In February, organic grocery chain Whole Foods invested in its on-demand grocery delivery partner, Instacart, making it the exclusive delivery partner for Whole Foods.

Now, it’s been revealed that Instacart reportedly sold an equity stake worth $36 million to Whole Foods as part of the five-year deal. The shares were tacked on to Instacart’s prior investment round that garnered the company a $2 billion valuation — it had raised over $270 million before the investment from Whole Foods.

This type of funding from a large food chain could help Instacart scale to new markets. Instacart has built a presence in over 25 markets in the US through its Whole Foods partnership, which originally began in 2014. And this year, the two companies have vowed to boost the number of stores with “embedded Instacart shoppers” by as much as 50%. Instacart could bolster its revenue by acquiring new customers within Whole Foods’ extensive network of stores in the US.

Beyond Whole Foods, Instacart has a vast market to transition to digital. Grocery sales are valued at $700 billion annually, however, only about 2% of them will occur online this year, according to our estimates. This is a relatively untapped opportunity in e-commerce that Instacart can capitalize on as it expands its presence at Whole Foods stores.

Since so much of the market can still be moved online, Instacart has significant room for growth. Moreover, it uses a different business model than one of its primary competitors, FreshDirect, which delivers groceries directly from suppliers and does not rely on third-party grocers. By partnering with grocery stores, Instacart can reach customers who are loyal to a particular brand or store — and more easily ret.

Source: Business Insider