Uber is reportedly close to making a tactical exit from India’s food delivery industry
Uber has said adamantly that it won’t exit India (or any more markets) following a hat-trick of retreats from China, Russia and Southeast Asia, but does that include its food delivery business?
The answer could well be yes. If media reports are right, Uber is on the cusp of a tactical exit from India’s food delivery industry.
India’s Economic Times is reporting that Uber is in the final stages of a deal that would see Swiggy, the food delivery service that recently raised $1 billion and expanded to general deliveries, eat up Uber Eats in India in exchange for giving the U.S. ride-hailing firm a 10 percent share of its business. Swiggy was most recently said to be valued at $3.3 billion following that billion-dollar round, which was led by Naspers and included new backers Tencent and Uber investor Coatue.
Uber Eats is touted as a major revenue generator for the company. The Information previously reported that it grossed $1.5 billion in sales in the first quarter of 2018 alone, and the company has pushed expansion hard in Asia. Uber Eats landed in India nearly two years ago but it finds itself in the middle of a dogfight between Swiggy, which raised capital three times last year, and Zomato, which is backed by Alibaba.
Already, the battle has taken its toll on peripheral players that include FoodPanda, the service acquired by Uber rival Ola in late 2017. Ola is reported to have slashed costs at FoodPanda and shifted the focus to a more sustainable cloud kitchen strategy. Yet Zomato and Swiggy continue to be aggressive.
Based on that backdrop, and Uber’s upcoming IPO, it would make sense to consolidate costs and yet retain a stake in the market. Uber did exactly that through its exit deal with Grab in Southeast Asia, which saw it hand over its transport and food delivery businesses in exchange for a 27.5 percent stake in Grab .
That deal, which I argued was a win not a loss for Uber, got the company out of an expensive subsidies war and gave it a stake in a growing business. It could well be a recipe that Uber repeats for India’s food delivery space.
Note: The original version of this article was updated to note that Coatue is an investor in both Uber and Swiggy.