DoorDash bids $17 billion to acquire Instacart

DoorDash has offered $17 billion to purchase Instacart, a transaction that would unify two major grocery and restaurant delivery services. The proposed deal aims to streamline options for consumers who currently pay for separate monthly subscriptions from both platforms.

Instacart, established in 2012, focuses on grocery and convenience store deliveries in the United States and Canada. DoorDash stated that the Instacart brand and application would remain in operation following the acquisition. The company said its 600,000 independent contractor shoppers would continue fulfilling orders under existing conditions.

Customers who currently pay $9.99 per month for both DashPass and Instacart+ memberships would pay a single fee instead of two. Instacart customers would also gain access to 50,000 additional stores already listed on the DoorDash platform. Tony Xu, DoorDash co-founder and CEO, said the merger would help local grocers compete against larger retailers.

Walmart holds the largest share of U.S. grocery spending at 21%, according to market research firm Numerator. Costco and Amazon each hold an 8% share. Xu told investors on a conference call that large companies have invested heavily in technology and fulfillment models. He said the combination would give retailers a better chance to compete in the current market.

DoorDash, which began as a restaurant delivery service in San Francisco in 2013, operates in 40 countries. The company completed more than 3 billion orders last year using a network of 9 million independent workers. Instacart fulfilled 338 million orders last year. DoorDash currently has a market value of $73 billion.

DoorDash entered the grocery sector in 2020 during a surge in pandemic demand. Kroger initially partnered with DoorDash in 2022 but limited deliveries 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. The company also added Costco delivery last month.

Instacart’s share of U.S. delivery platform spending has declined from 26% to 18% over the past five years, according to Consumer Edge. DoorDash’s share increased from 44% to 59% during the same period. Uber Eats maintained a share of just under 20%. Apoorva Mehta, who founded Instacart and left after its 2023 initial public offering, said he and Xu had discussed merging the companies for years.

Mehta stated that the industrial logic for combining the services has always been clear. He noted that customers have 21 meals a week to address and that combining grocery and restaurant delivery solves parts of that problem. The deal is expected to close by the end of 2027 or in early 2028, pending approval from Instacart shareholders and government regulators. DoorDash shares rose 6% in early trading Thursday, while Instacart shares remained flat.