Swiggy Dineout in a pickle as big brand restaurants log out

By Sowmya Ramasubramanian
October 27, 2022, Updated on : Wed Nov 02 2022 19:42:32 GMT+0000
Swiggy Dineout in a pickle as big brand restaurants log out
The walkout by the likes of Social and The Beer Cafe comes days after the National Restaurants Association of India voiced concerns about the discounting practices of online restaurant aggregators
  • +0
    Clap Icon
Share on
close
  • +0
    Clap Icon
Share on
close
Share on
close

Hundreds of A-list restaurants, including Cafe Delhi Heights, Smoke House Deli, and Mamagoto, have opted out of Swiggy Dineout in recent weeks, following through on a campaign that threatens to put a key driver of the foodtech platform’s growth on shaky legs. 


The National Restaurants Association of India (NRAI) recently urged its members to log out of Swiggy Dineout, citing that its practice of offering deep discounts would hurt one of the restaurants' core businesses. 

“At least 400 brands (of varying scale of operations) and over 900 dining outlets across 13 cities in India have sent delisting notices to Swiggy in the last two weeks,” a source at the NRAI tells YourStory, adding that another 2,000 outlets are expected to follow suit in the next few weeks.

Several hospitality chains, including Indigo Hospitality, Impresario Entertainment and Hospitality, and Simmering Foods and Restaurants have confirmed the development.


A Swiggy spokesperson said after the publication of the story that 20 brands having over 400 outlets have logged out of the platform.


In response to YourStory’s queries, a Swiggy spokesperson said: "Restaurant partners on Dineout have the complete liberty to decide on how much discounts they wish to offer to customers through their listing on the app. Only a handful of restaurant partners have expressed their desire to delist from the platform. We continue to engage with them and NRAI representatives to revisit their choices.”

Foodtech

In May, Bengaluru-based Swiggy acquired Dineout, a dining and restaurant tech platform founded in 2012 with over 50,000 restaurants listed at the time of the acquisition. The $120-million all-stock deal paved the way for Swiggy to enter the restaurant listings business—a terrain Zomato had entered years ago.


Restaurant partners listed on Dineout have to voluntarily migrate to Swiggy’s new dining platform Swiggy Diners (being rebranded from Dineout), according to the source at NRAI.


“Dineout continues to work with over 15,000 restaurants on the platform in over 20 cities. We continuously engage with restaurant partners to improve our offering and make this partnership viable for everyone,” the Swiggy spokesperson asserted.

The delisting process at Swiggy can take two weeks to a month to be completed and will result in the restaurants simply being listed on the platform for discovery. Customers will no longer be able to avail discounts or cashback through the aggregators for dining in at those restaurants.

The dining plans serve as key growth drivers for Swiggy and Zomato, especially as consumers have started dining out following the withdrawal of COVID-19 restrictions. The segment was severely hit during the initial months of lockdown but the companies subsequently expected it to perform better.


“The revival of in-restaurant dining in Q3 FY22 led to some green shoots in our dining-out ad-sales business. Our focus here, for now, is on improving our product and customer engagement while putting monetisation on the back burner for a while,” Zomato mentioned in a quarterly earnings report last year.


Industry body NRAI has been spearheading efforts to protect restaurants from the deep discounting offered by online platforms for both delivery and dining. 


The owners of several popular restaurants, including Indigo Hospitality (which owns Indigo Deli, Dakshin Rasoi), Impressario Entertainment and Hospitality (Socials, Smokehouse Deli), and Azure Hospitality (Mamagoto, Sly Granny) are on the board of the industry body.


The development at Swiggy mirrors that at its rival as several restaurants have already staged a walkout from Zomato on similar grounds, and several more are expected to follow.


NRAI had raised concerns against Zomato’s Gold membership plan in 2019, stating that deep discounting, high and uneven commission charges, data masking, and mandatory bundling of services were crippling the restaurant industry.


Anurag Katriar, Founder of Indigo Hospitality P Ltd and President of NRAI, adds that the food and beverage industry has seen “significant erosion in value while the enterprise value of these aggregators kept rising”.


The aggregator platforms offer discounts of up to 40% on every dining bill paid via the platform’s gateway, leaving alarmingly low margins for restaurants, according to NRAI.


Zomato discontinued the Gold programme shortly after and recently announced its new Zomato Pay offering. 


In July 2021, NRAI complained to the Competition Commission of India against the food aggregators for anti-competitive practices, leading to an ongoing investigation.


“We are currently advising our fellow fraternity members on the grave risks of engaging with both Zomato Pay and Swiggy Dineout programmes, and asking members to take necessary steps to prevent them from getting a foothold in the dining segment," Indigo Hospitality’s Katriar says. "Most restaurants in the organised sector understand this and are keen to exit any discount or deal-driven listing and have further served notice to Dine Out. Zomato Pay programme construct is pretty similar. Neither programme is solving any existing problem of the F&B sector.”


“These well-funded aggregators pose a huge threat to the hospitality industry, and if not stopped in time, will popularise a dangerous culture of discounting that will be irreversible," says Riyaaz Amlani, CEO and MD of Impressario Entertainment and Hospitality, who is also a trustee of NRAI.


(The article has been updated to include Swiggy's comments post publication and to correct that Zomato Pay has already been launched)


Edited by Kanishk Singh