Zomato Exits 225 Smaller Cities Due to “Not Very Encouraging” Performance in Recent Quarters

In view of the drop in earnings in the third quarter, the food tech company has announced that it has ceased operations in 225 smaller cities as the performance of these cities was ‘not very encouraging’. The company reported losses of Rs 346.6 crore for the quarter that ended in December due to the reduction in food delivery business.

Losses widened nearly 5.5x year-on-year (YoY) owing to the inclusion of Blinkit. This is the first full quarter after the completion of the acquisition of Blinkit. The current slackening was chalked up to a macro slowdown for the mid-market segment, coupled with a boom in dining out and surge in travel at the premium end. 

“The current slowdown in demand was unexpected, which is impacting the growth in food delivery profits. But despite that, we think we are in a good position to meet our profitability goal,” the company said in its Q3 report

Talking about the move, the company said, “Performance of these cities was not very encouraging in the past few quarters, and we did not feel the payback period on our investments in these cities was acceptable.”

On a year-on-year basis, the company’s adjusted food delivery revenue for the three-month period ended December 31 saw a 30% increase but witnessed a decline on a sequential basis

According to Zomato’s annual report for 2021-22 released in August last year, the food ordering and delivery business was present in more than 1,000 cities. However it is not clear on what all cities would witness the withdrawal.