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Zomato Acquires Uber Eats For $350 Million

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Zomato has officially taken over Uber Eats on 21st January 2020. This marks the biggest consolidation in the Indian food-tech market in terms of the transaction. 

Earlier, there were three top contenders- Zomato, Swiggy, and Uber Eats in the given order. After the acquisition, the current war is being fought by Zomato and Swiggy. 

Even though Uber Eats started in 2017, it had gained a commendable market share of 12 percent. Also, they were the top food delivery service in states like Madhya Pradesh, Kerala, and Tamil Nadu. 

Why did Uber sell its Food Delivery Service to Zomato? 

Incidentally, Uber introduced its food delivery service in 2017 when Zomato and Swiggy were already battling with each other. They tried to retain their consumer base by offering huge discounts and offers from time to time. This is what helped them to become the third contender in the Indian food delivery market. 

However, Uber Eats continued to provide offers to capture the market, which ended up in making losses. Earlier in 2019, Uber had to cut off fundings for the food delivery service as it wasn’t generating any revenue for the global company. 

Moreover, it had incurred huge losses for 5 months straight up to December 2019. Hence, they have been in talks with their contenders to sell off the Uber Eats division to overcome losses. 

How did Zomato Acquire Uber Eats? 

Before Zomato, Uber had actually tried to sell Uber Eats to Swiggy. Although the talks had started earlier in 2019, the final deal had fallen apart. This happened due to differences in business valuation, taxation, and other legal issues. 

Accordingly, Uber tried to pitch its offer to Amazon as well. This was when Amazon had started thinking of entering the food delivery business. 

Finally, Uber pitched its offer to Zomato and the agreement started taking shape. As of 21st January 2020, Zomato acquired Uber Eats for $350 million. The final purchase was made in an all-stock deal. According to the final agreement, Uber got a 10% share in the business of Zomato. 

How will Uber Eats Benefit Zomato and other Food Delivery Services?

With this deal, Zomato has now acquired all the delivery partners of Uber Eats along with its business details. Moreover, now it has access to Uber Eats customers as well. This has caused Zomato to propel ahead of Swiggy by a considerate margin. 

As stated earlier, Zomato will now be able to take over the leading market share in South Indian states also. This includes Madhya Pradesh, Tamil Nadu and Kerala where Uber Eats was the favorable choice. 

Currently, Uber Eats is diverting its customers to the Zomato application for ordering food. It will continue to do so for 6 months from now. After that, it will be taken off the App Store and cease to exist as an individual entity. 

Although Zomato has taken over the delivery partners, it has refused to take over the administration team of around 100 people. Currently, there has been no final decision regarding this matter. However, there are talks that they will be shifted to other areas within Uber or will be laid off. 

For the most part, Zomato will now have much fierce competition with Swiggy. As of now, they have more delivery partners and restaurants after acquiring Uber Eats. Therefore, it will help Zomato to capture a significant market share in the food delivery business in India. 

Benefits of Zomato’s Acquisition of Uber Eats for its Consumers 

As a consumer, you will be now left to choose between either Zomato or Swiggy. Each of these platforms had their advantages and disadvantages. However, the food delivery market has become consolidated for now. 

There are other online food delivery services but, they do not have much market share in comparison to both Zomato and Swiggy. Moreover, some of these have a local presence as opposed to the national presence of these two big food delivery platforms. 

Currently, Zomato is offering its Gold Membership for a duration of 3 months to the Uber Eats customers. Additionally, they are offering a 50% discount on up to 3 food orders. Additionally, the Uber Eats account will now be linked with Zomato as well. 

Thus, you won’t have to create a new account as your details will be carried over from Uber Eats to Zomato. These details only include your contact details, name, and address. However, you have to enter the payment details manually once again. 

Some users have speculated that the food delivery service could turn into a monopoly with only one contender. As of now, users will get to enjoy more discounts and lower prices from the food delivery services. 

Both Swiggy and Zomato will now try to oust each other to emerge as the market leader. Thus, this could be either a good or a bad thing. Till then, users can continue to enjoy these food delivery services until Amazon comes into the picture.