Founded in 2008 as a restaurant search and discovery platform, Zomato now stands as one of the biggest online food delivery services in India. The company currently delivers about 100 million orders a month and is growing at a rate of 10-20 percent month-on-month, according to its co-founder Deepinder Goyal.

Goyal, who serves as the CEO of the company, leads the team on overall strategy including content acquisition, legal issues, competitor benchmarking, marketing, growth and sustainability. Previously, he was associated with Bain and Company for four years as a consultant. An IIT Delhi alumnus, Goyal has been a director of Zomato Media Private Limited since January 18, 2010.

Watch the full interview here

In his wide-ranging interview with CNBC-TV18’s Shereen Bhan, Goyal spoke on his key priorities for Zomato, investment plans, competition with Swiggy, biggest challenges among others.

Here are edited excerpts from the interview:

Q: We have been tracking Zomato since its inception and it has been a little over 10 years now. Do you remember the time that you were on the show first?

A: Yes I do. I was in Noida.

Q: A lot has changed since then. We are here at your headquarters in Gurugram and I distinctly remember your mission statement was that you want to elevate the restaurant business. It started off as scanning menus, then about search and discovery, so restaurant listings and today, it's a transactions driven company. If I would ask you, what will be the key priorities for Zomato from here on, what would those be?

A: I think we have changed our mission statement and it is called ‘better food for more people’ now. What it means is that we want to make a difference to what people eat and not how people eat. We are fighting the food ordering battle and dining out business. For all of this gives us the flexibility to influence users’ choices and then we got the hyper-pure business where we are working with farmers and directly very closely with them and trying to teach them how to produce clean stuff and then bring it back to restaurants so that people can eat that.

Q: I will get to hyper-pure in just a second as that is one of the new pillars that you are betting on. But let us talk about the delivery business. Is it likely to become a two-horse race between you and Swiggy? I am wearing red today, but if I was wearing orange, would I have been allowed inside the Zomato headquarters?

A: I think over the last couple of years this has been a two-horse race like three times. But then somebody else has come in and then they have gone. We don’t know, life changes every day. And all it takes to fight in that particular space is money.

Q: In the food delivery business in India, from 400 odd players to four is a cautionary tale, where ambition has not necessarily kept pace with execution. What would you say is going to be the key as you slug it out in this space?

A: I think there is no slugging it out going on anymore. The market is very rationale.

Q: 50 percent is yours, 50 percent is theirs.

A: Yes. More or less.

Q: But the aspiration would be to get that 50 percent as well.

A: Of course, it is. But we are not fighting in any stupid way, we are trying to do the right things.

Q: When you say you are not trying to fight it in any stupid way, you are trying to do the right things, explain to me what that means? Which basically means that the cash burn is not going to be as crazy as one has gotten used to not just in the food delivery business but across transaction driven businesses in India?

A: Let us think of it in the context of a cricket match. There are two ways to win a match. One is to fix the match, the other is to have a great team, do good work, you should put in the hard work and then you win. I think both the companies are right now trying to do the right thing putting in the hard work and trying to win.

Q: And putting in the money as well.

A: That is something that has to be done. It is not something which has been used to win the market.

Q: How important is it? As there is so much focus on valuation, which I know that you don’t necessarily look at the business from the valuation prism, but it's a $3 billion company, what is the difference between the two of you, how do you look at this metric?

A:

I think it is a race. It is an infinite game. So at some point, they (rivals) will be ahead of us, sometimes, we will be ahead of them.We compete in 13 markets, so for us, it is about a lot of people and it is sometimes we are ahead, sometimes someone else is ahead. It is how it goes on.

Q: You are absolutely right about that. But let us talk about some of the metrics and I appreciate the fact that Zomato is one of the very few unlisted companies that put out details, which we find very difficult to access details from other companies, so I appreciate that fact. Let us talk about the cash burn and you have given the details in your annual report. How much further can we see the cash burn declining and what will lead to the cash burn declining if you believe that this is a rational battle?

