Instacart's Path to Sustainable Profitability and Stakeholder Satisfaction

Instacart is strategically positioning itself in the online grocery market to achieve sustainable profitability while addressing key stakeholder concerns. By enhancing relationships with CPG organizations, improving benefits for InstaShopper employees, and empowering grocers with market data, Instacart aims to generate significant profits and ensure stakeholder satisfaction in the evolving landscape of the grocery industry.

• Instacart
• Sustainable Profitability
• Stakeholder Satisfaction
• Online Grocery Market
• CPG Organizations

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1. Instacart Path to Sustainable Profitability for All Presenting to: Fidji Simo of Instacart Asper School of Business Angus Cheung | Sunny Sun | Eden Sorrell | Raymond Franczuk

2. Niche to necessity

3. Understanding the challenge Leading the industry even after pandemic Goals Healthy Grocer relationship Loyal and happy employees Sustainable profitability Grocer Relationship Management Employee Satisfaction Challenges Problem How can Instacart create sustainable profitability while improving their key stakeholders satisfaction? Introduction Analysis Recommendation Implementation Conclusion

4. Our Recommendation Enhance the value proposition for Instacart stakeholders by growing ad revenue and re- distributing value 2 3 1 Grow Relationships with CPG Organizations Improve InstaShopper Employee Benefits Empower Grocers/Retailers by Leveraging Market Data $7.3 billion profit over 5 years $1b Ad Revenue 90% Grocer Satisfaction

5. Online grocery market is picking up steam Projected to reach 20.5% by 2026 in US $1.5 trillion CPG industry 10% of grocery industry COVID-19 acceleration 300% YoY Robust, mature industry ripe for transitioning & disruption Potential downturn post-COVID Instacart must prioritize sustainable profitability and leverage the growth opportunities in the market https://www-statista-com.uml.idm.oclc.org/statistics/531189/online-grocery-market-share-united-states/ Introduction Analysis Recommendation Implementation Conclusion

6. What is drives & holds back the stakeholders for Instacart? Motivations Reservations Grocers | Retailers Control | Profitability Convenience | Data InstaShoppers Income | Flexibility Benefits | Fair Treatment Convenience | Flexibility Costs Consumers Consumer Data Costs CPG Brands Profit Costs Investors Instacart must address and balance the key stakeholders concerns and reservations in its pathway to profitability Introduction Analysis Recommendation Implementation Conclusion

7. The future will rely heavily on access to consumer data 3rd-party cookies phase- out by 2023 AI & ML prediction trends Data-driven ad industry Grocers & CPG brands will have limited access to data Uniquely position with its current core competencies & access to data to leverage Instacart can become a leader in data that benefits ALL of its stakeholders Introduction Analysis Recommendation Implementation Conclusion

8. Where the money goes in online grocery order Breakdown of $50 order INSTACART EXPRESS $99 annual / $9.99 per month Commission, 5 SERVICE FEES (alcohol) 5%-10% Delivery Fee, 9 PICKUP FEES $1.99 for non-express Grocer, 36 IN-APP ADVERTISING $0.75-$1.25 CPC How can Instacart make the pie larger to benefit ALL stakeholders? Introduction Analysis Recommendation Implementation Conclusion

9. Ad revenue presents an opportunity for Instacart & its partners $225 billion annual ad budget from CPG industry Projected $1 billion ad revenue in 2022 New plentiful revenue stream that does not dilute profitability from our stakeholders Higher margins than delivery service (80%) Undiluted revenue new external source Instacart must leverage their existing data and advertisement position and redistribute value to all stakeholders Introduction Analysis Recommendation Implementation Conclusion

10. Pathway to success for Instacart & its stakeholders Grocer Relationship Management Sustainable profitability Employee Satisfaction Introduction Analysis Recommendation Implementation Conclusion

11. How can Instacart create sustainable profitability while improving their key stakeholders satisfaction?

12. Alternatives Focus on Automation Global Expansion of Core Services Grow Ad Revenue & Redistribute Expand online grocery service to global markets to capture greater revenue and profits. Develop & implement automation throughout the entire Instacart value chain. Prioritize growing ad revenue and redistribute value to key stakeholders. E.g. Self-driving cars & automated shoppers E.g. Better data & higher margins E.g. Expand to Europe Introduction Analysis Recommendation Implementation Conclusion

