Foodtech major, Swiggy, has had a turnaround in fortunes, as the company is set to raise another $700 million, after raising $1.25 billion in investments this year.
As the company leaves behind the effects of the pandemic, it is actively diversifying itself into a newer set of hyperlocal services including grocery delivery through Instamart. The company is now confident it can add another five to six strong lines of businesses and services over the coming years, as it sets sight on rapid experimentation next year.
In an interview, Swiggy co-founder and chief executive officer, Sriharsha Majety talks about plans to diversify from the core food delivery business, the foodtech’s larger vision and the strategy moving forward.
Swiggy took some hard steps towards financial prudence last year. Where do revenues stand and has there been an improvement in business economics towards profitability?
The push that we got from the first wave of lockdown forced us to make some hard choices, then we kind of accelerated the path towards profitability. Demand was subdued, and we had to suck out all the oxygen (investments) in terms of category development.
We are now witnessing the growth and we have calibrated the overall economics.
I think our contribution margin is way healthier than pre-covid. Over the last few quarters, we're also investing because we're also seeing growth. The overall profile will get only better from here. As for the new businesses, they will have their own phase of investments, and Instamart is one example. The food delivery business will be most-further along on the profitability journey.
We will see the food delivery category to be profitable in the next two to three years.
Apart from the current lines of business, what are the new areas which Swiggy will enter into?
Beyond food delivery and Instamart, we have SuprDaily (subscription-based grocery), meat delivery and Genie (hyperlocal task service).
Unfortunately, I can’t comment on specific areas but in the next quarter, you will see us launch three to four new pilots of service offerings. Some of these are not even in the delivery space.
Internally, we have horizon one, which is food delivery, horizon two, which is Instamart, and horizon three, where we have a host of things in the pipeline. Our velocity of experimentation will be on an all-time high next year.
From food delivery to groceries, what is the larger vision for Swiggy over the next 5 years?
We have a high degree of confidence that over the next five years, we would have cracked more service offerings. Swiggy will have 5-6 very strong service offerings with solid footing.
Another number we keep talking about is that we want 100 million users transacting at least 15 times a month. Whether that'll happen in 5 years or 10 years is to be seen.
Do we see the launch of new B2B solutions or Swiggy starting grocery delivery for restaurant partners?
It is a meaningful proposition (to deliver groceries to restaurants) but not in the short-term horizon. Previously, we have experimented with the offering. And it is of interest to us, just not a short-term goal.
Zomato has taken a strategy of adding new businesses to its core, through inorganic investments. What is Swiggy’s view on the ‘build vs buy’ debate?
It's going to be a build and buy for us. Swiggy has a tinkering culture. Also, we will figure out companies building the future and find easy ways to partner with them.
I think we have a ‘build bias’ in general. Just the size of the pipeline that we have for innovation is big. We love building. But you will see it as a balanced strategy.
Swiggy is in talks to raise another $700 million after raising $1.25 billion this year. Where are you with the talks? Also, according to you, why is there so much investor interest in Swiggy?
I can't comment or confirm on the fundraising news. Clearly, we've made dramatic progress since the last round itself. There is a huge amount of excitement about Swiggy but with Instamart, I think things are coming to bloom. More and more investors are getting the conviction that Instamart is working. Previously, it was (Swiggy’s) potential that excited investors. Now I think it's performance that's also driving a lot of investor interest towards Swiggy.
For as long as I can remember, I've always been in the middle of conversation (with investors).
There has been resentment amongst restaurant partners. NRAI has complained to CCI. What are you doing for restaurant partners, in this regard?
There's nothing current right now. We continue to be in constant dialogue. And I think there’s continuous work towards reducing the restaurants’ costs of doing business.
One of them is our experiment – Swiggy Direct – where we are enabling restaurants to go direct (to consumers) without commissions, using some of the technologies Swiggy has built. This is since they (restaurants) will be generating their own leads.
We are in continuous conversations around flexible commission models, which may go down depending on higher order values. So, we do have a win-win mindset for all.
Did you think that Swiggy would have come so far in its journey?
When we started, our vision for – Swiggy has arrived –- was if 10,000 orders are placed (on the platform) in a single day.
The food delivery (volumes) is many times beyond my wildest imagination, today. But the canvas is so magical that we have been blessed to have the opportunity to build.