- Instacart is a delivery company that pairs customers with personal shoppers to delivery groceries to their homes. It partners with 300 chains across North America.
- In 2016, it signed a five-year contract with Whole Foods to become its exclusive delivery partner. In 2017, Whole Foods was acquired by Amazon.
- Instacart’s CEO Apoorva Mehta explains how he received news about the deal and what happened next.
On 17 June 2017 Amazon announced it would be buying Whole Foods for $13.7 billion, sending shockwaves around the market, and sparking off the beginning of an arms race between US grocery stores.
At the time, Instacart, a delivery company that pairs customers with personal shoppers to delivery groceries to their homes, had a deal with Whole Foods to exclusively deliver its produce around the US. When the news of the Amazon deal broke, the founder and CEO of Whole Foods, John Mackey, called Instacart’s CEO Apoorva Mehta to personally inform him about the new deal.
“It was probably a one minute call,” Mehta told Recode journalist Jason del Rey during an interview at Recode’s Code Commerce conference on Tuesday afternoon.
“He wanted me to be one of the first people to know,” he said.
Mehta explained that the news sent the whole industry into shock and for several weeks everyone went silent. “At that point we had to game plan. The whole industry had to game plan,” he said.
In the months that followed, Instacart signed deals with several major retailers in the US including Sam’s Club, Costco, CVS, Albertsons, and Kroger.
However, industry experts were left wondering what would happen to the five-year contract that it had signed with Whole Foods in early 2016 and was only a year-and-a-half in to.
“I don’t think anyone expected Amazon to buy Whole Foods and the contract was obviously written with that expectation,” Mehta said. Whole Foods was Instacart’s first national delivery partnership.
Today, Instacart continues to deliver for Whole Foods along with Amazon’s own delivery services.
“There’s no longer room for Instacart at Whole Foods,” Guru Hariharan, a former Amazon executive and CEO of Boomerang Commerce, which helps brand manufacturers sell to Amazon told Bloomberg in March. “It’s only a matter of time before Instacart is edged out completely.”
Bloomberg reported that Instacart shoppers at a store in San Francisco were now having to prepare deliveries in the corridors after being pushed out of designated packing areas by Amazon’s own delivery staff.
Mehta would not clarify whether Amazon is breaching the contract and if so, whether it’s a battle that is worth fighting.
However, he emphasized that the company does not rely on Whole Foods.
“Whole Foods is about 1.5% of the overall grocery market,” he said. “Most Americans do not shop at Whole Foods. The retailers that most Americans shop with are partners with Instacart.”
Mehta said that the company’s fastest growing markets are in areas where the household income is under $100,000.
On Tuesday, Aldi became the latest retailer to rollout nationwide delivery with Instacart.