InvestorQ : Why has Domino’s Pizza decided to reduce the dependence on aggregators like Swiggy and Zomato going ahead?
indhumathi Sayani made post

Why has Domino’s Pizza decided to reduce the dependence on aggregators like Swiggy and Zomato going ahead?

3 weeks ago

Should the Pizza guys delivery pizzas on their own or depend on the aggregators like Swiggy and Zomato. Obviously, both have their merits and demerits so it is hard to choose one of the options. However, now big names like Jubilant Foods are planning to go slow on their dependence on aggregator apps like Zomato and Swiggy. For instance, the Domino’s Pizza owned and operated by Jubilant in India, plans to wean business away from Zomato and Swiggy, due to the high cost involved and the hefty commission they are charging.

Jubilant Foodworks is not just stopping at that. It has also done a confidential filing with the Competition Commission of India (CCI) with requisite details since the CCI is already investigating anti-competitive practices adopted by big food aggregators like Zomato and Swiggy. Jubilant Foodworks runs the massive Domino's Pizza franchise in India and also the Dunkin Donuts chain in India. For a long time, the aggregators and product people had a symbiotic relationship, but now rising commission rates are pinching the products.

In a sense, Jubilant does compete with Swiggy and Zomato as they both try to dominate the lucrative pizza collection and delivery value chain. Jubilant is no small player as it has over 1,600 branded restaurant outlets. This comprises of 1,567 Domino's outlets and 28 Dunkin outlets. So it offers Swiggy and Zomato a lucrative opportunity to ride the fast food chain, which is a huge hit among the young crowds in India. The reason; Zomato and Swiggy are adopting anti-competitive practices and using their clout to charge hefty commissions.

Jubilant is quite categorical that in the event of another increase in commission rates by Swiggy and Zomato, Jubilant would seriously consider shifting more of its businesses in-house. It already has a full delivery set-up and only uses Swiggy and Zomato for added business expanse. The complaint against Swiggy and Zomato has alleged that these aggregators are charging exorbitant commissions in the range of 20% to 30%. That was almost making it unviable for the QSRs to use them as margins are already quite thin.

For now, the two players viz. Swiggy and Zomato have flatly denied any attempt by them to charge exorbitant monopoly rents from the customers. We need to wait and see how this battle evolves and could be interesting.