Zomato to set up kitchens, launch annual membership service to push revenues

Zomato Media Pvt. Ltd will launch two new initiatives – Zomato Red and Zomato Infrastructure Services – to increase revenue and profitability, Mint newspaper reported on Monday.

The new initiatives will be rolled out between February and June 2017. In an interview with the daily, Deepinder Goyal, co-founder and chief executive officer, said that he expects Zomato to achieve annual sales worth $50-60 million by March 2017 and that the new initiatives will contribute to growth next year, doubling revenues for the next three years.

An email query to Zomato confirming the development did not elicit a response at the time of filing this report.

With the Zomato Infrastructure Services initiative, the firm will set up kitchens for restaurants and assist in delivery. The Mint report stated that the investment, which will be in the range of $2-3 million, will go towards the kitchen infrastructure and last mile delivery and Zomato will charge restaurants a commission fee for orders taken through these kitchens. This initiative will first be tested in Gurgaon.

Zomato Red is an annual membership service where consumers can avail of offers at restaurants. Zomato will introduce the initiative first in Dubai and Portugal in January next year and then in India by March 2017.

Earlier this month, Zomato had hired Morgan Stanley to raise a new round of funding, the bulk of which will go towards the food delivery business and the remaining for restaurant reservations and deals

In Zomato's previous funding round, the company was valued as a unicorn—a startup that is valued over $1 billion. It had raised $60 million from Singapore government's investment firm Temasek and existing investor Vy Capital.

In its second quarter earnings, Zomato's parent company, Info Edge said that the restaurant listings company's cash burn was reduced to $1.5 million a month and that delivery accounted for a fifth of revenues. Goyal had attributed the drop in cash burn to the scaling back of its operations in nine countries.

Founded in 2008 by IIT Delhi alumni and former Bain employees Goyal and Pankaj Chaddah, Zomato's losses have multiplied over the years as it expanded rapidly. In January 2016, it shut down its online food ordering service in four cities—Lucknow, Kochi, Indore and Coimbatore, and launched its online food ordering business in April 2015.

In February, Zomato said it achieved operational break-even in six markets – India, Middle East (UAE, Lebanon and Qatar) and Southeast Asia (Philippines and Indonesia). This made Zomato the first Indian e-commerce unicorn to become profitable in the home market.

In April, the brokerage arm of HSBC, which initiated coverage on Info Edge, cut its valuation of the restaurant listing site by half to $500 million. Zomato, however, dismissed the HSBC report.