Instacart signs up Albertsons in delivery partnership that takes on Amazon-Whole Foods

Key Points
  • Instacart partners with Albertsons, expanding service to more than 1,800 stores across the country by mid-2018.
  • Instacart has now signed up the top five U.S. grocers and Canada's largest supermarket.
  • Instacart's exclusive delivery partnership with Amazon's Whole Foods expires in 2021.
Instacart CEO: Amazon-Whole Foods deal was a turning point in the industry
Instacart CEO: Amazon-Whole Foods deal was a turning point in the industry

Albertsons, the nation's second-largest grocer, announced a deal on Tuesday with Instacart, expanding the grocery delivery start-up's service to more than 1,800 U.S. stores by mid-2018.

As Amazon's surprising acquisition of Whole Foods threatens to disrupt an entire industry, American grocers are increasingly looking for ways to boost their e-commerce offerings — and are increasingly finding a partner in Instacart.

Just three months after the Amazon-Whole Foods deal, Instacart has now signed up the top five U.S. grocers: Kroger, Albertsons, Ahold, Publix, and H-E-B. Instacart also expanded its partnership with Costco, and earlier this month announced a deal with Canada's largest grocer, Loblaw, its first international foray.

"Ever since the Amazon-Whole Foods deal happened, things are very different," Instacart CEO Apoorva Mehta told CNBC's Deirdre Bosa. "After that deal happened, we were every major retailer's first call."

For traditional grocers, partnering with Instacart is a way to boost their e-commerce platforms and push deeper into the grocery delivery business as Amazon applies its technology and logistics network to Whole Foods.

With Instacart, Albertsons is doubling down on grocery delivery. Earlier this year, it began rolling out same-day delivery for its Safeway and Albertsons brands. In September, it acquired the meal-kit company Plated.

The growing number of partnerships Instacart signed in recent months is a way for the five-year-old start-up to look beyond 2021, when its exclusive deal with Whole Foods expires and, presumably, Amazon takes over.

Mehta said he didn't know whether Instacart would continue its partnership with Whole Foods after the contract's official end.

Also as part of that deal, Whole Foods invested an undisclosed amount in Instacart. It's a twist that becomes more complex as Instacart signs up more Whole Foods competitors.

In the new grocery landscape, a shakeup is brewing and Instacart is increasingly putting itself in the middle.

Instacart was last valued at $3.4 billion and is backed by some of the biggest names in venture capital, including Andreessen Horowitz, Sequoia and Kleiner Perkins.

--CNBC's Sara Salinas contributed to this report.