SWOT ANALYSIS OF

COMPANIES

EFFORTS BY: KRISHNA J SANTHOSH

 NESTLE
SWOT Analysis of Nestlé

Nestlé’s Strengths
 Largest Food Company
With a market capitalization of $330+ Billion, Nestle has been one of
the largest food companies in the world with the sales of its Hot Pockets,
Stouffer’s, DiGiorno, and Nespresso etc. 

 Reputed brand name

Nestle is the most renowned brand in the world. It has developed a
respected reputation in the food and beverages sector offering high-
quality products for everyday use across the globe.

 Brand valuation
Nestle is well positioned for growth. In 2021, Nestle ranked at #62
position by Interbrand – with a brand value of $10.6 billion, moved up 1
place compared with 2020.

 Highly diversified portfolio

Nestle owns more than 2000 brands globally and renovated over 8000
products. It is one of the worlds’ biggest companies with the broadest
and diverse product portfolio.

Nestle divides its products into 7 different categories:

 Powdered and Liquid Beverages—this is the largest segment of Nestle and

represents about 28% of total revenue. This segment sells soluble coffee
and other beverages such as tea and chocolate powder. Signature brands
include Nescafe, Nespresso, Starbucks coffee (license deal), Blue Bottle
Coffee, Milo, and Nestea.

 Petcare – second largest segment of Nestle and represents about 18% of

total revenue. This segment sells pet food & toy brands Purina, Lily’s
Kitchen, Tails, and Merrick.
 Nutrition and Health Science – represents about 15% of total revenue.
This segment sells products such as vitamins, minerals and supplements
 that help to promote health and wellness. Signature brands include
Illuma, Gerber, Nestum, Cerelac, Beba, Lactogen, Garden of Life, Pure, and
Vital Proteins.

 Prepared dishes and cooking aids – represents 14% of total revenue. This
segment sells frozen food, chilled prepared food, culinary and cooking
aids. Signature brands include Maggi, Original Waggner, Lean Cuisine,
Chef, Sweet Earth and Freshly.

 Milk products and ice cream – represents 12% of total revenue. This
segment sells milk products and ice cream products under the brand
names of Nido, Nesvita, Carnation, Lattiere, Coffee Mate, Hagen Dazs, and
Movenpick.

 Confectionery – represents 9% of total revenue. This segment sells

chocolate, sugar, candies, snacks and biscuits. Signature brands include
KitKat, Cailler, and Garoto.

 Water products -represents 5% of total revenue. Signature brands include

Pure Life, S.Pellegrino, Vittel and Perrier.

 Global presence
Nestle has a strong global presence, and its products are sold in almost
everywhere in the world. Nestle sells its products in 186 countries Instead
of relying on a few markets, it has captured the sizeable market in a lot of
developed and developing countries to earn most of its revenue.

 Americas is Nestle’s largest market and represents about 44.9% of total

sales. The United States and Canada account for 70% of sales in this
region, while Latin America and the Caribbean account for the other 30%.

 Europe, Middle East & North Africa (EMENA) is the second largest market
and accounts for about 29.6% of total revenue. 64% of regional revenues
are from Western Europe, 18% are from Eastern and Central Europe, and
18% are from the Middle East and North Africa.

 Asia, Oceania, and sub-Saharan Africa (AOA) represent the rest 25.5% of

its total revenue of Nestle. ASEAN markets (The Association of Southeast
 Asian Nations) account for 34% of regional sales, Oceania and Japan
account for 15% of regional sales, Other Asian markets account for 39% of
regional sales, and Sub-Saharan Africa accounts for 12% of regional sales.

 Looking at individual countries, the United States is the largest market for

Nestle and represents about 30% of total revenue, followed by
the Greater China Region (#2 largest market, representing about 6% of
total revenue), France (#3 largest market, represents about 4% of total
revenue), United Kingdom (#4 largest market, represents about 4% of
total revenue), and Mexico (#5 largest market, representing about 3% of
total revenue).

 World’s largest corporation

According to the Forbes Global 2000, Nestle is among the world’s largest
corporations and is ranked at 46th position in 2022 list.

 Health focused Breakfast

The world’s leading food conglomerate, Nestle, has reduced the amount
of sugars (by 25%) used to produce its beloved Carnation Breakfast
Essentials. Moreover, the company is also incorporating a completely new
and environment-friendly paper packaging for the product line to
enhance its sustainability.

