Instacart arrives in Twin Cities with Cub deliveries, pilot test with Target

Grocery delivery service Instacart has set up shop in the Twin Cities, including tests with two of the region's largest food chains, Cub Foods and Target.

The company is part of a wave of start-ups that are taking new approaches to food delivery. Instead of dealing with a specific grocery, consumers can use Instacart's website or mobile app to order goods from several different grocers. A delivery fee is based on order size and speed of delivery.

The service launched Tuesday with 150 local employees, 100 of them part-timers, who will initially make deliveries in much of Minneapolis, a swath of St. Paul along Interstate 94 and parts of Richfield, Edina, Hopkins and St. Louis Park.

The firm hopes to expand quickly, a spokeswoman said.

Grocers for decades offered delivery via the phone, but taking orders from computers has been an evolutionary process. Several Web-based grocery delivery firms collapsed in the first Internet bust in 2000 and 2001. Locally, chains like Kowalski's, Lunds & Byerlys and Coborn's eventually provided Web-based ordering and delivery service. Coborn's and Lunds & Byerlys cover much of the metro area and both grocery companies say their delivery businesses are growing.

The rise of smartphones and tablets has led to new firms like Instacart, Peapod and FreshDirect that let shoppers choose items and arrange delivery via apps.

The Twin Cities is the 18th metro region for three-year-old Instacart, which is based in San Francisco and the first of the new breed of delivery firms to arrive in the market.

"It's always been on our list," said Nilam Ganenthiran, Instacart's vice president of business development and strategy. "We knew we'd get to it in 2015."

The availability of the service and mix of retailers varies by neighborhood. For instance, food from Cub is available to consumers in St. Paul and portions of Minneapolis who are relatively close to the store in St. Paul that is being used as Cub tests out the service. Goods from Target are available to people who are closer to stores in Edina and St. Louis Park.

Instacart will also take orders and deliver for three other local grocers: Wedge Community Co-op, Lakewinds Food Co-op and United Noodles. And it will make deliveries from local outlets of its national retail partners: Whole Foods, Costco and Petco. Orders from Costco do not require a membership to the wholesale chain.

The first delivery is free, but after that Instacart charges $3.99 for a two-hour delivery or $5.99 for deliveries within an hour for orders over $35.

Cub Foods, owned by Eden Prairie-based Supervalu, said in a statement that it's "excited to be working with Instacart to bring the convenience of on-demand grocery delivery to Cub customers."

For Target, the test with stores in Edina and St. Louis Park will allow it to see whether Instacart's model is efficient. The retailer, based in Minneapolis, has been exploring a number of same-day delivery and curbside pickup options as it looks for ways to better compete with online retailers such as Amazon.com Inc.

"It's early days, but we're impressed by their technology and track record," said Eddie Baeb, a Target spokesman. "We're excited we're able to launch this pilot right here in Minneapolis where our team can monitor it very closely."

Sean Naughton, analyst at Piper Jaffray in Minneapolis, said Instacart could be a good business opportunity for Target.

He noted that since Whole Foods began working with Instacart last year, the grocer has said that some stores get 1 to 2 percent of their sales through Instacart.

"So it does appear that the sales could move the needle for some retailers," he wrote in a research note.

In addition to groceries, Instacart will deliver select household, health and beauty, pet and baby products.

"We've been in talks with Target for a long time," Ganenthiran said.

He added that Instacart has seen a "tremendous" amount of customer demand for its services in the Twin Cities, judging by the number of people who have gone to its website and plugged in local ZIP codes to see if it delivered here.

Staff writer Mike Hughlett contributed to this report. Kavita Kumar • 612-673-4113