Swiggy Instamart is expanding its horizons with the introduction of ‘Instacafe’, a novel division offering pre-made food and snacks similar to what’s available at supermarket food counters. This move follows the recent establishment of Zepto Cafe by Swiggy’s competitor, Zepto. For Swiggy Instamart, the addition of Instacafe is part of a broader bid to increase profitability, considering that pre-made food typically provides higher margins than grocery delivery.
The spokesperson for Swiggy Instamart confirmed this development, elaborating that Instacafe presently offers a range of pre-made snacks that can be easily added to an Instamart cart along with grocery orders. Products like puffs, toasties, baos, cold coffee, cookies, tarts, and croissants are now available, diversifying the choices for customers.
Further broadening its scope, Instamart recently launched its private brands and ventured into electronics and mobile accessories. This expansion aims to increase the average order value, thereby improving per-order profit margins.
Instacafe, first piloted in Hyderabad and later introduced to Bengaluru, aligns with the commonplace consumer behavior of purchasing pre-made food alongside grocery shopping. According to a Swiggy Instamart spokesperson, Instacafe serves as an online food counter, offering fast-moving snacks delivered quickly alongside other Instamart items.
Presently, Instacafe has around 60 stock-keeping units (SKUs) available in specific locations such as Bommanahalli and Bellandur in Bengaluru and selected areas of Hyderabad. A crucial distinguishing factor between Instacafe and Zepto Cafe is that most items on Instacafe are unbranded and directly sourced by respective location’s dark store managers. In contrast, Zepto Cafe procures branded snacks in bulk.
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Despite the potential risk of cannibalizing Swiggy’s core business, Instacafe’s offerings are mainly quick snacks and not full meals. Nevertheless, both Swiggy and Zepto’s menus have been extending to larger meal options. With the growing scrutiny over quick-commerce startups’ business models, these companies are keen on expanding their basket sizes and selling items with higher margins.
On the flip side, previous ventures by Zomato and Ola into quick commerce have not been particularly successful. Zomato’s 10-minute food delivery pilot was eventually shut down, and Ola’s quick-commerce service, Ola Dash, also ceased operations. The average order value (AOV) for quick-commerce companies has generally been declining.
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Swiggy’s co-founder and CEO, Sriharsha Majety, recently announced that the company’s food delivery arm had turned profitable on an adjusted EBITDA level. This success indicates a potential reduction in investments towards Instamart while expressing optimism about the trajectory of the quick-commerce business.
This news is based on an article from Moneycontrol.