The company is undoubtedly checking all the right boxes when it comes
to things most important for shoppers. Plus, it’s also a fact that a lot of
these shoppers have grown up enjoying the Carnation Breakfast
Essentials line of products and want their kids to enjoy them too.

 License deal with Starbucks & strong relationship with other brands
Nestle has entered into a perpetual license deal with Starbucks to market
its products globally. The deal strengthens Nestle’s coffee portfolio and
provides Starbucks an opportunity to use Nestle’s network for global
expansion. In addition, Nestle has well-established relationships with
other trusted and powerful brands like Colgate Palmolive, Coca Cola,
General Mills, and L’Oréal. 

 Efficient R&D system

Nestle has the world’s largest food and nutrition research organization
with 21 R&D centers. Its research and development capability is one of its
key competitive advantages.
 There are more than 5000 employees involved in R&D operations.
Recently, Nestle expanded its operations in the Greater China region to 3
R&D centers and 4 product innovation centers.

 Environmental sustainability practices

Nestle puts substantial efforts in environmental sustainability
practices and take innovative initiatives in improving its quality of
products. It optimizes advanced solutions to reduce waste, water usage,
non-renewable energy use, and packaging material usage.

The company pledged to net zero greenhouse gas emissions by 2050.

Also, deforestation free supply chain and aims to cut virgin plastics by
one-third (by 2025).

 Large distribution system

Nestle owns an extensive and diversified distribution system that is not
only penetrated in urban areas but also rural regions. It has adapted local
distribution methods and decentralized approach to run the business
efficiently in respective countries. Nestle has strong relationships with
suppliers, retailers, vendors, and distributors.

Nestlé’s Weaknesses
 Increase in prices
Nestle has increased prices by 6.5% on a certain category of their
consumer goods. The price increase is due to an increase in raw material
and transportation costs, supply chain constraints, and an overall
inflationary environment.

 Span of control and organizational structure

Nestlé is organized in a matrix structure. That means a large number of
brands are under the same umbrella group which makes it somewhat
challenging to manage a large number of individual brands, which can
often result in discord and conflict of interest.

 Water controversy
Nestle was accused of pumping millions of liters of water from the
Canada reserve, where residents are deprived of drinking water.

 Social criticisms
Nestle has become a target of media attention many times. The claim to
privatize water, misleading labeling, and a lawsuit for chocolate making
 using child and slave labor are some of the examples that have to weaken
its market reputation.

 Maggi Noodles controversy

In 2017, Nestle failed to clear a laboratory test in India. This created a
publicity hype as people boycotted Nestle, leading to the loss of 80% of
market share in the country. Nestle claimed ‘No added MSG’ in the
Noodles packets. However, 1000 times more lead was found in the
product after testing.

 Racially Insensitive Product Names

Nestle has been criticized for perpetuating racism using racially insensitive
names on its products. In Australia, Nestle has been under pressure to
stop advancing racism with its sweets named Red Skins and Chicos and
recently announced that it will change the name of two confectionery
products.

 Unhealthy Products
Nestle’s history consists of a long list of products that threatened
consumers, such as China Milk Scandal and tainted cookie dough.
Consumers distrust companies that have sold unhealthy products in the
past.

Nestlé’s Opportunities
 Venturing small food start-ups
Nestle has a fantastic opportunity to grow the number of small food start-
ups under its popular brand name. Nestle can also collaborate with the
new start-ups to promote its brand name.

 Online shopping
Nestle has a remarkable opportunity to boost its e-commerce sites and
online shopping platform. A very few CPGs are offering online services to
make the shopping experience more comfortable and pleasant. Although,
Nestle has its online stores in a few countries, expanding its online
services to more areas will prove a rewarding decision for the company.

 Market penetration for breakfast cereals

Nestlé’s cereals and oats market have shown fast growth in recent years.
Thus, penetrating this market more would be highly lucrative for the
company.
  Expanding ready-to-drink tea and coffee market
The demand for tea and coffee is continuously on the rise, rendering a
profitable opportunity for Nestle to groom this market more.

 Partnerships
Strategic alliances with other food and beverage giants are also a great
opportunity for the company to increase its revenues and profits.

