transacting users (33.3 million). This shows the distribution of each market’s consumer consumption power – and in Zomato’s case, much fewer consumers are affluent enough to be regular consumers of food delivery. They can’t change the macro, and will need to be very patient to scale up;

7. Meituan only reported annual users before – which stood at 677.9 million the last time they reported it in Q4 2022. This would translate into probably about 200-250 million monthly transacting users – making China still a much larger market;

8. Another region comparison we can draw is the food delivery GMV. Zomato registered about INR 73.18 billion (US$884 million) in the latest quarter – in comparison, Grab’s annual food delivery GMV in 2022 reached 9.8 billion, as we estimated in our Food Delivery Platforms in Southeast Asia 2023 report;

9. On Blinkit (previously Grofers) – the self-operated quick commerce subsidiary of Zomato, the average order value is INR 582 (US$7), with each dark store recording about 1065  daily average orders in the quarter. We have spoken with multiple operators of dark stores in China and the general formula (for China) is about 3500-4000 orders per store per day to hit breakeven – as with that volume you can build enough efficiency in SKU selection and fulfilment operations. India’s costs will be very different – would it be 2000 or is 1500 enough? Zomato is probably en route to figure that out;

10. At the end of the day, while we know that volume, density and operational efficiency are the formula towards profitability – relentless execution is the key here. That depends on the leadership, as well as people and organisation as we have argued in the book Seeing the unseen: behind Chinese tech giants’ global venturing. While opinions on Zomato’s founders differ (sometimes sharply), the people we have spoken to generally agree on their focus and relentlessness. We suppose that is a good thing for the company.

For more details on how to make sense of the myriad of reported metrics by key platform companies, do refer to our reports
Apples to Apples: Benchmarking Shopee, Grab, GoTo and other major tech platforms and Apples to apples 2.0: Benchmarking major tech platforms Updated with Q4 and FY 2022 results.

We will also issue a new version of Apples to Apples 3.0 once every platform company covered there has released their Q2 results. The third edition of the report will offer a distinctive perspective compared to the previous two editions. Stay tuned!

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].


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Jianggan Li is the Founder & CEO of Momentum Works. Prior to founding Momentum Works, he co-founded Easy Taxi in Asia, and served as Managing Director of Foodpanda. The two years running Rocket Internet companies has given him a lifetime experience on supersonic implementation, and good camaraderie with entrepreneurs across the developing world. He holds a MBA from INSEAD (GMAT 770) and a degree in Computer Engineering from Nanyang Technological University. Unfortunately he never wrote a single line of code professionally - but in his first job he was in media, travelling extensively across Asia & Europe, speaking with Ministers & (occasionally) Prime Ministers. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese & Spanish. He tried to learn Latin (for three years) and Sanskrit (for six months) as well. In his (scarce) free time, he reads, travels, hikes and dives. Pyongyang, Tehran & Chisinau are among the interesting cities he has been to.