PepsiCo to invest $175 million in Instacart as Grocery Delivery Hub Goes Public

PepsiCo to invest $175 million in Instacart as Grocery Delivery Hub Goes Public

In a significant move towards its long-anticipated initial public offering (IPO), grocery delivery service Instacart has filed a registration statement with the U.S. Securities and Exchange Commission. As part of this filing, Instacart revealed a major investment from PepsiCo, with the beverage and snack giant agreeing to purchase $175 million in preferred convertible stock.

The IPO filing follows months of speculation about Instacart’s plans to go public, with discussions on the matter dating back to May 2022. This development is emblematic of the ongoing digital transformation sweeping through various sectors, including brands, retailers, third-party platforms, and the grocery industry.

Instacart’s CEO, Fidji Simo, emphasized the immense potential within the grocery sector, describing it as “the largest retail category” and a “$1.1 trillion industry in the United States alone.” However, she noted that only 12 percent of grocery sales currently occur online, suggesting the potential for substantial growth in online penetration over time as more consumers shift to digital shopping.

According to data from Incisiv cited by Instacart, the online grocery market is projected to experience an annual compound growth rate of 10 to 18 percent between 2022 and 2025, compared to a modest 0 to 4 percent for offline sales during the same period.

Simo underscored the extensive reach of Instacart, stating that the platform collaborates with over 1,400 retail banners of various sizes and operates across more than 80,000 stores. This encompasses over 85 percent of the U.S. grocery market, positioning Instacart as a major player in the industry.

In the IPO prospectus, Instacart disclosed its financial performance, reporting a 31 percent increase in revenue to $1.48 billion for the first six months of 2023. Additionally, advertising and other revenue grew by 25 percent to $406 million. Most notably, the company achieved a net income of $242 million during this period, a significant turnaround from the $74 million loss reported in the same period the previous year.

Instacart acknowledged that its growth was substantially accelerated by the COVID-19 pandemic between March 2020 and the first quarter of 2022. While it does not anticipate sustaining those pandemic-induced growth rates, the company emphasized that this period played a crucial role in establishing a business with greater scale and higher gross profit.

Instacart intends to list its common stock on the Nasdaq Global Select Market under the ticker symbol CART. The specific details regarding the number of shares and per-share price have yet to be determined, but this move signals an exciting chapter for the company as it advances toward becoming a publicly traded entity.

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