How 2020 transformed the grocery business: Morning Brief

Friday, December 18, 2020

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Grocery habits were upended in 2020 and Instacart is the clear winner.

Lots of things changed in 2020.

Some of these new habits will be shed when we pass through the pandemic.

And others will leave a more indelible mark on the economy and society.

Most of us will recall frenzied trips to the grocery store in March, the bare shelves, the months of low stockpiles of previously taken-for-granted goods like toilet paper, sanitizing wipes, and chicken. And during this chaotic transition from life as we knew it to life lived apart, millions of consumers for the first time decided to try buying their groceries online.

Dan Frommer, author of the New Consumer, a website and newsletter which covers the digital economy, published his Consumer Trends 2021 report this week, and among other areas zeroed in on the changes in grocery habits that started this year and appear to have some durability.

And Instacart appears to be the big winner.

Frommer — who co-authored the report with Coefficient Capital — notes that about 10% of U.S. grocery sales were online orders in 2020, more than double the market share held in 2019. Current trends suggest online sales as a percent of total grocery spending will rise to 20% by 2025. And with the U.S. grocery market currently sitting around $1 trillion each year, every 1% gain in market share from online retailers is worth $10 billion.

Data from Sensor Tower shows that Instacart was downloaded more than 3 million times in just a few weeks spanning mid-March into April and weekly downloads have remained well above pre-COVID levels in the moths since.

Instacart now works with 500 retailers, is available for more than 85% of the U.S. population, and has more than sextupled its shopper count to more than 500,000 from 70,000 in just the last 18 months.

Using data from Earnest Research, Frommer notes that while the pace of growth in Instacart’s business has moderated since the frenzied spring boom, the service is still growing at more than twice the rate of every other grocery competitor combined.

In the grocery delivery space, it is clearly Instacart and everyone else.

And with this ascent, Instacart now seems poised to attain the status that cements so many consumer brands — verb status. In other words, “we can just Instacart that” becomes slang for “order a grocery item online.” Even if the purchase isn’t made through Instacart. Much the same way I refer to calling a car as “getting an Uber” even though I exclusively use Lyft for ride-hailing.

The rise of Instacart amid the pandemic is also likely to keep another 2020 trend fueled as we head into 2021. And that is the hot IPO market.

Back in November, Reuters reported that Instacart was preparing for an IPO to capitalize both on its hot 2020 and the passage of Prop-22 in California, which affirmed the classification of app-based delivery workers as independent contractors.

On Thursday, Coinbase announced that it had filed its S-1 with the SEC, signaling the company will likely hit the public markets sometime next year.

And so after a year in which brands well-known to consumers like Airbnb (ABNB), DoorDash (DASH), and DraftKings (DKNG) all made their way to the public market, Instacart and Coinbase look set to headline another buzzy class in 2021.

As former Citi CEO Chuck Prince once said: “As long as the music is playing, you’ve got to get up and dance.”

And the IPO market is still blasting music.

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

What to watch today

Economy

  • 8:30 a.m. ET: Current Account Balance, 3Q (-$187.4 billion expected, -$170.5 billion during 2Q)

  • 10:00 a.m. ET: Leading Index, November (0.5% expected, 0.7% in October)

Earnings

Pre-market

  • 7:00 a.m. ET: Darden Restaurants (DRI) is expected to report adjusted earnings of 71 cents per share on revenue of $1.69 billion

Post-market

  • 4:15 p.m. ET: Nike (NKE) is expected to report adjusted earnings of 62 cents per share on revenue of $10.55 billion

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