400+ Leading Restaurants Across 13 Cities Quit Swiggy Dineout Program Over ‘Deep Discounts’

All is not well for Swiggy, the player which has roughly 50% market share in the duopolistic $ 5-billion Indian food delivery market.

There is troubled waters for the delivery leader as hundreds of of A-list restaurants, including Cafe Delhi Heights, Smoke House Deli, and Mamagoto, have opted out of Swiggy Dineout in recent weeks.

Restaurants Opt-out of Swiggy Dineout

This move came after the announcement from The National Restaurants Association of India (NRAI), which asked its members to log out of Swiggy Dineout, citing that its practice of offering deep discounts would hurt one of the restaurants’ core businesses. 

This development has been confirmed by several hospitality chains, including Indigo Hospitality, Impresario Entertainment and Hospitality, and Simmering Foods and Restaurants.

After the publication of the story that 20 brands having over 400 outlets have logged out of the platform.

A Swiggy spokesperson said: “Restaurant partners on Dineout have the complete liberty to decide on how much discounts they wish to offer to customers through their listing on the app. Only a handful of restaurant partners have expressed their desire to delist from the platform. We continue to engage with them and NRAI representatives to revisit their choices.”

In the month of May, Bengaluru-based Swiggy acquired Dineout, a dining and restaurant tech platform founded in 2012 with over 50,000 restaurants listed at the time of the acquisition. The $120-million all-stock deal paved the way for Swiggy to enter the restaurant listings business—a terrain Zomato had entered years ago.

According to the source at NRAI restaurant partners listed on Dineout have to voluntarily migrate to Swiggy’s new dining platform Swiggy Diners (being rebranded from Dineout).

One of the spokesperson said that “Dineout continues to work with over 15,000 restaurants on the platform in over 20 cities. We continuously engage with restaurant partners to improve our offering and make this partnership viable for everyone”.

Post the withdrawal of COVID-19 restrictions, consumers have started dining out and this makes the dining plans serve as key growth drivers for Swiggy and Zomato.

During the initial months of lockdown, the segment was severely hit, however the companies subsequently expected it to perform better.

Zomato mentioned in a quarterly earnings report last year that the “The revival of in-restaurant dining in Q3 FY22 led to some green shoots in our dining-out ad-sales business. Our focus here, for now, is on improving our product and customer engagement while putting monetisation on the back burner for a while”.

When it comes to delivery and dining, Industry body NRAI has been spearheading efforts to protect restaurants from the deep discounting.

The owners of several popular restaurants, including Indigo Hospitality (which owns Indigo Deli, Dakshin Rasoi), Impressario Entertainment and Hospitality (Socials, Smokehouse Deli), and Azure Hospitality (Mamagoto, Sly Granny) are on the board of the industry body.

Indian Restaurant Industry & Food Aggregators

Swiggy is not alone, Zomato has also faced the dismay of the industry body and its members. Previously in 2019, NRAI had raised concerns against Zomato’s Gold membership plan, stating that deep discounting, high and uneven commission charges, data masking, and mandatory bundling of services were crippling the restaurant industry.

Founder of Indigo Hospitality P Ltd and President of NRAI, Anurag Katriar said while the enterprise value of these aggregators kept rising, the food and beverage industry has seen significant erosion. 

As per NRAI, for every dining bill paid via the platform’s gateway, these aggregator platforms offer discounts of up to 40% and leave alarmingly low margins for restaurants. 

Shortly after this, the Gold programme was discontinued by Zomato. Zomato recently announced its new Zomato Pay offering. 

In July 2021, NRAI complained to the Competition Commission of India against the food aggregators for anti-competitive practices, leading to an ongoing investigation.

Indigo Hospitality’s Katriar says that “We are currently advising our fellow fraternity members on the grave risks of engaging with both Zomato Pay and Swiggy Dineout programmes, and asking members to take necessary steps to prevent them from getting a foothold in the dining segment. Most restaurants in the organised sector understand this and are keen to exit any discount or deal-driven listing and have further served notice to Dine Out. Zomato Pay programme construct is pretty similar. Neither programme is solving any existing problem of the F&B sector.”

Riyaaz Amlani, CEO and MD of Impressario Entertainment and Hospitality, who is also a trustee of NRAI said that “These well-funded aggregators pose a huge threat to the hospitality industry, and if not stopped in time, will popularise a dangerous culture of discounting that will be irreversible”.