 Authentic labeling
Nestle has already been criticized for giving misleading nutritional
information on its labels. So, there’s an opportunity to improve its
practices by giving trustworthy information and accurately labeling its
products.

 Expand through Acquisitions

In 2019, Nestle offloaded several low-performing brands like Herta
Charcuterie and is switching to acquisitions. The company has
acquired gastrointestinal medication brand Zenpep and the better health
company recently. Expanding portfolio with high performing SMB
acquisitions offers immense opportunities for Nestle to grow. [9]

 Refocus on Profitable Ventures

Having too many brands can stretch a company’s resources to the limit
and undermine overall performance. Nestle has been grappling under the
weight of too many unprofitable brands and is seeking to sell its North
American water brands like Pure Life and shift focus on strengthening the
best and highly profitable brands in its portfolio. [10]

 Nestle introduces “Vuna” a vegan substitute for Tuna

 After being under fire for producing unhealthy foods, Nestle seems
to be gravitating towards healthier and plant based food categories
targeting a more health and environment-conscious target
audience. Nestle claims that Vuna is the result of the futuristic food
technology the company is working on.
 After the successful launch of Vuna, Nestle also stated that it will
work on bringing more vegan-based food items, especially in the
protein sector. For example, Nestle will soon launch vegan
alternatives for dairy products such as eggs and other seafood
items such as shrimps.

Nestle’s Threats
 Price fluctuations by retail giants
Nestlé’s grocery sales are achieved majorly through huge retail giants
like Walmart, Tesco, Target and Kroger. Any reduction or increase in
prices by these retailers can affect Nestlé’s sales and its profitability. 

 Illegal rainforest destruction controversy

In 2017, Nestle was alleged of involvement in the illegal destruction of
Sumatra’s last tract of rainforest. It faced severe criticisms from NGOs and
environmentalists in this regard.

 Water scarcity
Nestlé’s production is highly dependent on water usage. Accessing the
clean water through less costly sources has become difficult for the
company due to many reasons. These include increasing population,
climate change, growing demand for food and water, increasing pollution,
water wastage, and overexploitation of resources.

 Rising competition
Many CPG companies like Mondelez and Unilever offer similar food and
beverage products. It is hard for Nestle to compete in such a situation
where the substitute products are easily accessible.

 Government regulations
Government regulations can affect the business operations of Nestle.
Additionally, the increasing prices of commodities force the company to
increase the prices of its products. It will lead to sales reduction as
consumers can switch to other brands which are available at low costs.

 Economic Uncertainty
Even though, Nestlé’s sales were not drastically impacted during the
pandemic due to panic buying catalyzed by recent events. The company’s
revenue is still threatened by economic uncertainty and recession in the
global markets.

 Haunting Dark Past

The US Supreme Court is reviewing whether to open human rights probe
against Nestle subsidiary for knowingly helping to perpetuate slavery in
cocoa farms in the African nation of Ivory Coast. Even though the events
occurred over a century ago, Nestlé’s racist past can haunt the company
and affect its sales, profitability, and growth for years to come.
 Under Fire for Printing Hindu God Image on Wrapper
In a flurry of heated emotions and complaints, Netizens accused Nestle
India of playing with citizens’ religious sentiments. The company came
under fire after printing the photograph of different Hindu gods on
wrapper.  Citizens also stated that the wrappers will ultimately be
disposed off in trash cans, which is blatant and utter disrespect of their
gods. Nestle has since apologized for the controversy, claiming that it was
never their attention to disrespect the Hindu religion.

ITC
SWOT Analysis of ITC

ITC Strengths
 India’s largest cigarette producer
ITC Ltd. enjoys a market share by volume of over 75% in the cigarette
segment in India and is the absolute market leader. The company has five
cigarette manufacturing factories across India in Bengaluru, Kolkata,
Munger, Pune, and Saharanpur.

 Diversified businesses
 ITC’s diversified portfolio includes FMCG, Hotels, Packaging,
Paperboards & Specialty Papers, and Agri-Business.
Approximately 67% of the revenue comes from the FMCG segment,
including cigarette sales and staple products.
 The Agri-Business segment accounts for about 21% of total revenue
and includes the sales of agri-commodities such as wheat, rice, and
coffee, while Paperboards, Paper & Packaging accounts for about
11% of the total revenue, and Hotel business accounts for the rest
2%.

