Online food delivery app Swiggy said it will layoff a part of its private brand kitchen team, renegotiate contracts with landlords, while discontinuing operations at a few of its centres on the back of the Covid-19 pandemic which has severely impacted the food and hospitality industry.
Sources close to the matter said Swiggy plans to reduce up to 1,000 jobs in its private brands business next month amid a larger downsizing drive at the company which may result in more job cuts going forward.
Swiggy confirmed the development on downsizing private kitchen staff without disclosing the number of people likely to be affected by the retrenchment.
“As the lockdown gets further extended, we are evaluating various means to stay nimble and focused on growth and profitability across our kitchens,” a Swiggy spokesperson said. “This will, unfortunately, have an impact on a certain number of kitchen staff who will be fully supported during this transition.”
The company plans to reduce monthly cash burn to less than $5 million in the next few quarters from $40 million in May last year, to conserve cash for the next 20-24 months, a person who is aware of the development said. Swiggy’s cash burn stands at about $20 million.
“All projects which are not core to the business are being kept at bay for now and all teams have been asked to rethink their plans. Cutting people cost is one of the areas that the company is focussing on, along with reducing discounting,” the person said.
These discussions to downsize private brands have been on since February, a source told ET adding that as many as 30 private label kitchens across Mumbai, Delhi, Hyderabad, and Bengaluru would be shut leading to workforce retrenchment.
“The plan going forward is to automate certain functions, including call centres, downsize projects which are not core to the business, make cuts across on-ground city teams,” the person, who is directly aware of the matter, said.
Swiggy’s wage bill for financial year 2019 accounted for 40% of its Rs 1,297 crore revenue.
Swiggy runs at least four private brands, including The Bowl Company, Homely, Goodness Kitchen and Breakfast Express. News portal Entrackr was the first to report the development on Tuesday.
Last year, Swiggy infused Rs 250 crore to create and expand 1,000 Swiggy Access kitchens and also launched Brandworks to scale up the initiative.
Swiggy was recalibrating the profitability of these private brands and business verticals for over six months, employees told ET previously.
However, the pandemic has hurt its top line, with order numbers falling by 70% with most cities under lockdown.
The move to cut costs is aimed at creating a two-year-long runway, as it may not be able to raise fresh capital in the near term.
The Bengaluru-based company recently closed its latest $150 million funding round led by Naspers along with smaller investors Ark Impact, Korea Investment Partners, Samsung Ventures and Mirae Asset Capital Markets.