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Zomato acquires Uber’s food delivery business in India

By selling Uber Eats in India to Zomato, Uber can cut losses while taking a stake in a startup that was valued at $3 billion earlier this month.

By: New York Times |
Updated: January 21, 2020 7:55:28 am
Zomato acquires Uber's food delivery business Uber Eats never managed to attract many restaurants or customers in India, despite the company’s ride-hailing business.

Written by Vindu Goel and Kate Conger

Uber, in its latest move to drop money-losing businesses, agreed Tuesday to sell its food delivery business in India to Zomato, a local competitor, in exchange for 9.99% of the Indian startup.

All delivery drivers for the service, known as Uber Eats, and basic information about customers, including their phone numbers and order history, will be transferred to Zomato, the companies said. In addition, Uber’s app will send Indian users to Zomato for six months when they click on the “Get Food Delivery” button.

Uber has faced increased pressure from investors to turn a profit, and it spent much of 2019 cutting costs and laying off employees after a disappointing initial public offering last May. While Uber Eats has grown quickly, it faces aggressive competition around the world, and the company has been forced to spend heavily on subsidies and promotional offers to gain new users.

By selling Uber Eats in India to Zomato, Uber can cut losses while taking a stake in a startup that was valued at $3 billion earlier this month, when it raised $150 million from Ant Financial. Uber will continue to operate its ride-hailing business in the country, where it competes with a local rival, Ola.

The two local food delivery leaders in India, Zomato and Swiggy, were already well established and together controlled about 80% of the food delivery market. Zomato said the deal will add Uber’s 10 million in monthly food orders to its own 40 million, giving it a slight edge over Swiggy.

Uber Eats never managed to attract many restaurants or customers in India, despite the company’s ride-hailing business. There was little synergy between the two businesses, since food delivery in India is done by motorcycle couriers, while rides are provided mostly by cars.

Dara Khosrowshahi, Uber’s chief executive, told investors in a November conference call that he planned to make Uber Eats the primary or secondary food delivery service in every city where it operates. If the plan failed, “we’ll look to dispose or we’ll get out of the market,” he said.

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Uber has recently ceded ground in several of the international markets where it operates.

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