DoorDash bids $17 billion to acquire Instacart

DoorDash is offering $17 billion to purchase Instacart, a move that would consolidate the two largest players in grocery delivery. The acquisition is designed to strengthen DoorDash’s position in a sector where it has rapidly expanded its market share over the last five years.

Under the proposed terms, the Instacart brand name and app will remain in operation. Instacart shoppers, who are independent contractors, will continue fulfilling orders as they currently do. Grocery retailers will retain the option to work with either Instacart or DoorDash. DoorDash stated that Instacart customers will gain access to 50,000 additional stores that are already covered by the DoorDash network.

Instacart, which was founded in 2012, operates in the U.S. and Canada. According to company filings, its network of 600,000 independent contractor shoppers completed 338 million orders last year. The company currently holds a market value of $14 billion. DoorDash, founded in San Francisco in 2013, began as a restaurant delivery service before expanding into pet food and electronics. It operates in 40 countries and completed more than 3 billion orders last year through a network of 9 million independent delivery workers. Its market value stands at $73 billion.

DoorDash entered the grocery delivery market in 2020 during a surge in pandemic-era demand. Early adoption by major grocers was cautious. Kroger partnered with DoorDash in 2022 but initially limited the service to flowers, sushi, and prepared meals from a small number of stores. The partnership expanded last fall, and DoorDash now lists the full inventory of all 2,700 U.S. Kroger stores in its online marketplace. DoorDash also added delivery from Costco last month.

Tony Xu, co-founder and CEO of DoorDash, said the deal will merge Instacart’s grocery expertise with DoorDash’s logistics capabilities. In a statement, Xu noted that grocery delivery requires specific skills, such as selecting ripe produce and preventing items from melting. He stated that the combination would provide stores of every size with better tools to unlock the potential of grocery delivery.

Market research from Consumer Edge shows that Instacart’s share of spending on U.S. delivery platforms has declined from 26% to 18% over the past five years. During the same period, DoorDash’s share increased from 44% to 59%. Uber Eats maintained a share of just under 20%.

The deal leaves some existing partnerships unclear. Instacart currently provides delivery for Walmart, but DoorDash stopped providing Walmart delivery in 2022.