13. Alternatives evaluation Stakeholder Satisfaction ROI Sustainable Growth Focus on Automation Global Expansion of Core Services Grow Ad Revenue & Redistribute Introduction Analysis Recommendation Implementation Conclusion

14. Alternatives evaluation Stakeholder Satisfaction ROI Sustainable Growth Focus on Automation Global Expansion of Core Services Grow Ad Revenue & Redistribute Introduction Analysis Recommendation Implementation Conclusion

15. Recommendation Enhance the value proposition for Instacart stakeholders by growing ad revenue and re- distributing value 2 3 1 Grow Relationships with CPG Organizations Improve InstaShopper Employee Benefits Empower Grocers/Retailers by Leveraging Market Data 2.5B in 5 years Estimated Cost (OR OTHER CRITERIA)

16. Empower Grocers/Retailers by Leveraging Market Data 1 Product and Volume Forecasts Improve Margin for Grocers Tailored Ads to Customers WHAT Grocers are a key partner in Insta Cart s success and are essential to long term business sustainability. WHY Strengthen grocer relationships Maintain Loyal customer bases even after pandemic IMPACT Introduction Analysis Recommendation Implementation Conclusion

17. Product and Volume Forecasts 1 How grocery stores can use the data The power of data Communication For small, medium and large grocery stores Announcement on the InstaCarts grocer s portal Predict regional market trends (inventory, new products) More agile to evaluate risks Seasonal products Local customer s buying power The movement eliminating Cookie (ex: Google, Apple in 2023) Location based (Postal code) shopping habits, market trends Demographic data Seasonal products Team of five (each province) for initial communication Introduction Analysis Recommendation Implementation Conclusion

18. Improve Margin for Grocers 1 More attractive fees for grocers Enhanced relationships for more royal partnership On average 2% reduction Additional ads revenue Healthier ecosystem between Instacart & grocery stores (Depending on time/volume) (Opportunity for additional touchpoint and feedback) $1b ad revenue 2022 Quarterly communication for feedback and improvement Introduction Analysis Recommendation Implementation Conclusion

19. Tailored Ads to Customers 1 Better customer experiences Less thinking from consumers Leverage data for recommendation products Ex: Only buying organic products Ex: Young professionals in the area cares about calories Increased Cart Size Develop the shopping habits with Instacart Tailored coupons (value-driven) Ex: Buying rice every two months (notification) More attractive to consumers with tailored coupons Customized explorer center Ex: Stay home mom looking for inspirations Notification for feedbacks: Max twice/yr Introduction Analysis Recommendation Implementation Conclusion

20. Grow Relationships with CPG Organizations 2 Identify and Establish Key Partnerships CPG Advertisement Revenue Sponsored Product Recommendations WHAT Instacart is perfectly positioned to lead the charge in Grocery and CPG marketing and realize significant revenue potential. WHY Achieve the goal of $1B in ad revenue by 2022 Growth of ad revenue to ~$3B by 2025 Improve value proposition for all stakeholders IMPACT Introduction Analysis Recommendation Implementation Conclusion

21. Adding CPG Organizations to Instacarts Stakeholder Table 2 Highlight Value Proposition Identify Key Partnerships Direct interface with Leading eCommerce Customer Base Being acquired Target Leading CPG Suppliers Leverage established relationships with monolithic global retailers E.g. Pepsico, Unilever, P&G Access to Critical Mass of Retailers and Customers 1 + 1 = 3 Increased mutual benefits for both CPG & Instacart Introduction Analysis Recommendation Implementation Conclusion

22. Instacart is positioned minimize user frustration from Ads 2 Target Customers on Instacart Platform Seamlessly integrate into shopping experience. Obtain Ad Leverage User & Grocer Data to best position Ad requirements directly from CPG Organizations E.g. Have you tried This? CPG Product Sponsorship Increase Conversion Introduction Analysis Recommendation Implementation Conclusion