 Large market capitalization

ITC is one of India’s leading private sector companies with
a market capitalization of Rs 4.3 trillion. The corporation is currently
considered the number one stock in the market capitalization category
compared to similar companies.

 Vast market reach

The conglomerate runs over 10 business lines and exports its range of
products to 60 countries. ITC boasts over 200 manufacturing facilities in
India and a distribution network covering over 7 million retail
outlets across various trade channels. Its product range includes more
than 25 brands spanning various categories. The company also has 113
hotel properties.

 Market growth & e-commerce sales

ITC added new markets and outlets in FY 2021-22, thereby increasing
its market coverage by 1.4 times and outlet coverage by 1.1 times over
the previous year. The growth has further strengthened its multi-channel
distribution network in the process.

 Brand recognition
 ITC Ltd. is ranked #2 among the top ten India FMCG brands. In the
hospitality sector, ITC’s flagship restaurants Bukhara, Avartana  and Dum
Pukht have received recognition among the world’s best
restaurants by 50 Best Discovery.

 Shrewd acquisitions
ITC Ltd. has made several astute acquisitions to help the company expand
into new business areas. A few examples of those acquisitions are:

 Tecnico Agri Sciences, a producer of high-yielding seed potatoes,

was bought for Rs 121 crore in March 2016. It is India’s largest seed
potato producer, with more than 50% market share in the
processed potatoes segment.
 Sunrise Foods, a leading manufacturer of high-quality Indian spices,
was acquired for Rs 2,150 crore in May 2020.
 ITC also acquired a 10% stake in Blupin Technologies for Rs 390
million in May 2022. The company is a web and app-based content-
to-community-to-commerce platform that also deals in mother and
baby care products and services under the brand name ”Mylo”.

 Innovative marketing
ITC’s B2B app Unnati has brought over 2.2 lakh retailers on board within
eight months of the national launch, further strengthening the
conglomerate’s pull in the retail segment.

It also runs an exclusive D2C platform, ITC e-Store, enabling consumers to

access more than 700 FMCG products across 45 categories.

ITC Weaknesses
 Overreliance on the Tobacco business
ITC is heavily reliant on its cigarette business for its revenue. Although it
has tried to diversify its FMCG segment, cigarettes still account for
around 40% of revenues and about 81% of operating income.

 Negative public perception

Despite its PR efforts, the tobacco industry cannot escape the perception
that it harms health and the environment. In some quarters, tobacco has
been linked with the deaths of more than 1 million people a year in India.

 Disadvantageous tobacco regulatory environment

 While ITC Ltd.’s international peers have managed to diversify into lower-
risk sectors such as vaping, a ban on e-cigarettes in India has made it
difficult for the Indian multinational to follow suit. 

 Business disputes
ITC Ltd. and Nestle India have been embroiled in a seven-year
dispute over the use of ‘Magic Masala’ and ‘Magical Masala’ catchphrases
to promote their noodles brands.
The Madras High Court in 2020 ruled that the phrases are common English
and Indian words and that neither of the companies can claim a
monopoly over them.

ITC Opportunities
 Upbeat economic environment
After putting its pandemic-related problems behind it, India is poised to
become the world’s fastest-growing major economy for the second year
in a row, growing at approximately twice the rate forecast for China.

Economic initiatives like the Gati Shakti scheme and PLI scheme, which
are aimed at fostering infrastructural & manufacturing investment, have
also played their part in creating a buoyant economic atmosphere.

 Post pandemic recovery

Analysts expect ITC Ltd. to enjoy robust growth in business in FY-23,
supported by volume growth in the cigarettes business, recovery in the
hotel sector, as well as improvement in its info-tech segment.

There is also room for ITC Ltd.’s range of fast-moving consumer goods to
grow, backed by an estimated total addressable market potential of Rs 5
trillion by 2030.

 Product diversification
A strategic shift from tobacco towards acquisitions in FMCG can help
accelerate the conglomerate’s growth, given how rapidly the FMCG
segment is expanding. Financials have shown encouraging performance in
ITC’s overall matrix with its value-accretive M&As.

Currently, consumer staple products account for around 40% of segment

revenue, while cigarettes account for the remaining 60%.

