Online food delivery companies saw a softer rise in ordering demand this IPL season compared to previous years, and it could be due to the companies trying to double down on profitability and cut on costs, experts suggest.

In a report by a consulting firm Redseer, The OFD companies recorded a 7% increase in online food delivery orders during the IPL matches in 2023 compared to the 50%+ increase seen in the IPL-2020 season.

The report said, “Continuing their focus on profitability, OFD players adopted lighter campaigns in IPL 2023, largely limiting to in-app promotions. This was unlike the IPL seasons 2017-2020, wherein platforms made a significant presence on prime-time television through their advertisements. They enticed viewers with attractive discounts ranging from 50% to 60% at a wide array of restaurants. Additionally, they integrated their offerings with OTT platforms and created customized advertisements for maximum impact.”

IPL has been a major source of income for brands across the years of its existence. Online food delivery applications like Swiggy and Zomato did not fall behind in making the most of this period by marking their presence in every other media channel. But lately, especially this year, the range at which their offers and ads appeared to the audience mostly just stuck to our mobile phone notifications.

Could this be why the applications saw modest online demand compared to previous years? Experts say the OFD companies cutting down on costs and trying to move towards profitability, which they are doing successfully, could lead to lesser visibility and hence, tighter demand growth during times like the IPL. It could be working since Swiggy recently said their food business has become profitable while Zomato is also seeing near-term growth as their losses narrowed.

Reasons for softer demand during IPL 2023

Rashid Ahmed- Chief Digital Officer, Infectious Advertising believes lack of aggressive advertising directly impacted demand this year.

“During the 2023 IPL season, large Food Delivery Companies (FDOs) like Zomato and Swiggy seem to have largely shied away from aggressive advertising, resulting in a lacklustre orders spike of 7% as compared to spike highs of over 50% during the 2020 IPL. It is likely that FDOs relied on captive audience direct digital marketing. While metropolitan audience ordering behaviour may have plateaued out during the IPL period, users from smaller towns and cities seem to have ordered over twice as much during the IPL than metro users, despite little-to-no advertising.”

“Advertising, especially where impromptu decision-making may be triggered, can have a significant positive impact on segments like Food Delivery, during significant events like the IPL where entertainment, gatherings, and F&B pretty much go hand in hand. Unlike earlier industry formation years during which advertising and desirable discount demand drivers saw spikes upwards of 40% and even above 50% during IPL-13, the lack of advertising may have directly impacted the spike in orders during the 2023 IPL season,” Ahmed added.

Karan Taurani of Elara Capital says both the reach of a respectable penetration level and the companies chasing profitability could have impacted this demand slowdown during IPL.

“I think two things are happening over the last three years. One is that in terms of penetration, they have reached a respectable level. So, the base is something that was kind of catching up on this revenue growth that has come down. That's one broad reason, in terms of why this fifty percent number became seven percent. The other supplementary reason for it is that most of these companies are now kind of chasing profitability. So, I think they are playing around with levers around marketing and around customer creation. That is why this reduced marketing campaign strength as well. That is why even the growth is compound.”

Not all bad news

Although a lack of advertising, the companies did not shy away from offerings and deals during the season while engaging customers on their application through various gimmicks. Swiggy’s Match Day Mania offers and Zomato’s IPL quizzes made up for good engagement.

Samit Sinha, Managing Partner, Alchemist Brand Consulting, says “Watching television, be it entertainment or sports, goes hand in hand with the convenience of ordering food at home, as in many instances people are so glued to the screen as to not have time to spend in the kitchen. So, food delivery services like Zomato and Swiggy address the opportunity as the modern version of the TV Dinner.  The co-branding with Star Sports was a unique (as well as relevant) aspect, which made them almost complementary to televised sports and entertainment.”

Viren Razdan, Managing Director at Brand-nomics, believes the rewards and cashback played well for the applications. “IPL has become a major window and increasingly marketed well by F&B as an accompaniment. Both delivery brands delivered well on engagement region specific too. This was also in some sort of a post-Covid celebration of people getting back with a vengeance. Apart from advertising, the apps had some really good interactive elements with rewarding cash back plans and deals.”