I'm thinking that the grocery store would be the distribution center. I don't know what their transportation lanes look like but most produce just goes from the field to the grocery store. If you're already storing it there, why put it in a distro center when these stores are in the same locations.

Instacart brings a userbase. Heck, maybe Amazon just buys Instacart as well.

Not sure if amazon's FCs are currently equipped to store produce and milk and other things like that. Just seems like they can take advantage of existing supply chains and synergies if they embrace Instacart.