PURCHASE, NY. — PepsiCo, Inc. recently took another step toward advancing its digital future with the disclosure it has agreed to purchase $175 million of Instacart’s Series A preferred convertible stock. The potential investment was disclosed as part of Instacart’s Form S-1 filed Aug. 25 with the Securities and Exchange Commission for a proposed initial public offering.
Founded in 2012 “to bring the grocery industry online and help make grocery shopping effortless,” Instacart is partnered with more than 1,400 national, regional and local retail banners representing more than 85% of the US grocery market.
Instacart generated approximately $29 billion of gross transaction value (GTV) in 2022, according to its Aug. 25 SEC filing. GTV is defined as the value of the products sold based on prices shown on Instacart, applicable taxes, deposits and other local fees. Net income was $428 million in fiscal 2022 on total revenue of $2.55 billion, which compared with a loss of $73 million on sales of $1.83 billion in fiscal 2021. Fiscal 2022 results included a $358 million tax benefit from the release of the company’s valuation allowance on deferred tax assets in the United States.
PepsiCo’s decision to take a stake in Instacart comes as the company seeks to build out its digital capabilities. Ramon L. Laguarta, chairman and chief executive officer of PepsiCo, hinted at such a strategy in a July 13 conference call to discuss financial results, saying the company is focused on being a more intelligent company in a broader sense, “having better data, having better digitalization and execution capabilities.”
Mr. Laguarta also made similar comments about PepsiCo’s reliance on technology for growth during a February 2022 presentation at the Consumer Analyst Group of New York virtual conference.
“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,” Mr. Laguarta said in 2022.
Meanwhile, in its SEC filing Instacart said it will be making investments “with a long-term focus.”
“Every decision we make as a company stems from a fundamental belief that, in order to succeed, we need to work together across the entire grocery industry — supporting retailers and brand partners, giving consumers an affordable, accessible and personalized experience they can’t find anywhere else, and creating flexible earnings opportunities for shoppers,” Instacart said. “We are in the business of growing our partners’ businesses, which is reflected in one of our company’s core values: ‘Grow the pie.’ In a world where success too often comes at the expense of someone else, we believe that there is more than enough to go around — and that, by working together with our retail partners, we can create more opportunities for the entire industry.”
In its prospectus, Instacart identified nine ways it offers value to brands: high return on investment; high-intent customers; actionability and immediacy; self-service management; first-party data; measurability; impactful insights; broad solution set; and national retailer scale.
“CPG brands are seeking more opportunities to connect digital advertising investments directly to sales impact,” Instacart said. “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.”