DoorDash bids $17 billion to acquire Instacart in grocery delivery shakeup

DoorDash has offered $17 billion to purchase Instacart, a move that would combine the two largest competitors in the grocery delivery sector. The proposed deal aims to consolidate market share in both the United States and Canada, where Instacart operates its specialized grocery and convenience store services.

DoorDash is the larger of the two entities by a wide margin. The San Francisco company, founded in 2013, completed more than 3 billion orders last year using a network of 9 million independent delivery workers. Its market value stands at $73 billion. Instacart, which was founded in 2012, fulfilled 338 million orders in the same period. Instacart employs 600,000 independent contractors who fulfill grocery orders.

The merger would change how consumers pay for delivery services. Currently, customers pay $9.99 per month for DashPass and a separate fee for Instacart+. Under the new structure, customers would pay a single fee for access to both platforms. Instacart customers would also gain access to 50,000 additional stores available on DoorDash's network. DoorDash stated that the Instacart brand name and app would remain in use.

Tony Xu, co-founder and CEO of DoorDash, spoke to investors on Thursday about the strategic rationale behind the bid. He noted that large retailers have invested heavily in technology and fulfillment models, making it difficult for smaller grocers to compete. "That’s what this combination is really about, where DoorDash and Instacart can give every retailer a fighting chance at competing in the modern-day era," Xu said. He added that the deal would help local grocers compete with major players like Walmart, which holds a 21% share of U.S. grocery spending. Costco and Amazon each hold an 8% share, according to Numerator.

The acquisition also positions DoorDash against Walmart's expanding restaurant delivery business. Walmart partnered with Subway this summer to offer delivery from 1,400 in-store locations. The company has since added select Dunkin' and Papa Johns locations, bringing its total to 2,400 restaurant sites on its delivery platform. DoorDash entered the grocery market in 2020 and has since expanded its partnerships. It now lists the full inventory of all 2,700 U.S. Kroger stores and added Costco delivery last month.

Market data indicates a shift in consumer spending away from Instacart. Five years ago, Instacart held a 26% share of spending on U.S. delivery platforms. That figure has dropped to 18%, according to Consumer Edge. During the same period, DoorDash's share increased from 44% to 59%. Uber Eats maintained a share of just under 20%.

Apoorva Mehta, Instacart's founder, said he and Xu explored the idea of combining the companies for several years. "Customers have 21 meals a week to figure out. Groceries and restaurant delivery each solve part of that problem," Mehta said. The deal is expected to close by the end of 2027 or early 2028, pending approval from Instacart shareholders and government regulators. DoorDash shares rose 6% in early trading on Thursday, while Instacart shares remained flat.