Zomato Gold or Swiggy One: Who’s winning the loyalty programme race?

Zomato’s revamped Gold membership programme, which it rolled out in January, is showing initial signs of success with the foodtech unicorn recovering some of its lost ground from archrival Swiggy. 

A report by HSBC Global Research indicates that Gold, which was relaunched at an introductory price of Rs 149 for three months, has enabled Zomato to eat into Swiggy’s market share in this quarter (Q4FY23). “Zomato has started to reclaim some of the market share it lost in H2CY22, thanks to the launch of Zomato Gold. We expect it to continue to gain market share from Swiggy, led by an aggressive go-to-market strategy,” HSBC stated in its report.

Zomato shared in a prior announcement that it had added 9 lakh Gold members within a month of the relaunch. “The new Gold programme is built on top of what we have learnt over the last few years – iterating on feedback we have received from customers, restaurant partners, as well as investors… We expect this programme to drive loyalty and higher frequency of ordering going forward,” CEO Deepinder Goyal wrote in a letter to shareholders. 

According to HSBC, Zomato’s market share could reach 57 per cent in FY24, which is an improvement of 13 percentage points over Swiggy since FY20. In the next few quarters, the brokerage also expects Zomato to absorb the impact of Gold benefits, thereby improving its EBITDA margins. Swiggy, meanwhile, continues to have a higher burn rate than its listed peer, HSBC stated.  

Additionally, the brokerage also sees a ~64 per cent upside from current levels to Rs 87 in Zomato’s stock price. Despite the food ordering industry showing signs of slowdown, especially outside the top 8 cities, HSBC expects Zomato’s quick commerce vertical Blinkit to add value over the next 1-2 years. 

Blinkit’s current gross order value (GOV) run-rate of $1 billion could easily double by FY25, per HSBC estimates. “Blinkit remains under-appreciated by the Street. Hyperlocal/Q-commerce is likely to see strong growth for a few years due to low penetration and stabilizing competition. With increasing volumes, we see the potential for an improvement in profitability as well,” it stated.