🤔 10 Foreign Market Exits: What's Up with Zomato?

After aggressive expansion, not only in India but 23 countries the world over, Zomato is closing down its subsidiaries. The food delivery platform is taking the simplicity route and liquidating to optimise its business in these locations. The focus is now on profitable growth. In its most recent round of cuts, Zomato is dissolving 2 more step-down subsidiaries Zomato Vietnam Company and Poland's Gastronauci as a part of its November 2019 decision to pull out of international markets and focus on India.

Let's understand what a step-down subsidiary means with an example:

FYI: Zomato launched its first international subsidiary in Dubai on Sep 1, 2012, and spread its reach to 24 different countries by 2019.

Before the pandemic, international expansions seemed like the way forward. As of March 2023, Zomato had 16 direct subsidiaries, 12 step-down subsidiaries, and one associate company.

FYI: An associate company is a company in which that other company has a significant influence.

But after giving this strategy a shot, Zomato felt global expansion was not a part of its future roadmap. Since then, it has liquidated 10 of its subsidiaries in countries like Chile, Australia, Portugal, and Vietnam. These international branches did not have active business operations, and thus, are unlikely to impact Zomato’s operations. It is still operational in Sri Lanka and UAE with its dining-out business.

✨ Why is this important?

Zomato called this whole international exit a “clean-up drive”. Just as expansion is important for a business to find new sources of earning revenue, clean-up is important to exit the loss-making ventures or markets where the efforts are not rewarding.

📝 Zomato’s Quarterly Revenue and Profits

The closing down of subsidiaries was not a cost-cutting initiative but a strategy to channelise the money into more profitable ventures - one which has worked earlier too:

• January 2023 - Zomato closed its operations in 225 cities (contributing only 0.3% of its gross order value) and relaunched Zomato Gold.
• Cut to June 2023 - The company reports its first operating profit of ₹12 crore in the June quarter.

Zomato is focussing on ‘growth geographies’ which are currently less profitable than more mature cities with a wider network. It also shifted its focus to expanding its e-commerce network by acquiring quick-commerce platform Blinkit in 2022.