Eternal’s Blinkit Model to Eat into Its Hyperpure Business: A Shift in Quick Commerce Strategy
Eternal Ltd, the parent company of Zomato, is changing its quick commerce strategy to an inventory ownership model, which is likely to impact its Hyperpure business.
In a recent letter to shareholders, the company announced that it will be gradually transitioning its quick commerce business from a marketplace model to inventory ownership over the next 2-3 quarters. This change is expected to increase margins and expand assortment.
Hyperpure is Eternal’s business-to-business platform that supplies ingredients and kitchen supplies to the restaurants industry. As of the June-ended quarter, Hyperpure contributed Rs 2,295 crore to Eternal’s top line, a 25% jump compared to the previous quarter. Meanwhile, the quick commerce segment saw a 40% quarterly jump in revenue, coming up to Rs 2,400 crore for the first quarter.
According to Chief Financial Officer Akshant Goyal, the company’s teams are well-prepared for this transition and expect to start working with brands directly without any disruption to the business. Goyal added that a control on inventory gives the firm more leverage on margins in the business, and allows it to push on assortment expansion.
As a result of this transition, quick commerce revenue is expected to become very similar to NOV going forward. Hence, quick commerce revenue will increase. Hyperpure revenue will decrease on account of scale-down of non-restaurant business. Net working capital in quick commerce business will increase as Eternal starts owning inventory and net working capital in Hyperpure business will decrease.
Currently, about 3% of Eternal’s NOV is already on its own inventory. The company expects this share to increase sharply in the next quarter.
Eternal’s decision to shift its quick commerce strategy is part of its efforts to improve margins and expand its offerings. The company will launch a new service where food will be prepared, sold, and delivered to customers in a bid to rival Zepto Cafe. The company will incorporate a wholly-owned subsidiary named Blinkit Foods Ltd. with a total paid-up capital of Rs 10 lakh.
Blinkit Foods is proposed to be incorporated as a wholly-owned subsidiary and would inter-alia engage in the business of providing food services (including innovation, preparation, sourcing, sale, and delivery of food to customers).
Impact on Hyperpure Business
The shift in quick commerce strategy is likely to impact Eternal’s Hyperpure business. Hyperpure is the company’s business-to-business platform that supplies ingredients and kitchen supplies to the restaurants industry. As the quick commerce segment expands, it is likely to reduce the company’s dependence on Hyperpure.
However, the company’s CFO, Akshant Goyal, has assured shareholders that the transition will not disrupt the business. Goyal added that the company’s teams are well-prepared for the change and expect to start working with brands directly without any disruption to the business.
What Does This Mean for Investors?
Eternal’s decision to shift its quick commerce strategy is likely to have a significant impact on its Hyperpure business. The company’s CFO has assured shareholders that the transition will not disrupt the business, but investors should keep an eye on the developments in the quick commerce segment.
The shift in strategy is likely to increase margins and expand assortment, which could lead to increased revenue and profitability for the company. However, investors should also consider the potential risks associated with the transition, such as disruption to the business or increased competition.
In conclusion, Eternal’s decision to shift its quick commerce strategy to an inventory ownership model is a significant development for the company and its investors. The shift is likely to impact the company’s Hyperpure business and could lead to increased revenue and profitability. However, investors should keep an eye on the developments in the quick commerce segment and consider the potential risks associated with the transition.
