William Blair Funds investing for the future: The Global/Local ✓ Solved

William Blair & Company is an American investment bank and financial services company headquartered in Chicago. The company was established in 1935 and has almost $100B USD in assets under management. Their International Growth Fund looks to invest into companies that are likely to experience growth in the next couple of years, over and above what is expected for the industries in which they are operating.

As a new investment analyst with William Blair, you have been asked to look at the market for on-line groceries and to select one company from either the United States, Canada or the United Kingdom which you believe is well positioned to out-perform over the next few years in this market. The company can be an existing grocery retailer such as Loblaw, Wal-Mart or Morrisons, or one of the app developers such as Instacart or an online retailer such as Amazon. You will want to consider the business model of the company (how they make money), the market(s) in which they operate, and the likelihood of success of their approach to on-line grocery shopping compared to the others being developed.

Paper For Above Instructions

The online grocery market has witnessed transformative changes, especially in the wake of the COVID-19 pandemic. As an investment analyst at William Blair, selecting a company that is well positioned for growth in this space is critical. For this analysis, I have chosen Instacart, an American grocery delivery service that partners with local retailers. Instacart has shown a remarkable ability to adapt to market changes and consumer demands, making it an ideal candidate for investment.

Company Overview: Instacart

Founded in 2012, Instacart has rapidly evolved from a startup to a significant player in the online grocery market. The company's business model is built on partnerships with grocery retailers, enabling consumers to order groceries online and have them delivered to their homes. This model not only expands the reach of brick-and-mortar stores but also meets the increasing consumer demand for convenience.

Market Analysis

The market for online groceries has seen accelerated growth during the pandemic, with more people opting for home delivery due to health concerns. According to Statista, the online grocery market in the U.S. is projected to grow to $100 billion by 2025 (Statista, 2021). Instacart's various partnerships allow it to tap into this growing market effectively. The company's platform supports over 750 retailers, providing consumers with vast options.

Business Model Evaluation

Instacart operates primarily on a commission-based revenue model. Retail partners pay Instacart a fee for services, which includes delivery and order fulfillment. Additionally, the company earns revenue through its subscription service, Instacart Express, which offers customers unlimited free delivery for an annual fee. This dual revenue model provides financial stability and allows for sustainable growth opportunities.

Competitive Advantage

One of Instacart's key advantages is its ability to offer faster delivery times compared to traditional grocery stores. By leveraging a network of personal shoppers and efficient logistics, Instacart often promises to deliver groceries on the same day or even within hours of placing an order. This agility addresses consumer demand for convenience, setting the company apart from established grocery retailers that may struggle with logistics.

Challenges in the Online Grocery Market

Despite its successes, Instacart faces several challenges. The perishability of products poses logistical issues, requiring careful management of deliveries to ensure quality. Additionally, competition in the online grocery sector is intensifying, with major players such as Amazon and Walmart expanding their grocery delivery services. However, Instacart's established relationships with local grocers give it a unique position in the market.

Future Prospects

As consumers continue to embrace online grocery shopping, Instacart is well-positioned to capitalize on this trend. The company's strategic investments in technology, such as AI to enhance order picking efficiency, further solidify its competitive stance. Furthermore, partnerships with retailer giants such as Costco and Safeway allow Instacart to broaden its reach and strengthen its market presence.

Conclusion

In conclusion, Instacart represents an attractive investment opportunity for William Blair's International Growth Fund due to its innovative business model, market adaptability, and strategic partnerships. As the online grocery market continues to expand, Instacart’s focus on customer satisfaction and operational efficiency positions it to lead the industry in the coming years. Investing in Instacart aligns seamlessly with the vision of fostering growth in promising companies that are set to outperform their competition.

References

  • Statista. (2021). U.S. Online Grocery Sales - Statistics & Facts.

  • Forbes. (2020). How Groceries Won In 2020: Grocery Delivery Leadership Revealed.

  • MarketWatch. (2021). Instacart aims for sustainable delivery amidst competition.

  • Business Insider. (2020). Instacart: An Overview of Its Business Model.

  • Harvard Business Review. (2020). The Impact of COVID-19 on the Grocery Sector.

  • The New York Times. (2020). The Future of Grocery Delivery Post-Pandemic.

  • Bloomberg. (2021). Instacart's market potential amidst renewed interest in fresh groceries.

  • Wall Street Journal. (2021). Inside Instacart's plan to sustain its growth.

  • Reuters. (2021). Instacart's Tech Investments Improve Delivery Efficiency.

  • NYU Stern. (2019). The Evolution of Online Grocery Shopping: The Instacart Model.