Grocery Delivery: DoorDash Puts $17 Billion Bid on Instacart

DoorDash has proposed a $17 billion acquisition of Instacart, a move that would combine two leading platforms in the grocery and convenience delivery sector.

The transaction seeks to streamline the market by merging DoorDash, which operates in 40 countries, with Instacart, which specializes in U.S. and Canadian grocery delivery. DoorDash stated that the Instacart brand name and application will remain active following the close of the deal. The company also confirmed that Instacart’s 600,000 independent contractor shoppers will continue to fulfill orders under their current arrangements.

Key financial changes for consumers include the consolidation of subscription fees. Customers currently paying $9.99 per month for separate DashPass and Instacart+ memberships would pay a single fee instead of two. Additionally, Instacart users would gain access to the 50,000 stores currently listed on the DoorDash platform. Retailers would gain the ability to select either delivery network for their operations.

The strategic rationale centers on competing with large retail corporations that have expanded into delivery services. Tony Xu, co-founder and CEO of DoorDash, told investors on Thursday that large companies have aggressively invested in technology and fulfillment models, capturing a larger share of the market. He noted that Walmart holds a 21% share of grocery spending, while Costco and Amazon each hold 8%, according to market research firm Numerator. Xu argued that the combined entity would provide local grocers with the technological infrastructure necessary to compete with these larger players.

The acquisition also addresses the threat posed by Walmart’s expansion into restaurant delivery. Walmart partnered with Subway in the summer to offer delivery from 1,400 in-store locations, a service that has since expanded to select Dunkin’ and Papa Johns sites. Walmart now lists 2,400 restaurant locations on its delivery platform. DoorDash, which began as a restaurant delivery service in San Francisco in 2013, has diversified into pet food and electronics. The company completed more than 3 billion orders last year using a network of 9 million independent workers. Instacart, founded in 2012, fulfilled 338 million orders in the same period. DoorDash currently holds a market value of $73 billion.

DoorDash’s entry into grocery delivery in 2020 has shifted market share away from Instacart. According to Consumer Edge, Instacart’s share of U.S. delivery platform spending dropped from 26% to 18% over the past five years. During that same period, DoorDash’s share increased from 44% to 59%. Uber Eats maintained a share of just under 20%. DoorDash has strengthened its grocery position recently, adding the full inventory of all 2,700 U.S. Kroger stores to its marketplace last fall. The company also began offering delivery from Costco locations last month.

Apoorva Mehta, the founder of Instacart who departed after its 2023 IPO, said he and Xu had discussed merging the companies for years. Mehta stated that the industrial logic supports combining grocery and restaurant delivery to better serve customers who manage 21 meals per week. He added that the combination would create more earning opportunities for shoppers.

The deal requires approval from Instacart shareholders and government regulators. If approved, the transaction is expected to be finalized by the end of 2027 or in early 2028. DoorDash shares increased by 6% in early trading on Thursday, while Instacart shares remained flat.