 Growth in consumer demand

 The FMCG industry is currently estimated to be the fourth largest
sector in India. In 2021, it realized a 16% increase in value, the fastest
recorded in nine years. It is expected to increase at a compound annual
growth rate of 14.9% to reach $220 billion by 2025, double the amount
recorded in 2020.

The Indian packaged food market is also expected to double to $70 billion
by 2025. This presents an excellent opportunity for ITC to invest further in
this promising sector.

 Emerging market segments

Rising digital connectivity in metro cities and rural areas is driving the
demand for FMCG products through e-commerce websites. ITC can
position itself to take advantage of this changing trend.

 Use of AI and data analytics

Organizations in India are increasingly using AI to enhance their core
business processes and services to serve their clients, employees, and key
stakeholders better.

Although ITC has invested in Artificial Intelligence and developed its

NextGen data architecture powered by AI and ML, there is room for the
conglomerate to exploit the technology even further to gain insights into
consumer behavior and for its agricultural operations.

 Low penetration of legal cigarettes 

Currently, legal cigarette consumption in India accounts only for 8% of
total cigarette consumption, compared to the world average of 90%. ITC
could well leverage stricter laws from the government on cigarette sales
channels to increase the sales of its products.

ITC Threats
 Rising production costs
A sharp increase in commodity prices and energy costs, coupled with
persistent global supply chain disruptions in the last few months, have
put considerable pressure on the company’s profit margins.

 Counterfeit cigarette trade

Tobacco consumption in India from the legal cigarette trade has been on
the decline and currently accounts for only 10%. This has severely
impacted ITC’s cigarette sales.
  Anti-tobacco regulation
The cigarette business is under threat from heavy taxation and
regulations, not only in India but across the globe. This has led to
the migration from tax-heavy cigarettes to lightly taxed or tax-evaded
tobacco products.

Unfortunately, for ITC, cigarettes are still the company’s mainstay in

terms of revenue, making the company highly vulnerable.

 Intense competition
ITC does not only face intense competition from local competitors but
also from international FMCG brands and hotel chains. The intense
competition might hinder ITC from expanding its market share.

CADBURY
SWOT Analysis of Cadbury
Cadbury’s Strengths
 A strong brand name
Cadbury is well known globally as one of the leading confectionery
companies. Its brand is extremely powerful, and users around the world
associate it with a specific taste. They know what to look forward to as
they pick the product from the shelves. A global study found that Cadbury
Dairy Milk, one of its products, is the most popular chocolate bar
worldwide. It came up as the leading product in 78 countries, including
India, South Africa, and United Arab Emirates.

 Available in many countries across the world

The company does not just have a powerful brand and strong operations
in the United Kingdom alone. As a leader in confectionery, it runs
operations in more than 70 countries and has been universally positively
received. The global presence that Cadbury enjoy drives its revenue and
also functions as insurance for the company. In the event one company
comes up with unfavorable regulations, Cadbury would still remain
operational in the other markets.

 It comes from a wealthy parent company

Mondelez International, formerly called Kraft Foods Inc, which owns
Cadbury. The international food giant has numerous other household
brands under its wings, with revenue of 2059 billion Rupees. Thanks to
these impressive revenue statistics, the company ends up getting large
profits that are re-invested in subsidiaries. Therefore, Cadbury is sure of a
massive bankroll in case it faces adversity.

 Successful marketing and advertising campaigns 

The company is known for running some of the best marketing
campaigns. It has managed to capitalize on vital events and made the
most out of them. Due to these campaigns, the average consumer finds it
more natural to choose some of its products when gifting loved ones.

 Premium quality brand

Cadbury presents itself as a premium brand, ensuring that consumers
trust it. It is renowned as a high-quality brand that is moderately priced.
Its products are not just releasing sweet chocolate. Instead, they are
quality-driven and consumer-oriented.
  Strong link with Indian customers
Brands operating globally always salivate to make a positive penetration
through the Indian market. Cadbury is among the few that have
successfully done so. That’s because it capitalizes on the important
aspects of Indian culture, which are love, home, and friends. Thanks to
this link in the Indian market, Cadbury manages to get record-high sales in
India, further bolstering its financials.

 Enter new markets

Cadbury has an effective creative team that plays a central role in helping
them enter new markets. The team comes up with an impressive strategy
that helps it seamlessly integrate into new countries.

