Reduced marketing spending took a toll on Zomato and Swiggy during the recently-concluded Indian Premier League (IPL) 2023, resulting in only a modest 7% growth in their food delivery businesses, according to a report by consulting firm Redseer. The companies opted for a more subdued approach with their campaigns during the IPL season, moving away from extravagant and attention-grabbing advertisements.
During previous IPL seasons, Zomato and Swiggy made a significant presence on prime-time television, leading to substantial growth in their businesses. However, the 2023 IPL season saw a noticeable change in their marketing strategy. This shift resulted in a mere 7% growth, a far cry from the double-digit growth seen in pre-pandemic years.
The report revealed that the growth was driven by sales of popular food items such as biryani, desserts, north Indian cuisine, and snacks. While metro and Tier-I cities experienced a 6% growth, Tier-II+ cities outperformed with a remarkable 14% year-on-year growth.
The decline in growth during IPL 2023 aligns with the startup ecosystem’s focus on achieving profitability amidst a funding winter and investor-driven valuation cuts. Startups, including Zomato and Swiggy, have been on a cost-cutting spree, resulting in layoffs and reduced advertising.
Both Zomato and Swiggy have intensified their efforts to achieve profitability. Swiggy reported a significant increase in losses in FY22, while Zomato managed to decrease its losses in FY23. To cut costs, the companies have also closed down underperforming verticals.
Despite the challenges, Zomato aims to report a net profit on a consolidated level in the next four quarters. Swiggy’s food delivery business has already turned profitable, excluding employee stock option plans (ESOPs), as of March 2023, according to co-founder Sriharsha Majety.
The IPL 2023 season demonstrated the impact of reduced marketing spending and the startups’ pursuit of profitability. With the focus shifting towards cost-cutting measures and a leaner approach, Zomato and Swiggy are striving to strike a balance between growth and financial stability.