A: Investments is also another term for cash burn. If we are able to raise a lot of money and we will also want to invest it in the right places to grow the business faster. That is it. Cash burn is up to you, whether you want to do it or not.

Q: You want to do it clearly at this point in time.

A: Investment, not burn.

Q: And when we talk about investment, what is the kind of investment outlay or plan that you have especially when you talk about greater penetration?

A: There are three different pillars of the business. The food ordering business, dining out and hyper-pure. We think of all three in a very different way and different P&Ls as well. So, they all have their own growth strategies and dining out and hyper-pure are a profitable business for us. The food delivery business is where we are trying to acquire a lot of customers and most of the burn is on the customer acquisition cost and we are launching maybe like 20 cities a week. So that is costly.

Q: 20 cities a week is what you are launching as far as the food delivery business is concerned. In terms of the kind of investments that are required especially in the tier-II and tier-III cities, I would imagine that it would be lower than what you require for some of the top metros. So which means that probably your return on investments would be higher there?

A: Yes and no. It is harder to set up those markets as there is a lot of travel cost and people have to go there. Also, it is very hard to find talent within those markets. So, we have to send people, we have hotel expenses and when we scale the business, there is a lot of money you burn.

Q: Was this a surprise for you that you are seeing so much traction in cities like Kolhapur and Kota. One wouldn’t have imagined that to be the case.

A: Last year in our board meeting, we said that 20 cities in India is where the market lies and that is it. It is not going to go beyond 20 and then somebody just pushed, can you guys try like 200 cities. We didn’t even try 200 cities. We tried Nagpur and it is like the 30th-35th city and then we saw a lot of volume and growth. The interesting thing from Nagpur was that 78 percent people who ordered food from Zomato had never ordered food in their lives not over the phone or not on an app. So that is when we thought that we are going to create a whole new market for us.

Q: So you are in 200 plus cities now?

A: We are in 310 cities now. I don’t know, today the number would have changed.

Q: What is the biggest challenge that you see today as you have grown to this sort of scale and especially when you talk about the traction coming in from the tier-II and tier-III cities? What are the kind of bottlenecks and the challenges that you have to live with on a daily basis? Let us talk about some of the challenges that you face today which is a holiday. So, you got a lot of traffic coming in but not necessarily enough from the supply side?

A: I think the peaks are the hardest for us to manage. Even like dinner peaks every day, like almost everybody orders between 8:20 PM and 8:35 PM and that is when you have to process all the orders. So, you have to have a lot of people on the road and you will never able to take all the orders at that time. In order to take the last 2.5 percent of the orders in a day during that time when that is a peak, we would incur about 30 percent more cost. So, you have to let go off those orders in order to maintain some balance on cost.

So, when it rains, order volume spikes but our riders cannot do what they do. So, we got fewer people on the road but we have got more orders and today its Eid and then there is going to be the match.

Q: So the orders are pouring in.

A: Orders are like 40-45 percent up but we are 20 percent short on the supply.

Q: How do you then deal with customer satisfaction? How do you ensure that you keep clients happy even while you are turning them away?

A: We do the best that we do. There is nothing you can do about this. I need 60 percent more people just for the day. That is about 100,000 more people on the road. We cannot find 100,000 people for one day.

Q: I know that you have always maintained that it is not valuation but the love of the customer that matters to you as the most significant metric, what have you done to ensure that you, in fact, deliver on that promise? What are the many changes that you have done as you have scaled to ensure that you deliver on that promise?

A: There are a couple of things. The most important thing is that earlier we sometimes used to take an order and then used to find a rider who is free or maybe a rider would get free and then we would allocate that order to that person. But nowadays, we only take an order when we know that this order is going to get to the customer on time. Of course, you go wrong, it is a wild wild west out there. But nowadays we tell people that we cannot take an order right now. So, we tell people up front that you are not in a serviceable area right now. So, that they can go to some other app or order from the restaurant directly or maybe cook at home.

First Published:Jun 5, 2019 10:09 PM IST