Food and grocery delivery platform Swiggy said it will suspend operations of its subscription-based delivery service, Supr Daily, in five cities, as it is yet to demonstrate profitability, as consumer internet companies focus on cutting spends in an increasingly challenging environment.
The announcement came on a day when Swiggy also halted its pick-and-drop service Genie in multiple cities. To be sure, unlike Supr Daily, which is being scaled down for business reasons, the company said Genie will not be temporarily available in a few cities due to a surge in demand, resulting in a shortage of delivery partners.
Supr Daily, a subscription-based delivery service for milk, daily essentials and groceries, was founded by IIT Bombay graduates Shreyas Nagdawane and Puneet Kumar in 2015 and was acquired by Swiggy in 2018. It rejigged the leadership for Supr Daily in September last year in a bid to unlock value and accelerate growth. Phani Kishan, who was elevated to co-founder was given charge as the CEO of Supr Daily. The support functions of HR, Admin, Legal, IT and Finance from Supr were integrated into the relevant functions with Swiggy, while it continued to have dedicated business teams.
When Swiggy acquired Supr Daily in mid-2018, it was serving close to 6,000 orders a day in a few suburbs of Mumbai. Over the last four years, Supr Daily services have scaled to fulfil 200,000 daily orders across six cities, but profitability remains elusive.
“While we are now an inalienable part of our consumer’s lives, we unfortunately are yet to demonstrate a clear path to profitability. Today, we find ourselves in a situation where we end up spending a significant amount of time & money in managing the business - distracting ourselves from our primary goals of establishing the business market fit. As we go into the year, it's important that we organise ourselves in a way that best sets us up to hit our goals,” Phani Kishan said in an email to all Supr Daily employees.
As a part of the restructuring, Supr Daily will suspend operations in Delhi NCR, Mumbai, Pune, Hyderabad and Chennai.
“We have a detailed transition and closure plan in place to make it less painful for our users as well as brand and vendor partners. We will continue to serve users in Bangalore and double down on our efforts here,” he said.
The restructuring will have an impact on employees operating in these five cities and some corporate employees as it right-sizes the organisation.
“I’m glad to inform you that we’ve identified relevant roles for a significant majority of the employees within the open requisitions across the broader organisation and expect to place the rest over the next few weeks,” he further said.
Swiggy’s arch rival Zomato too has come under pressure in the last year. While its shares hit a record high of Rs 169.10 on the BSE on November 16, 2021, it has since tanked more than 70 percent, with investors losing nearly Rs 1 trillion in market value.
The food delivery platform is trading below its last private valuation of $5.4 billion in early 2021. Swiggy was last valued at $10.7 billion.
This development comes at a time when several tech stocks have seen a major dip from the highs of the pandemic-led growth in the past couple of years. Many tech companies which boomed in the past couple of years are taking various measures, including laying off employees, to reduce costs and conserve capital amid an anticipated slowdown in the sector.
Uber CEO Dara Khosrowshahi, for instance, said it will slow down hiring and cut down on marketing and incentive spending to address a “seismic shift” in investor sentiment.
“We will treat hiring as a privilege and be deliberate about when and where we add headcount. We will be even more hardcore about costs across the board. We have to make sure our unit economics work before we go big. The least efficient marketing and incentive spend will be pulled back and some initiatives that require substantial capital will be slowed,” he said.