Amazon’s blockbuster deal to buy Whole Foods Market for $13.7 billion shocked the foundation of the grocery/retail world, and it also put grocery delivery startup Instacart in an awkward spot.
Whole Foods is an Instacart investor, and the two companies have an exclusive delivery deal that reportedly has four years remaining. Amazon is an Instacart competitor with its grocery delivery operation. Now Instacart is essentially left competing with one of its investors and partnering with them at the same time. Apoorva Mehta, CEO of Instacart, said at the 2017 GeekWire Summit that Whole Foods owns less than 1 percent of the $3.4 billion company and has no inside information.
Mehta said Instacart would be open to another group coming in and buying out Whole Foods’ stake in the business, but no conversations about such a plan have taken place.
“Would I rather not have them as investor? Yes; but does this keep me up at night? Absolutely not,” Mehta said.
However, Amazon buying Whole Foods doesn’t shut the door on Instacart continuing to work with Whole Foods beyond the term of its current partnership, Mehta said. Instacart takes pride in giving its customers as many grocers as possible to choose from.
Mehta said the Amazon-Whole Foods megadeal has been a “blessing in disguise” for his company. The move has cajoled grocers and other retailers to invest more in online retail, delivery infrastructure and everything that goes with it.
“When Amazon bought Whole Foods, what they did was they sent the signal to the entire grocery/retail landscape that Amazon was coming,” Mehta said. “Now, for every single grocery retailer at this point in time, whether they believed it or not before, now they needed an e-commerce strategy. They needed to have same day delivery. The reality was, for the last five years, that’s what we have done. We have brought hundreds of grocery retailers online, and so we had the track record of being able to do this successfully.”
Instacart has been growing faster than expected this year, and it has expanded to 149, up from only 30 at the beginning of the year. Mehta said the company can now reach 63 million households as potential customers, up from about 11 million a year ago.
The Amazon-Whole Foods deal provided a wakeup call to the industry, and Mehta said it drove grocers to reach out to Instacart as they contemplate their online footprints.
“At this point retailers are coming to us,” Mehta said. “When the Amazon/Whole Foods announcement happened, essentially every major grocery retailer in the country had an emergency board meeting and right after that board meeting they called us.”