23. Instacart can expertly align CPG Products with Grocer/Retailers 2 1) CPG partner identifies product to be advertised 5) Feedback Provided to CPG & Grocer/Retailer Stakeholder Impacts Data Driven Product Alignment CPG Partner CPG Driven Grocer Product Recommendations 2) Instacart identifies most suitable Grocer/Retailer Improved Inventory Turn & Sales 4) Performance Monitored by Instacart Grocer/Retailer Increased Revenue & Partner Satisfaction Instacart 3) Instacart engages with Grocer/Retailer for Distribution Introduction Analysis Recommendation Implementation Conclusion

24. Improve InstaShopper Employee Benefits 3 Health & Dental Plan for Full-Service Shoppers WHAT WHY Full-Service shoppers are key stakeholders in Instacart s success. Improved employee satisfaction Improved retention and job performance Positive for public relations and brand image IMPACT Introduction Analysis Recommendation Implementation Conclusion

25. Defining Benefits 3 Full-Service Instacart Shoppers 20% of 500,000 employees Estimated to grow by 5-10% annually Who is Eligible? Ensuring that workers receive an equitable piece of the pie 50% of Benefit Cost Subsidized $800-1200 per family Cost realized by Instacart Health & Dental Coverage Plan Details Marketed directly through Instacart Platforms Rollout Strategy Introduction Analysis Recommendation Implementation Conclusion

26. What is drives & holds back the stakeholders for Instacart? Motivations Reservations Grocers | Retailers Control | Profitability Convenience | Data InstaShoppers Income | Flexibility Benefits | Fair Treatment Convenience | Flexibility Costs Consumers Consumer Data Costs CPG Brands Profit Costs Investors Introduction Analysis Recommendation Implementation Conclusion

27. Bringing it all together Enhance the value proposition for Instacart stakeholders by growing ad revenue and re- distributing value 2 3 1 Empower Grocers by Leveraging Market Data Grow Relationships with CPG Organizations Improve InstaShopper Employee Benefits Expand Stakeholders Retain Key Partners Leave no one Behind Introduction Analysis Recommendation Implementation Conclusion

28. Timeline Year 2021 2022 2023 2024 2025 2026 Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Empower Grocers by Leveraging Market Data Develop Product and Volume Forecasting Portal Communicate Margin Improvements and Portal Launch to Grocers Data Maintenance and AI Improvement Grow Relationships with CPG Organizations Identification of Partners & Negotiation CPG Advertisement Framework Sponsored Product Recommendations Improve InstaShopper Employee Benefits Establish Benefit Eligibility Benefit Supplier Identification Benefits Rollout & Administration

29. Fundamental Assumptions 2% Reduction in Revenue by returning value to Stores Baseline Revenue 4.3B to end 2021 Average Ad Rev $1 per click 80% Average Margin on In-App ads App Development Cost $5M per quarter in 2021 500,000 employees; 20% get covered; 50% cost share Introduction Analysis Recommendation Implementation Conclusion

30. Total 5Yr Revenue $ 9.8 B Projected Ad Revenue 5 Year Revenue 3,500 Main Revenue Driver: Ad Revenue 3,000 2,500 USD Millions 2,000 1,500 2,925 2,438 1,000 1,950 1,500 500 1,000 - 2022 2023 2024 2025 2026 Additional Ad Revenue Introduction Analysis Recommendation Implementation Conclusion

31. Total 5Yr Cost $ 2.5 B Project Specific Costs 5 Year Costs 800 Main Cost Driver: Cost of Ad Revenue ($1.9 B total) 700 600 500 USD Millions Instashopper Benefits Begins in 2023 17% of costs ($441 M) 400 300 200 100 Total Development Costs 4% of costs ($106 M) - 2022 2023 2024 2025 2026 Cost of Ad Revenue (20%) Expanding Grocer Analytics Full Service Instashopper Benefits Introduction Analysis Recommendation Implementation Conclusion

