Explore the competition between Swiggy and Zomato in 2024. Who’s leading in market share, and which stock should you buy for future growth?
The online food delivery industry in India has seen a massive transformation over the last decade. From numerous players vying for a piece of the pie, we now find ourselves in a duopoly dominated by Swiggy and Zomato. These two giants have been battling for supremacy in an ever-growing market, and after Swiggy’s strong stock market debut, analysts are predicting it’s on track for a remarkable future, much like its competitor, Zomato.
Both companies have their strengths and weaknesses, but the question remains: Which stock should you invest in? In this article, we’ll break down the rivalry between Swiggy and Zomato, their individual business models, and what makes them tick, especially from an investor’s perspective.
Introduction to Swiggy and Zomato
The Indian food delivery market has transformed into a duopoly dominated by Swiggy and Zomato. These two platforms are competing not just in food delivery but have also ventured into quick commerce, groceries, and hyperlocal services. While Zomato remains the larger player in terms of market share, Swiggy is not far behind, showing potential for growth with its innovations and services.
A Look at the Competitive Landscape (2015-2018)
In the early years, India saw a chaotic mix of online food delivery services. Zomato, Swiggy, Foodpanda, Uber Eats, and others all competed fiercely for market share. Fast forward to today, and the landscape has largely settled into a duopoly, with most other players either shutting down or being acquired. The evolution into this duopoly is the result of heavy investments, market consolidation, and strategic innovations from both Swiggy and Zomato.
Swiggy vs Zomato: Market Share Breakdown
In FY24, Zomato led the market with a 56% to 57% share in the online food delivery space, while Swiggy captured around 40%. The remaining 5% is divided among smaller restaurant chains. Zomato’s market share dominance can be attributed to its early execution capabilities, superior customer acquisition strategies, and efficiency in operations.
Swiggy’s Offerings: A Tech-First Approach
Swiggy has positioned itself as a consumer-first technology company, offering a wide range of services beyond food delivery. These include Instamart (grocery delivery), Dineout (restaurant reservations), SteppinOut (event bookings), and Genie (product pick-up/drop-off services). Swiggy’s ability to integrate multiple services into a single app has helped it stand out, with a focus on quick-commerce becoming a key differentiator in recent years.
Zomato’s Strategic Moves: Innovation at Its Core
Zomato is not just a food delivery app; it’s an e-commerce company with a focus on restaurant discovery, user-generated reviews, and restaurant listings. Zomato has also introduced Zomato Gold and Hyperpure to strengthen its brand, creating value for both consumers and restaurant partners. In 2024, Zomato further expanded its footprint by acquiring Grofers, rebranding it as BlinkIt, and entering the quick-commerce sector with rapid delivery services.
Zomato: The Bigger Player in the Duopoly
Zomato holds a larger market share, which has been a result of its better execution, strategic partnerships, and the introduction of innovative services like Hyperpure and Zomato Gold. Its focus on efficiency over rapid expansion has allowed it to maintain a strong position in the food delivery space.
Swiggy: Catching Up and Gaining Ground
While Swiggy has lagged behind in terms of market share, it is catching up fast. Its quick-commerce vertical and other services like Genie have contributed to its growing presence. Swiggy has recently managed to breakeven on EBITDAM (Earnings Before Interest, Taxes, Depreciation, and Amortization) and is focused on improving its cost structure and platform-funded discounts.
The Key Differences in Their Growth Strategies
Swiggy and Zomato have taken distinct approaches to growth. Zomato has focused on scaling efficiently, withdrawing operations from low-density cities and improving its monthly ordering frequency (MoF) and average order value (AoV). Swiggy, on the other hand, has opted for aggressive expansion, particularly in its food delivery operations, but now seems focused on efficiency over aggressive growth.
Food Delivery: Where Do They Stand?
Both companies have made food delivery their core business. However, Zomato has a slight edge due to its efficient operations and scale, while Swiggy is still in the process of optimizing its operations and improving fixed cost absorption. As of Q1FY25, Swiggy’s fixed cost was still higher compared to Zomato, but it has shown improvement and is expected to catch up.
Quick-Commerce: The New Battlefield
Quick-commerce is a rapidly growing segment where Swiggy and Zomato are competing for dominance. Swiggy’s Instamart and Zomato’s BlinkIt (via Grofers) have shown promise, but Zomato’s acquisition of BlinkIt gives it a leg up in terms of market share. Both companies are building their quick-commerce verticals, but Zomato’s established presence in the grocery delivery sector is hard to match.
Swiggy vs Zomato: Which Stock Should You Buy?
Zomato has a strong market position and has proven its execution abilities, making it a safer investment for conservative investors. However, Swiggy’s aggressive expansion strategy and quick-commerce focus might appeal to those seeking higher risk and reward. Swiggy has shown impressive growth in recent quarters and could be poised for a strong run, making it an interesting stock to watch.
Financial Performance: A Deep Dive
Zomato’s steady market share growth and focus on operational efficiency have resulted in better financial metrics compared to Swiggy. However, Swiggy is showing signs of improvement, particularly in its EBITDAM and cost structure. Analysts expect Swiggy to lag Zomato in terms of GoV (Gross Order Value) growth in the coming years, but its quick-commerce segment could drive future growth.
Future Outlook: What Lies Ahead for Swiggy and Zomato?
Both companies are expected to continue innovating and expanding their offerings. Zomato’s focus on efficiency and scale positions it well for steady growth, while Swiggy’s quick-commerce initiatives could fuel its expansion in the coming years. Investors should keep a close eye on how these companies evolve and whether Swiggy can close the gap with Zomato.
Conclusion: Which is the Better Investment?
Both Swiggy and Zomato have their strengths and are likely to continue growing in the food delivery and quick-commerce markets. Zomato offers stability and a more established market position, while Swiggy has the potential for higher growth due to its aggressive expansion and innovation.
Ultimately, the choice between these two companies depends on an investor’s risk tolerance and investment goals. If you’re looking for a more stable, established option, Zomato might be the way to go. However, if you’re seeking higher growth potential and willing to take on more risk, Swiggy presents an exciting opportunity.
FAQs
Q1: What is the key difference between Swiggy and Zomato?
Swiggy focuses on an aggressive expansion strategy with a strong quick-commerce offering, while Zomato has been more efficient in scaling its food delivery business.
Q2: Which company has a better financial outlook?
Zomato has been more successful in capturing market share and executing its strategies, but Swiggy’s recent improvements in profitability could make it a strong contender in the future.
Q2: How did Zomato’s acquisition of Blinkit impact the market?
Zomato’s acquisition of Blinkit allowed it to dominate the quick commerce sector, giving it a competitive edge over Swiggy.
Q4: Should I invest in Swiggy or Zomato?
It depends on your investment goals. Zomato offers a safer, more established option, while Swiggy’s growth potential in the quick commerce sector makes it a compelling option for those looking for higher returns.
