Swiggy Vs Zomato: Food Delivery Wars, Who Is Better? | Growth & Demand Trends | Karan Taurani

Let's carry forward this conversation and bring on board Karan Tharani as well from Senior Vice President at Lara Securities. Karan, thank you so much for joining in Ritas. Good morning. And what's the thought, you know, Swiggy versus Zomato? First, let's just start with that. What are you seeing in terms of trends and how do you see the market share moving between these two leaders in the space S how are you seeing this going forward also? Hi, good morning. So I think it's a typical comparison, you know, Swiggy versus Zomato. We've been seeing since the last so many years that the, you know, Zomato has outperformed Swiggy and that trend continues from here on, whether it is on growth rates, whether it is on better take rates, whether it is on proximity. I think execution by Zomato has been power superior versus, you know, Swiggy and that very new trend continues now 2, three things to note here. One is, you know, I think Zomato has been very proactive in certain things. One very big lever for the advertising, one very big lever for the Pro 50 rather is the advertising revenue. So I think if you look at Zomato stake rates, we've seen a sharp improvement from a range of about 70 1/2 to 18% to 20% plus. And the bigger driver for this is because of the ad revenue. I think that they've been, they've been a winner over there very clearly. Second big lever is the platform fee. You know, platform fees have been hiked, you know, constantly over the last eight to 10 months. And aside of from what ₹2 and today in some markets it's about ₹5 and potentially this could go to even ₹810.00. So I think these are the two lever that differentiate Zomato versus Swiggy in terms of profitability as far as restaurant Commission and take rates are concerned. I think both platforms are largely at par and also in terms of growth profiling, I think, you know, Zomato has been far superior versus Wiggy. I think on the flu delivery front, we may not see much of differentiation as far as Gov is concerned because we haven't seen any trends in terms of a sharp market share increase. You know, for Zomato, I think that market share number is very much on par where Zomato has, you know, got an edge versus Wiggy. But one is on the property front where execution has been very superior. And secondly, if you look at the overall growth rate, there's a big difference because Blanket obviously has, you know, seen very sharp growth and acceleration over the last one and half two years as compared to what is someone would have seen and Blinkit has gained significant market share. I think today as far our assessment, Blinkit is the market data as far as quick commerce is concerned. So I think because of these two three differentiating factors, Zomato's performance has been far superior. You know, right, we're talking about right now the quick commerce, the Blinkit side. Now even right now when you're looking at the commentary that's coming, you know what we understand from processes is that quick commerce is doing well even for Swiggy and overall that competition is increasing right in the quick commerce space. So how are you valuing all this at on the basis of that? And do you think that blink it then will be managing to hold on to such strong gains that it has been seeing in the last few quarters, right. So see the quick commerce segment is untapped. So the industry itself is like, you know, seeing strong growth and Swiggy, you know, having a reasonable amount of play. I think As for assessment, they would be somewhere close to about between 20 and 20% kind of market share. Definitely, you know, they would also grow, you know, because of the market itself growing. But the question here is about our performance. The question here is about very good execution. I think if you look at blanket numbers like you know, quick commerce as a segment, you know, blanket has come much later as compared to what instant Mart would have come. And Despite that, you know, blanket today is you know, at least about 3040% higher market share as compared to what an instant Mart would have. So clearly there is there have been, you know, execution challenges as far as Swiggy instant Mart is concerned. And the basis that I think the valuations for Swiggy both on the food side and on the quick common side will be at a discount, you know, versus Zomato. But you know, things can definitely turn around, you know, if if you know, Swiggy was was equal to turn around in terms of execution, profitability, growth, the valuation discount can converge and probably it can even air on par. Now to the question in terms of the competitive intensity that is something you know, which is growing. All this while it is nothing new, I think we have seen, you know, big basket, you know, making very strong inroads here recently. You know, Jio has announced their plans to come into quick commerce now quick commerce. But yes, delivery is sort of a situation wherein they'll deliver within 30 minutes, which could be, you know, something similar to a quick commerce proposition. You know, we've seen Flipkart announcing their plans to come into quick commerce and all the existing quick commerce players are expanding very aggressively. I think they are all interested in terms of doubling the store count because they don't want to miss out on the opportunity because the growth is huge, opportunity is very big and there's a very rapid, you know, movement as far as growth and, you know, consumption and adoption is concerned. So clearly nobody wants to miss out on this huge untapped opportunity. So yes, a good time for the quick commerce segment. But what will differentiate here is user experience like, you know, the lead times, who's able to deliver in that lead time of 1012 minutes? Who's able to deliver, whose product assortment is better as compared to peers because these are key differentiating factors. And also what will differ in terms of monetization, Who's able to, you know, get good ad revenues? Who's able to, you know, go for a break even path? Who's able to attain the profitability, right? So even Zepto recently raised money. They also need to double the stores. So the opportunity is huge. Everybody will grow, but execution in terms of ad revenue, in terms of, you know, product assortment, in terms of user experience and in terms of, you know, the overall profitability, these are the things which will differentiate between the players. Commerce is clearly untagged, but the competition is heating up. Zepto just doing the fundraise and that was expected to perhaps start a fresh war as well. But there's lots to talk about with you, Karan, right, from PVR to the Alkabev industry because ABDS IPO is just opening today. There was that news from Karnataka yesterday with respect to the reduction in the GST slabs. Talk to me about that in terms of Alkabev A, what's your view on the Abd IPO, if you have a view? Secondly, what's the implication of this Karnataka slab changes on the likes of USL and other companies? I think in terms of valuations, what they're, what they're getting listed at potentially about 8000 crores or the market cap post listing, I think the valuations are fair. We may not see any big listing gains. Fundamentally, this is the numbers and