32. Total 5Yr Profit $ 7.3 B Profit Summary Project Profit 3,500 3,000 2,500 Quantitative: Maybe upfront losses, with hockey stick back end 2,000 USD Millions 1,500 Qualitative: 1,000 Supply Chain Resilience Improved Brand Perception 500 - 2022 1,000 780 2023 1,500 1,079 2024 1,950 1,434 2025 2,438 1,816 2026 2,925 2,194 Projected Ad Revenue Profit Projected Ad Revenue Profit Introduction Analysis Recommendation Implementation Conclusion

33. Scenario Analysis Baseline Vs 2 Scenarios 8,000 7,000 6,000 5,000 USD Millions Best Case Project Profit: $8.6 B 4,000 3,000 Worst Case Project Profit: $5.7 B 2,000 1,000 - 2022 2023 2024 2025 2026 Baseline Profit Scenario Ad Revenue Pessimistic Profit Optimistic Profit Introduction Analysis Recommendation Implementation Conclusion

34. KPIs KPI 2022 2023 2024 2025 2026 # of clicks (Ad Revenue) 1B 1.45B 1.95B 2.4B 2.9B Instashopper satisfaction rate 80% 83% 85% 90% 92% Grocers' satisfaction rate 75% 85% 90% 92% 95% Introduction Analysis Recommendation Implementation Conclusion

35. Risks Management Risks Mitigation 1 Implement inventory management support for grocers to help reduce costs. Explore further commission decreases. Continued dissatisfaction from grocers due to profitability challenges 2 Prop 22 legislation being dismissed Develop potential increases in benefits plan for gig workers. 1 Impact 3 2 3 Showcase the value that consumer data that allows CPG brands to make INFORMED decisions across their value chain CPG brands dissatisfied with the increase cost burden Probability Introduction Analysis Recommendation Implementation Conclusion

36. Looking to the future 2026 Year 5+ A bigger pie to share Fairly distributed value Satisfied stakeholders Sustainable profit model 2021 Today Challenged to show future profitability without impacting Grocers or Customers Concerned Stakeholders all around

37. Conclusion How can Instacart create sustainable profitability while improving their key stakeholders satisfaction? Problem Enhance the value proposition for Instacart stakeholders by growing ad revenue and re-distributingvalue Solution 2 3 1 Grow Relationships with CPG Organizations Improve InstaShopper Employee Benefits Components Empower Grocers/Retailers by Leveraging Market Data $7.3 billion profit over 5 years Impacts $1b Ad Revenue 90% Grocer Satisfaction Introduction Analysis Recommendation Implementation Conclusion

38. Thank you! Questions?

39. Appendix

40. Appendix A 2022 1,000.0 1,000.0 2023 1,500.0 1,500.0 2024 2025 2026 Trend SUM 9,813 9,813 Additional Ad Revenue Total Project Revenue 1,950.0 1,950.0 2,437.5 2,437.5 2,925.0 2,925.0 Cost of Ad Revenue Total Cost of Sales (200.0) (200.0) (300.0) (300.0) (390.0) (390.0) (487.5) (487.5) (585.0) (585.0) (1,963) (1,963) Expanding Grocer Analytics Full Service Instashopper Benefits Total Opex (20.0) - (20.0) (20.6) (100.0) (120.6) (21.2) (105.0) (126.2) (21.9) (112.4) (134.2) (22.5) (123.6) (146.1) (106) (441) (547) - 7,303 Project Profit 780 1,079 1,434 1,816 2,194 Introduction Analysis Recommendation Implementation Conclusion

41. Most popular online groceries website in US in June 2021 Website Percentage based on share of visits Instacart.com 7.42% Kroger.com 7.26% Publix.com 3.33% Safeway.com 2.93% Heb.com 2.36% https://www-statista-com.uml.idm.oclc.org/statistics/1256028/most-visited-groceries-websites-in-the-united-states/ Introduction Analysis Recommendation Implementation Conclusion

42. Instacart business and revenue models SaaS Enterprise business Advertisement-based In-app targeted ads 10% commission per order Commission-based Fee for service Delivery & alcohol B2B2C Partnerships Partners w/CPG brands Transaction-based Per order revenue Subscription-based Consumer-oriented Introduction Analysis Recommendation Implementation Conclusion