With consumers now having more options, QSR sales are likely to get fragmented and this is denting the already weak average daily sales of the QSR industry, said BNP Paribas
The brokerage said in the report that Zomato and Swiggy have seen rapid growth in the number of restaurants on their platforms and this is expected to continue going ahead
Restaurants active on Zomato increased to 51X of the total branded QSR stores in FY24 vs 22X in FY19
The rapid expansion and adoption of foodtech majors Zomato
and Swiggy is set to hurt the sale of the quick-service restaurant (QSR) sector, which includes pizza and burger chains, as per a report by brokerage BNP Paribas.
In its QSR Tracker report, the brokerage said that Zomato’s average monthly active restaurant partners surged to 2.70 Lakh by FY24 from 61,000 in FY19. In comparison, listed QSR chains had a cumulative store count of 5,300 stores as of FY24.
Meanwhile, IPO-bound Swiggy had 2.72 Lakh active restaurants on the platform at the end of FY23.
“This implies that the scale of food delivery companies has expanded significantly over the past few years, which has helped improve customer reach, especially for smaller restaurants,” the report said.
Analysts at the brokerage said that restaurants active on Zomato increased to 51X of total branded QSR stores in FY24 vs 22X in FY19, and this will continue to expand rapidly.
“… with consumers now having more options, sales are likely to get fragmented. This is further denting the already weak average daily sales of the QSR industry, along with the general weakness in demand,” they added.
At the segment level, the report said that the revenue growth for listed QSR companies was down by 9% year-on-year in Q4 FY24, against an 18% increase in FY23 for the same quarter. At the heart of this decline lies the low demand, macroeconomic conditions, and lower consumer spending among others.
Despite the low demand and slow sales growth, QSR companies have retained their plans to open new stores or spend on capital expenditure, the report added.
Jubilant FoodWorks, Devyani International – a franchisee for Yum Brands (KFC & Pizza Hut) in India, and Restaurant Brands Asia, which runs Burger King, are among the major QSR brands in India which are looking to increase the number of their outlets in India.
The report comes at a time when both Zomato and Swiggy have been taking steps to further increase the restaurant count and help the existing restaurants on their respective platforms.
Earlier this year, Swiggy introduced a marketing tool called ‘Smart Links’ that enables restaurants to redirect customers from social media posts and advertisements to their menu pages on the food delivery app. It also launched a digital learning academy to support the growth of its restaurant partners last year.
In January, Zomato also rolled out a daily payout feature for select restaurants.
However, Swiggy increased its restaurant collection fee to 2% last year after Zomato imposed a similar ‘payment gateway fee’ of around 1.8% on all orders.
Besides, both the platforms have also introduced platform fees, which seems to have helped them shore up their toplines without any major impact on the demand for their services.
Zomato’s consolidated profit surged to INR 175 Cr in Q4 of FY24, up 26% from INR 138 Cr in the same quarter last year. For the same period, its operating revenue rose 73% to INR 3,562 Cr in Q4 FY24 against INR 2,056 Cr in Q4 FY23.
Along similar lines, Swiggy’s operating revenue zoomed 40% to INR 8,264 Cr in FY23 compared to 5,704 Cr in FY22.
Amid all these, Swiggy is also preparing for its IPO, which is likely to comprise a fresh issue worth INR 3,750 Cr and an offer for sale component of INR 6,664 Cr.
With increasing smartphone penetration and adoption of online food ordering, the food delivery market in the country is expected to rise rapidly and have 34.66 Cr users by 2028, as per Statista.
