Food tech major Zomato has decided to scrap its grocery delivery service for the second time amid growing competition in the segment. The company is of the view that its investment in Grofers will generate better outcomes than its in-house grocery effort.
Zomato has informed its grocery partners through a mail that it plans to stop its pilot service with effect from September 17. "We have decided to shut down our grocery pilot and as of now, have no plans to run any other form of grocery delivery on our platform," a Zomato spokesperson said.
"Grofers has found high quality product market fit in 10 minute grocery and we believe our investment in the company will generate better outcomes for our shareholders than our in-house grocery effort," the spokesperson added. The recently-listed company had started its grocery service pilot in select markets offering delivery within 45 minutes to its customers.
Last month, the Competition Commission of India (CCI) approved the proposed acquisition of 9.3 per cent stake in e-grocer Grofers by Zomato. The acquisition involves an investment of $100 million by Zomato in the online grocer.
Zomato, which witnessed a bumper IPO in July, reported a significant loss in the first quarter (Q1) of the current financial year. The company reported a net loss of $48 million in the June quarter, up from nearly $13.5 million in the same period last year.
According to the company, this is largely on account of non-cash ESOP expenses which have increased meaningfully in Q1 FY22 "due to significant ESOP grants made in the quarter pursuant to creation of a new ESOP 2021 scheme”. "This divergence in reported profit/loss and Adjusted EBITDA will continue going forward," the company said in a blog post.
However, Zomato's revenue increased from Rs 591.9 crore to Rs 757.9 crore in the June quarter, growing 28 per cent (quarter-on-quarter) basis. The company said it delivered more than 100 million food orders last quarter.
"Q1 FY22 was also one of the most challenging quarters for our team. As the second COVID wave ravaged the nation, we were left scrambling to work on multiple things at the same time," said Zomato. "Revenue growth was largely on the back of growth in our core food delivery business which continued to grow despite the severe COVID wave starting April," the company noted.