DoorDash bids $17 billion to acquire Instacart

DoorDash is offering $17 billion to purchase Instacart, a move that would significantly consolidate the grocery delivery market in the United States and Canada. The proposed merger would combine two of the largest platforms for online grocery shopping while keeping the Instacart brand and application accessible to consumers. If approved by shareholders and government regulators, the deal is expected to be finalized by late 2027 or early 2028.

The acquisition would allow the 600,000 independent contractors who currently shop for Instacart to continue their work under the new structure. Customers who currently pay $9.99 per month for separate DashPass and Instacart+ subscriptions would have the option to pay a single fee for access to free delivery on most orders. Additionally, Instacart users would gain access to 50,000 more stores currently listed on the DoorDash platform.

DoorDash co-founder and CEO Tony Xu stated that the combination aims to help local grocers compete against larger retailers. According to market research firm Numerator, Walmart holds a 21% share of grocery spending, while Costco and Amazon each hold 8%. Xu told investors on Thursday that larger companies have invested heavily in technology and delivery speed, giving them a distinct advantage. He described the merger as a way to give every retailer a better chance to compete in the modern market.

DoorDash, founded in San Francisco in 2013, began as a restaurant delivery service and has since expanded into grocery, pet food, and electronics. The company operates in 40 countries and completed more than 3 billion orders last year using a network of 9 million independent delivery workers. In contrast, Instacart, founded in 2012, fulfilled 338 million orders last year. DoorDash currently has a market value of $73 billion.

DoorDash entered the grocery delivery space in 2020 during a surge in pandemic-era demand. The company has since built major partnerships, including one with Kroger that expanded last fall to include the full inventory of all 2,700 U.S. Kroger stores. DoorDash also added delivery from Costco last month. These expansions have impacted Instacart’s market position, with its share of spending on U.S. delivery platforms falling from 26% five years ago to 18%, according to Consumer Edge.

Instacart co-founder Apoorva Mehta, who left the company after its 2023 initial public offering, said he and Xu had discussed the idea of a merger for years. Mehta noted that customers have 21 meals a week to plan, and combining grocery and restaurant delivery services addresses that need. The consolidation also positions the combined entity to compete with rivals like Walmart, which has expanded its restaurant delivery platform to 2,400 locations, including in-store Subway, Dunkin’, and Papa Johns restaurants.

DoorDash shares rose 6% in early trading on Thursday following the announcement. Instacart shares remained flat.