 Revamped website
Cadbury’s official website speaks of creativity and gets clicks from all over
the world. The well-functioning and engaging website helps keep
consumers remembering about the company’s products. More
importantly, the websites are market-specific to make site visitors feel
they get personalized attention.

Cadbury’s Weaknesses
 Limited product range
In as much as Cadbury has a global presence, analysts have always
criticized it for having a limited product range. The company has so far not
expanded into developing and manufacturing other types of products,
whether they are food-wise or any other type. Due to this, Cadbury faces
a big exposure to the market when things are going well and badly. As the
world starts paying more attention to one’s general health, this can be a
major problem for the company.

 Advertising controversies
Even though Cadbury runs one of the best marketing and advertising
campaigns, it sometimes finds itself on the wrong side of consumers. As a
household product, the company faces significant risks of criticism when
advertising. For instance, its controversial worms advertisement made
international news.

 Does not have US rights

Given that Cadbury is a western confectionery brand, one can assume
that the US stands out as its biggest market. However, you’d be forgiven
 for thinking so. The rights to produce Cadbury chocolate in the United
States lies with The Hershey Company. That has led to complaints from
some customers who argue that the taste differs from the original
Cadbury. Additionally, this lack of rights means Cadbury cannot expand its
vital chocolate products in the United States.

 A couple of product recalls

Cadbury has had a few instances where it has recalled some of its
confectionery products. The recalls come in different ways, including
labeling nut residues as allergen-free or the discovery that some of its
products have harmful bacteria. The few products recalls negatively affect
the company’s brand name.

Cadbury’s Opportunities
 Fresh tastes
An opportunity exists for Cadbury to come up with fresh tastes that will
take the company a notch higher. Currently, it is focused on customers
that have sweet tooth. Mostly these customers eat chocolate bars and
small chocolates. That means the introduction of new tastes and new
flavors gives Cadbury the opportunity to deliver to another market
segment regularly.

 Rural markets
Cadbury appears to focus largely on urban markets based on the way it
has been marketing and distributing its products. Coming up with
strategies for penetrating the rural market can be a great opportunity for
the company.

Cadbury’s threats
 Increasing health campaigns 
Key stakeholders are running global advertisements advising consumers
on the need to remain health-conscious. That is a major threat to this
confectionery because its products can easily be considered not healthy
for the average consumer. No matter what Cadbury says about this,
studies exist that suggest sweets have a negative effect on one’s health.
The shift in consumers becoming more health conscious translates to a
decline in sales for Cadbury.

 Heavy taxation 
 Some countries are on a mission to reduce the consumption of sugar
products. They do this through heavy taxation, including the possibility of
introducing a sugar tax. Norway already does this. Introducing such taxes
in newer areas leads to high costs for consumers, cutting down Cadbury
sales and revenue.

ZOMATO
SWOT Analysis of Zomato

Zomato Strengths
 World’s leading food delivery services site
 Zomato is one of the largest restaurant search websites in the world. Its
food ordering and delivery services cover more than 1,000 cities and
have 14.7 million monthly average transacting customers.

Additionally, Zomato has partnerships with 180,000

restaurants and 285,000 delivery partners.

 Market dominance in India

The Indian food delivery services market is a duopoly
market, with Zomato and its rival Swiggy as the two absolute market
leaders.

The competitive landscape used to include Zomato and Swiggy holding

50% each of the market share, but this has changed in recent years.
Recently, Zomato expanded its market share and stands at
around 55% currently.

 Rapid growth
Zomato continues to enjoy growth in terms of revenue and operations. In
FY2022, the total value of all food deliveries ordered through Zomato’s
online platform jumped to Rs 213 billion, registering a 125% growth year-
on-year.
The number of orders (535.2 million) and monthly transacting
customers (14.7 million) have also grown by 124% and 116%, respectively,
compared with last year.

 Dynamic marketing strategies

Zomato’s aggressive marketing channel mix across various social
platforms has helped it to reach out to customers seamlessly across
devices, keeping it ahead of the competition.
Even though Zomato is an online platform, it does both digital marketing
and offline advertising. This strategy has allowed Zomato to strengthen its
presence and attract a huge amount of followers.

