CART Pre-IPO Preview
Our Restaurants team is presenting a pre-IPO Black Book on Instacart today at 2 PM ET. For the webcast and slides: CLICK HERE.
Currently, over 1,400 various national, regional, and local retail banners (80,000 doors), accounting for more than 85% of the U.S. grocery market, collaborate with Instacart. In 2022 alone, Instacart generated around $29 billion in GTV, establishing itself as North America's foremost grocery technology enterprise.
How Instacart Makes Money:
- Volume Incentives for Brands: Instacart partners with various brands to promote their products. In return for better visibility or promotion on the Instacart platform, these brands pay Instacart a fee to drive larger online sales volumes for these brands.
- Commissions: For each order processed through its platform, Instacart charges a commission (typically a percentage of the order's total value.)
- Advertising Revenue: Similar to the volume incentives, brands can pay to advertise or highlight their products on the Instacart platform, which means their products might appear at the top of search results or be featured in special promotional sections, leading to increased sales for those brands.
- Subscription Service (Instacart +): Consumers can subscribe to Instacart Express, which offers benefits such as free delivery on orders over a certain amount.
- Value Proposition for Grocery Stores: Instacart provides grocery stores with a digital platform to compete more effectively online. As e-commerce becomes more prevalent, especially in the grocery sector, stores that might not have the infrastructure or resources to create their online shopping platforms can partner with Instacart to access a ready-made system. This partnership benefits both parties: grocery stores can expand their online presence and reach, while Instacart gets a broader product range and customer base. Instacart's business model is multi-faceted and built on partnerships with brands and grocery stores and direct relationships with consumers. CART's primary goal is to make online grocery shopping seamless, efficient, and beneficial for all parties involved.
WINNING IN DIGITAL GROCERY (WMT)
Walmart has been winning share in digital grocery. In the last two years, it has seen its share gains accelerate online to surpass its brick & mortar market share. Walmart can more effectively leverage its low-price offering and scale online even more than in brick & mortar. This makes Instacart a partner despite Walmart having its own competing digital offering.
August CPI (TSN)
CPI for food at home decelerated to 3.0% YOY in August from 3.6% in July. The two-year average decelerated 10bps to 8.2%. Going forward the base effects get smaller which should lead to less YOY deceleration.
All of the subcategories decelerated with the meat, poultry, fish & eggs category being the outlier. The meat category was flat YOY in August, a sequential acceleration from -0.2% in July.
FOOD SPENDING GREW FASTER THAN OTHER CATEGORIES (WMT)
The Consumer Expenditures report recently released by the Bureau of Labor Statistics said the average annual income before taxes rose 7.5% in 2022 while expenditures rose 9%. Food was the third largest spending category at 12.8% of total expenditures. Food had the second largest increase in expenditures at 12.7% after cash contributions which rose 14.1%. Food away from home spending rose 20.1% while food at home rose 8.4%. Food expenditures rose 13.4% in 2021. Spending on alcoholic beverages rose 5.2% in 2022 with the lowest income quintile spending 11.6% more YOY while the highest income quintile spending 0.4% more YOY. Spending on food at home grew fastest for the middle quintile at 16.2% YOY. Spending for food away from home grew slowest at the lowest income quintile at 8.6% growth while the other quintiles spending grew between 16.0% and 24.3%. The growth in food spending last year accounted for 17.5% of the total average spending increase for consumers last year.
