Jubilant Foods to reduce dependence on Swiggy and Zomato

In the entire value chain of Pizzas, what is the most important link? Is it the preparation and quality control of the Pizzas, or is it the delivery and logistics of Pizzas. Obviously, it has hard to choose one of the options, but that is the big fight between the Pizza franchises like Jubilant Foods on the one side and the food aggregator apps like Zomato and Swiggy on the other hand. In response, Domino’s Pizza owned and operated by Jubilant in India, may take some of its business away from Zomato and Swiggy, subject to further hikes in commission. 

In fact, Jubilant Foodworks has gone a step further. It has also done a confidential filing with the Competition Commission of India (CCI) which is already investigating the alleged anti-competitive practices adopted by the big food aggregators like Zomato and Swiggy. Currently, Jubilant Foodworks of the Bhartia group runs the massive Domino's Pizza franchise in India as well as the Dunkin Donuts chain in India. The filing with the CCI comprises most of the relevant details, meant to curb the unfair monopoly rents charged.

In the past, it has been a symbiotic relationship. While they have looked at each other as competitors, both are also keen to have total ownership of the supply chain. Even today, when a Domino’s order is placed, the order fulfilment is done by Jubilant Foodworks and not by Swiggy or Zomato. For Jubilant, both Swiggy and Zomato are their competitors in their attempt to dominate the last end of the value chain. Jubilant has more than 1,600 branded restaurant outlets; comprising of 1,567 Domino's outlets and 28 Dunkin outlets.

These allegations have been ongoing against Zomato and Swiggy about anti-competitive practices. For instance, early CCI had ordered a probe into Zomato and Swiggy after an Indian restaurant group alleged preferential treatment. In addition, most of the retail and food outlets are also hassled by the exorbitant commissions charges by Zomato and Swiggy and misuse of the monopoly status in the last mile food delivery business. However, till date, the two food delivery apps have denied any such wrong doings.

Now, Jubilant is quite clear that if there is another increase in commission rates by Swiggy and Zomato, then Jubilant will consider shifting more of its businesses from online restaurant platforms to the in-house ordering system. It also has a simultaneous in-house ordering system but that comes with the benefits of customer acquisition and onboarding that Swiggy and Zomato offer to Jubilant Foodworks. Incidentally, Zomato is backed by China's Ant Group. It also affirmed that it had no plans hike commission rates. 

The CCI investigation was triggered after a complaint from the National Restaurant Association of India. The complaint had alleged that the commissions charged by Zomato and Swiggy were exorbitant in the 20% to 30% range and hence most of the restaurants were finding the going unviable. Zomato does own the value chain of delivery and fulfilment and would be looking to make the best of its spread and reach as well as its ability to do fulfilment to the fullest extent possible. For now, commissions are a big concern.

Like the others, even Jubilant Foodworks is quite categorical that in the event of another hike in commissions, they would prefer to rely on their existing in-house marketing infrastructure. Zomato had informed the CCI that it negotiated the rates and commissions with the restaurants but also added that no restaurant was given preferential treatment on listings. However, such things are very tough to verify. For now, the battle looks to long and convoluted. It may eventually have to be resolved across the table.