the growth rates of the margin profile. They have two, three things to monitor here. The 1st is the revenue growth profile. Rather if you look at the revenue growth, it is very heavily skewed towards the regular segment. And we all know regular segment in a country like India wherein you are seeing a lot of, you know, adoption towards premiation growth rates in terms of volume may not be that strong. And the margin obviously for Abd, you know, this segment makes healthy margins as compared to peers because you know, the dependence on glass is very low here as compared to peers. So that is a very good thing for them. But broadly, the growth rate in this segment is not very, very compelling. That's one. Secondly, on the premiumization side, I think they don't have too many brands which have seen very sharp volume growth. If you look at brands like Sterling series, if you look at you know the brands which is OC Blue, these are the brands which they have PNA segment. If you look at the brand volume numbers over the last two to three years, it's been very stagnant in terms of brand performance and volume of take. I think Iconic White, which is a new brand launched about a couple of years ago. That's the only brand which is seen massive traction. So there's an over dependence for the PNA segment and Iconic White has to really perform in a very strong manner for you know the PNA volume growth, you know to be good from here on and healthy from here on. So potential market share gain is somewhere you know going to be a challenge because they are over depending on Iconic White as a brand. I think the third thing is profitability, right. So if you look at the margin profile of the players or other the peers in the in the spirit side gradual spirit score, Alcobev EBITA margin is about 1616 1/2 odd percent. If you look at the likes of Radical, they are some in the range of 12 to 14%. So for Abdi think margin profile is also so very poor. They are at about 7 to 7 1/2 percent EBITDA margin range. Obviously we believe that you know going ahead margin improvement will come because there are multiple levers, you know that they have they are backward integrated by almost about 1/3. There are other levers in terms of you know gross margin improvement for the industry as a whole and for Abd. But even after the margin improvement, let's say if the margin even improves from a 7% to 9%, we don't foresee Abd trading at a valuation which is on par with Radical. And currently the listing, I think they would come at a price of almost about, you know, which is 2530% discount valuation versus Radico today. So for this discount to converge, I think execution is a key here. The margins need to move towards low double digit volume growth needs to be very strong towards 1012% and the blend has to be made in terms of growth and profitability. So not much will be made in listing gains as such. But yes, if the execution is correct, if there's a consistent performance which is there, then obviously the multiples you know could have get related towards more closer towards Radico. The second thing is on the Karnataka. So the slab which is come, I think there is no impact for this for now for the beer industry but definitely is good news for spirit industry because they will use a duty in some slabs. And as per our assessment and as per our checks in the industry, you know the impact is quite significant for the premium, you know brands here. So specifically there are brands which would be priced at MRP of 1500, 2002, 1500. For those there could be an MRP cut off at least 10 to 15%. This is the new slab system that Karnataka has implemented. So definitely very strong volume growth of take that one could see because we look at Karnataka as a state liquor is most expensive as compared to its peers in the state which is Telangana, Kerala, everything put together. So definitely this is a big relief, you know, to see very strong volume of taking Karnataka. And as you all know, most of the larger brands have got explosion Karnataka. Karnataka in terms of volume contribution, you know, contributes about 1415% of volume for the whiskey industry as such. So I think United Spirits will see a positive impact here because they have a very large PNA portfolio and their Scotch portfolio is very heavy in the pricing range of ₹2000 plus. So United space will have positive impact here and Radico as well because Radico also has multiple brands in the whiskey segment which are ₹2000 and above an overall view there. But since we have you with us, Karen, curious to get in your take on PVR Inox. The stock hasn't been performing all too well on a year to date basis down 20%. And one would imagine with you know the OTT releases that have been coming up and the kind of competition that it's been presenting itself. Is that something that it cannot ignore or is the fact that we have some pretty promising releases lined up going to be a silver lining? Yeah. I think with PBR Inox, we need to be, we need to be more patient. I think, you know, if you look at the first half of calendar year 24, it has not been great. It's been a very muted performance. 2-3 reasons to blame here. One is, of course, you know, the last ticket. Hindi films have not done well. The likes of you know, baremia, chotemia during festive season, the likes of war, what we had estimated, you know, in terms of box office have been, you know, below par. Secondly, if we look at the regional films, I think because of elections around the corner, we haven't seen too many last ticket Tamil, Telugu films. And regional contribution in terms of box office has increased in the post COVID era. So dependence on regional content is very high now as compared to the pre COVID era. Third thing is writer association strike, which we all know has led to a big change in terms of the content flow for Hollywood and Hollywood does contribute 1520% for the multiplexes as far as box office is concerned. So therein I think we'll start to see momentum, you know, post September, October. So because of these three reasons, the performance has been muted going ahead. There are green shoots, but I don't think you know, one should expect anything spectacular in the in the second quarter of FI 25. I think, you know, the momentum will start to pick up in Q3 F 525 because that is the time when you'll see festive season. That is the time Hollywood will make a comeback. That is the time we have got, you know, last ticket Hindi films which are using that is the time where even regional film like you know, push Part 2 is going to come, which is, you know, consistently being postponed over the last six months. So I think Q3 is where you'll see the best performance of this financial in F-25. Q2 obviously we'll see acceleration versus Q1 because of a muted base. So yes, good times ahead. The momentum will pick up in Q3 and you know post that it puts it will not not sustain in Q4. But yes, you know, on a momentum basis, Q3 is a very good quarter to monitor the momentum, but Q2 definitely will be better versus Q1 will be better than Q1 and Q3 surely will be a one to watch out for. Thank you so much, Karan, for joining in with us for all those updates from Zomato, Swiggy to PVR. Thanks so much for joining in with us this morning. If you like this video then like, share and subscribe to ET Now.