Instacart wants a piece of the restaurant supply chain

When a restaurant inevitably runs out of something in the middle of service—ketchup, tortilla chips, napkins—it’s common to send an employee to the nearest grocery store or wholesaler for the missing item.

But in recent years, some operators have found a more convenient solution for sudden out-of-stocks: Instacart. 

While doing a deep dive into its customer data recently, the grocery delivery company discovered that a chunk of its users were not individual consumers but small- and medium-sized businesses. 

What’s more, those businesses were good customers. They showed better retention, placed larger orders and shopped at a greater variety of retailers compared to the average consumer.

Instacart dug deeper and learned that the release of pent-up pandemic demand, combined with supply chain backups, had made it more difficult for busy restaurants to stay stocked. “That’s where they started to experiment and use Instacart and become attached to not having to go to the store themselves,” said Andrew Nodes, Instacart’s VP of business and supply chain.

Now, the delivery company is embracing this growing segment with a new division called Instacart Business. The separate experience within the Instacart app allows restaurants and other small to medium-sized businesses to create an account. These accounts have features geared toward businesses, such as tools for tax exemptions and invoicing, and will show products they’re likely to be interested in, like bulk items.

Instacart Business launched earlier this year and has been processing millions of orders each quarter. Because Instacart is a privately held company, Nodes would not reveal more specific details, but suggested that the company sees a big opportunity there.

“We’re making a big bet on this space, and we think it’s gonna lead to medium- and long-term growth opportunities for Instacart overall,” he said. 

To be clear, Instacart has no intention of disrupting the existing restaurant supply chain. It’s not going to be showing up in semi trucks for weekly deliveries. But it can be helpful in a pinch. 

“I think of Instacart as being more complimentary to [restaurants’] current supply chain,” Nodes said.

He gave the example of a chef who needed a specialty lemon olive oil that was not carried in bulk by his regular distributor. But he was able to find it on Instacart. 

Restaurants are using the app to buy all kinds of things, from fresh produce to cleaning supplies and canned goods, Nodes said. There are 1,200 retailers on Instacart, from wholesalers to grocers, pharmacies and convenience stores. Restaurants tend to shop at a variety of places. Their orders are fulfilled by what Instacart calls “Shoppers”—independent contractors who go to the store, buy the items and deliver them to the customer.

That convenience comes at a cost: Instacart’s delivery fees start at $3.99 and scale up based on things like geography and order size. But it also saves time. In a profile on Instacart’s website, the owners of five-unit Connie’s Chicken & Waffles estimated they had saved 2,000 hours since they started using Instacart to order supplies.

“It was just too much time away from the business,” Shawn Parker said. “We were going to Restaurant Depot almost every day, to the point where we were on a first-name basis with the team there and the other restaurant owners coming in daily.

“Now, we can just order directly from them through Instacart and have it all delivered.”

This story originally appeared in WGB sister publication Restaurant Business Online.