Sep 2, 2023 3 min read

Instacart IPO Announcement, Boosted By Major Investment From PepsiCo

Earlier this week, Instacart announced their long-awaited IPO, including a key $175 million investment from one of the largest foodservice providers in the world in PepsiCo. For what has been an uneven journey for the online grocery retailer, Instacart just reported their best financials to date.
Instacart IPO Announcement, Boosted By Major Investment From PepsiCo

Instacart was founded in 2012 to “bring the grocery industry online and help make grocery shopping effortless.”  The core delivery business received a real boost through the stay-at-home environment of the COVID-19 pandemic, as online grocery orders soared. The company was valued at $39 billion in 2020. However, as restrictions eased in 2022, Instacart’s valuation came crashing down. In December 2022, Instacart’s internal valuation got as low as $10 billion, 74% below its 2020 number.

As of this year, Instacart has fully recovered and is beginning to reach new heights. Through the first six months of 2023, advertising and other revenue increased by 24% YoY to $406 million. Instacart’s revenue was reported at $1.48 billion, a 31% increase from the same period last year. Lastly, they reported a net income of $242 million during the first two quarters, compared to a $74 million loss just one year earlier.  With over 1,400 retailers, Instacart currently works with 85% of the US grocery industry, a truly astonishing number. Alex Frederick, a senior emerging technology analyst at PitchBook, added that Instacart’s success has been “driven by diversification efforts such as the expansion into grocery technology hardware, advertising and partnerships with more stores.”

Instacart’s decision to go public should have a positive impact on the broader U.S. IPO market, which has already seen some major filings throughout the year, including Cava and marketing automation firm Klaviyo. "I think we're going to see more companies kick off their (IPO) process in 2024, which is when a healthy IPO market will return," said Mike Bellin, IPO services leader at PricewaterhouseCoopers U.S. The market is currently searching for IPO ready companies that are profitable, a change in previous priorities. Pitchbook lead VC analyst Kyle Stanford noted that while Instacart’s revenues “aren’t enormous,” the company is “growing fast” in addition to generating profit. “This is in contrast to many unicorns that have filed in recent years and is in line with what is expected from public investors in the current market,”

For PepsiCo, the partnership looks to be a true win. PepsiCo’s decision to invest in Instacart is a continuation of their dedication to building digital capabilities including “having better data, having better digitalization and execution capabilities” according to PepsiCo CEO Ramon L. Laguarta. “Ultimately, we strive to better leverage technology and data analytics to capture data at a more granular level and ensure we have the right products in the right location at the right place or what we refer to as precision at scale.”

Instacart is dedicated to working with other corporates within the grocery industry, as they look to support retailers as well as offer consumers affordable, accessible, and personalized shopping experiences. As Instacart stated in their filing, “Instacart ads offers CPG brands an opportunity to move products off of store shelves as a direct result of their ads on Instacart. We help them advertise their products in a way that can enable an immediate purchase that can be delivered to the customer within hours or even minutes. The real-time nature of purchase and consumption allows brands to optimize their targeting and messaging to achieve compelling returns on investment.”

For investors like PepsiCo and others, they understand that the online grocery market is just scratching the surface of its full potential. According to Instacart CEO Fidji Simo, “Grocery is the largest retail category and represents a $1.1 trillion industry in the United States alone. But only 12 percent of grocery sales are made online today. As more people shop online, online penetration could double or more over time.” Through this IPO, Instacart, along with support from the global powerhouse that is PepsiCo, have sent a very clear message to the rest of the retail grocery space; Online grocery shopping is here to stay.

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