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Good morning! It's Thursday, October 12th. Today’s post breaks down Zomato, a company taking over the Indian restaurant scene with its data-driven cloud kitchens!

THE FEATURE

India's $8 Billion Food Delivery Giant

The biggest name in the Indian food delivery industry is Zomato, a company with 55% market control that generated ~$660M in revenue last year.

Let’s trace how Zomato went from a simple online restaurant review platform to an $8B food delivery service that drives profits through data collection!

The Business: An “Everything App” for Food

Zomato was founded off of Deepinder Goyal’s lightbulb moment while working as a consultant for prominent Indian private equity firm Bain&Co. Every day when lunch rolled around, his fellow co-workers would spend excessive time rifling through physical takeout menus and arguing over which restaurant to choose.

Goyal’s first iteration of Zomato in 2006 was simple. Goyal digitized physical menus, and in just 9 months, he grew his website into the largest restaurant directory in Delhi. In the following years, he expanded Zomato’s directory throughout India and surrounding countries.

Despite adding countless restaurants to its directory, Zomato stagnated in its early years until Goyal discovered the company’s true potential. He could turn Zomato into a platform for everything food-related: finding menus, reviewing restaurants, making reservations, and placing delivery orders.

By adding new avenues for consumers to utilize Zomato, the company grew exponentially between 2012 and 2014– growing from 3.5M users to 60M!

Essentially, Zomato’s app functions like a combination of OpenTable, DoorDash, and Yelp. Creating a variety of services in a single app isn’t new. In fact, it’s the basis for the success of China’s WeChat, which allows users to communicate, purchase transportation tickets, pay bills, and manage subscriptions (Elon Musk hails it as the “Everything App”).

Zomato’s $660M annual revenue comes from commission fees on delivery orders and restaurant bookings, advertising space on its platform, and its Zomato Gold subscription model.

While $660M in revenue is impressive, it was only last quarter that Zomato posted its first-ever profit of just $241K. So, what’s changed?

How They Win: Using Data to Undersell the Competition

In 2018, Zomato generated $68M in annual revenue, but its losses reached a staggering $500M! However, Goyal had a plan in the works for Zomato. Behind the scenes, he was turning his company into the largest database on consumer eating habits.

With years of data collected from tens of thousands of restaurants and millions of user orders, Zomato has a better grasp on consumer food trends than any other business. Its database collects information on food type, location, and season to accurately predict which meals will be popular and at what price point. For example, Zomato knows that in Hinjewadi Pune, Biryani dishes priced at ₹150 will be a best seller in November and December.

Initially, Goyal put this data to use through a consulting service used by restaurant chains that wanted to maximize consumer demand. But what’s brought Zomato into a new age of profitability is its personal ventures into the restaurant game.

Zomato is now conquering the Indian takeout market through Zomato Kitchen– a network of hundreds of highly efficient cloud kitchens that only take online delivery orders.

To build its network of cloud kitchens, Zomato identified the most popular restaurant brands in a given region and partnered with them. At each cloud kitchen, the cooking space is large enough for 10 restaurant brands to turn out delivery orders.

With its data-powered cloud kitchens, Zomato can quickly produce the most in-demand foods set at a calculated price point to undercut the competition. As if that wasn’t enough, Zomato further boosts sales by promoting its cloud kitchen brands first among the search listings seen by its 32M monthly users.

Why It Matters

Everyone knows data collection is huge for social media and software companies. But Zomato’s success shows how data collection can be utilized to great effect across every industry in our modern economy, even the restaurant business.

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