Swiggy to cull 1,100 jobs, scale down cloud kitchens as Covid-19 affects business

Swiggy to cull 1,100 jobs, scale down cloud kitchens as Covid-19 affects business
Photo Credit: VCCircle
18 May, 2020

Just days after its primary rival Zomato announced major job cuts, online food delivery unicorn Swiggy on Monday said it would lay off 1,100 employees.

As the Covid-19 crisis continues to affect the company’s core business of food delivery, it looks to scale down some “volatile business verticals”, including cloud kitchens, and explore new segments, co-founder and CEO Shriharsha Majety said in a blog post.

Employees across functions and cities will be affected by the layoffs. They will all receive three months of salary and mobile communication allowance, an extra month of ex-gratia, as well as medical and accident coverage till the end of the year, he wrote.

The staffers will also be allowed to use their work laptops for three months, while Swiggy’s outplacement cell will help them find new jobs, he said. 

Additionally, the Bengaluru headquartered company will extend its employee stock option (ESOP) vesting to the nearest quarter and waive off its one-year cliff, he said.

Apart from the job cuts, the Bundl Technologies-run company aims to reduce indirect costs, such as office infrastructure, while also scaling down adjacent businesses such as cloud kitchens. 

“The biggest impact here is on the cloud kitchens business, with many unknowns about volumes through the year. Since the onset of Covid-19, we have begun the process of scaling down our kitchen facilities temporarily or permanently, depending on their outlook and profitability profile,” Majety wrote. 

The company will rejig its growth strategy to capitalise on the silver lining of Covid-19, he said, by focusing on penetration of digital commerce and home delivery of essential products.

“This offers us opportunities to continue investing our efforts in grocery and other service offerings that we think will continue to do well. We are going to invest in these high-confidence efforts to focus not on surviving alone, but on growing along the way by adapting very quickly,” he said. The company will realign some team members from other businesses into these initiatives, he added.

The startup last raised capital in February, when returning investors Prosus, Meituan-Dianping and Wellington Management invested Rs 804.7 crore ($112.5 million) in a growth funding round. This capital gives the firm sufficient runway, Majety said.

Prior to the February round, the company received $1 billion in a funding round led by South African technology conglomerate Naspers in December. 

Online food delivery firms have been severely impacted by the lockdown, as a majority of restaurants across the country remain shut due to the extended nationwide lockdown, even as several delivery executives test positive for the virus.

Read: Coronavirus India LIVE updates

Last week, Alibaba-backed Zomato announced its plans to lay off 13% of its 4,000-strong workforce, among other cost-cutting measures, to tide over the Covid-19 crisis. CEO Deepinder Goyal said in an open letter that he expected the number of restaurants to shrink by an estimated 25-40% over the next 6-12 months due to the lockdown. 

“All our employees who no longer have any work at Zomato, will continue to be with us at 50% salary for the next six months. During this time, outside of the handover period of 1-2 weeks, we expect these folks to spend 100% of their time and energy towards looking for jobs outside of Zomato,” Goyal said earlier.