Eternal, the food delivery giant formerly known as Zomato, is currently navigating a challenging landscape in its delivery operations. In a recent announcement regarding the company’s financial performance for the January to March quarter, Deepinder Goyal, the founder and CEO, expressed concerns over a noticeable slowdown in growth. This decline, he noted, is primarily driven by increased competition from rapid commerce platforms and a reduction in discretionary spending among consumers.

Factors Contributing to Slowdown in Food Delivery Growth

Goyal highlighted several key factors affecting the company’s performance:

• Rising Competition: The surge in packaged food orders from services like Zepto Cafe, Swiggy Snacc, and Blinkit Bistro is diverting demand from traditional restaurant deliveries.
• Delivery Partner Shortage: Many delivery personnel are transitioning to faster-paced quick commerce roles, further straining the food delivery sector.
• Consumer Spending Cuts: As consumers tighten their budgets, discretionary spending has taken a hit, impacting food delivery orders.

Financial Performance Insights

In the latest quarter, the gross order value (GOV) for the food delivery segment experienced a 1.3% decline quarter-over-quarter, settling at ₹9,778 crore, down from ₹9,913 crore in the previous quarter. Although GOV saw a 16% increase year-on-year, it still fell short of the company’s projected 20% growth target. Zomato attributed this underperformance to the removal of roughly 19,000 restaurants for compromising consumer trust, alongside a leap year adjustment that reduced the quarter by one day.

Despite these challenges, the adjusted year-on-year growth of around 18% remained below expectations.

Rising Expenses and Financial Overview

Zomato reported a significant rise in total expenses, with costs soaring to ₹6,104 crore for the quarter, compared to ₹3,636 crore during the same timeframe the previous year. Over the full fiscal year, Zomato’s profit increased by 50%, reaching ₹527 crore, up from ₹351 crore in FY24. Revenue also saw a substantial rise of 67%, totaling ₹20,243 crore, although annual expenses surged by 63% to ₹20,623 crore.

Cash Position and Delivery Revenue

At the end of the quarter, Zomato’s cash reserves stood at ₹18,824 crore, a slight decrease from ₹19,235 crore in the prior quarter. The food delivery segment reported an adjusted revenue of ₹2,409 crore in Q4, reflecting a 17.5% increase year-on-year but remaining flat compared to the previous quarter. The adjusted EBITDA margin for this segment stabilized at 4.4%.

As the company navigates these hurdles, it remains to be seen how it will adapt to the changing dynamics of the food delivery market and whether it can reclaim its growth trajectory amidst fierce competition and evolving consumer behaviors.