The Rs 1.3 billion increment in Zomato’s digital marketing spend in FY

2022 enabled the company to acquire 25 million new
customers compared to 10 million new customers in FY 2021.

 Innovation in digital payments

Innovation is at the core of Zomato’s operations. Zomato has developed
innovative products like its digital payments service to take advantage of
the rapidly expanding digital payments space.
 The digital payments subsidiary of Zomato, Zomato Payments, offers
services including e-wallets, virtual payment systems, mobile wallets, and
cash cards to consumers. Zomato Payments will enable the company to
provide better services for customers.

 Ability to raise capital

The food aggregator has a knack for successfully raising capital to run its
operations. In 2020, Zomato raised $62 million from Temasek and
received $52 million in funding from Kora Investments.
The following year it raised $250 million from five investors,
including Tiger Global Management, followed by a successful IPO in July
2021 valued at $12 billion.

 Global presence
Although Zomato is headquartered in India, it has an international
presence in countries including Australia, Netherlands, USA, Turkey, and
some Southeast Asian countries.

 Strategic acquisitions
Zomato has made shrewd acquisitions that have helped it dominate the
food ordering segment. In 2020, it acquired its rival; Uber Eats India,
for Rs 2,485 crores in the form of a 10% stake in Zomato’s equity.

Later, in 2022, Zomato acquired Blinkit for Rs 4,447 crores in an all-stock

deal. The multinational restaurant aggregator has also acquired minority
stakes in startups like Grofers, Curefit, Shiprocket, and Magicpin.

Zomato Weaknesses
 Loss-making status
Zomato, and food delivery companies in general, are viewed by
analysts as loss-making ventures with small margins. These factors are
likely to discourage future investments in the sector.
In FY22, Zomato’s net loss widened by 50% to Rs 12.23 billion, further
continuing the negative trend in its fortunes.

 Poor business decisions

Zomato has made wrong business decisions in the past, such as its
unsustainable offer of discount programs at dine-in restaurants. The
program led to 1,200 restaurants delisting themselves from the food
aggregator’s online food delivery system in a standoff.
 Zomato’s foray into the alcohol and groceries delivery segment
also failed in 2020, as the venture proved to be unscalable.

 Management/ownership restructuring
In April 2020, the startup had to shuffle its top management as one of the
co-founders, Pankaj Chaddah quit, leaving the company in a vulnerable
position.

Zomato Opportunities
 Potential market growth
The food delivery business is estimated to be worth $110 billion by 2025,
while India’s food delivery market is expected to grow at 28.13% CAGR for
the next four years. Analysts believe that food tech giants like Zomato
can exploit this vast potential.

 Partnerships & acquisitions

Investments and acquisitions still represent the best way for restaurant
aggregators to grow in the market and explore new business
opportunities.
To this end, Zomato is spending more than $1.2 billion for
investments and acquisitions to strengthen its position in the food
delivery market space.

 Product diversification
Venturing into new product lines like nutraceuticals presents a great
opportunity for Zomato to exploit the increasing popularity of this
alternative medicine segment.
Currently, India has 150 million consumers of nutraceutical products, a
number which has grown from 12% of the population to a high
of 25% since 2016.

Zomato Threats
 Client shrinking margins
Food establishments using Zomato’s platform continue to shoulder the
burden of increasing online delivery service costs.
This poses the threat of restaurants shying away from the food aggregator
if their margins become unsustainable.
 Rising energy costs
Zomato is also a victim of inflation and rising costs of energy. An increase
in fuel prices has pushed up Zomato’s delivery cost per order, eating
further into the food tech’s fine margins and increasing the net loss.

 Security breaches
The threat of hacking into Zomato’s system and gaining access to
information on its clients remains real. The security breaches that
happened in 2015 and 2017 resulted in 17 million user data being stolen.

 Social & Governance risks

Zomato has seen its fair share of controversies that have undermined its
public image. In October 2021, for example, #Reject Zomato trended on
Twitter after a company chat support representative appeared to
discriminate against a non-Hindu customer.

 Withdrawal of major shareholder

In August 2022, Uber Technologies Inc. sold off its stake of 612 million
shares in Zomato, and another major shareholder Tiger Global sold 185
million shares.

The sale of shares shows low investors’ confidence in the company’s

future, leaving the online food-delivery startup in a weaker financial
position.