DoorDash Bids $17 Billion for Instacart to Expand Grocery Network

DoorDash has proposed a $17 billion acquisition of Instacart, a move designed to consolidate the grocery delivery sector. The San Francisco-based company aims to strengthen its position in the grocery market by integrating the two platforms. The deal would preserve the Instacart brand and its mobile application, allowing existing shoppers to continue fulfilling orders as they currently do.

Under the terms of the proposal, grocery retailers would retain the option to work with either Instacart or DoorDash. Instacart customers would gain access to an additional 50,000 stores currently covered by DoorDash. The transaction values Instacart, a company founded in 2012, at a sum higher than its current $14 billion market valuation.

Instacart operates in the United States and Canada, specializing in grocery and convenience store delivery. The company employs 600,000 independent contractor shoppers who completed 338 million orders last year. DoorDash, founded in 2013, has expanded beyond restaurant delivery to include pet food and electronics. It operates in 40 countries and utilized a network of 9 million independent delivery workers to complete more than 3 billion orders in the previous year. DoorDash currently holds a market value of $73 billion.

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

Tony Xu, co-founder and CEO of DoorDash, stated that the acquisition would combine Instacart’s grocery expertise with DoorDash’s logistics capabilities. In a statement, Xu noted that grocery delivery requires precision, such as selecting ripe produce and preventing items from melting. He said the combined entity would provide tools to stores of all sizes to unlock the potential of online grocery shopping.

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

The deal’s impact on existing retailer partnerships remains uncertain. Instacart currently offers delivery from Walmart, a service DoorDash stopped providing in 2022.