DoorDash Puts Instacart on the Market for $17 Billion

DoorDash is proposing a $17 billion acquisition of Instacart to consolidate its grocery delivery operations. The offer values Instacart at a premium over its current market valuation of $14 billion. This move signals a major shift in the competitive dynamics of the online grocery sector.

Under the terms of the proposal, the Instacart brand and application will remain distinct from the DoorDash platform. Independent contractors known as Instacart shoppers would continue fulfilling orders in their current capacity. Retailers would retain the option to partner with either service provider, preserving existing relationships.

The merger would expand DoorDash’s retail footprint immediately. Customers of Instacart would gain access to approximately 50,000 additional stores currently served by DoorDash. This integration leverages DoorDash’s existing logistics network, which supports operations in 40 countries.

Instacart, founded in 2012, operates in the United States and Canada. Its network of 600,000 independent contractors completed 338 million orders in the previous fiscal year. DoorDash, established in San Francisco in 2013, began as a restaurant delivery service before expanding into pet supplies and electronics. The company processed over 3 billion orders last year through a workforce of 9 million independent delivery workers.

DoorDash entered the grocery market in 2020 during a period of heightened demand. Initial adoption by major retailers was gradual. Kroger, one of the largest grocery chains in the nation, began a limited partnership with DoorDash in 2022, initially offering only flowers, sushi, and prepared meals. This relationship expanded last year to include the full inventory of 2,700 U.S. Kroger stores. DoorDash also secured a delivery agreement with Costco last month.

Tony Xu, co-founder and chief executive officer of DoorDash, stated that the acquisition combines Instacart’s grocery expertise with DoorDash’s logistical capabilities. “Grocery is one of the hardest things to get right online. Someone has to pick a ripe avocado, find a substitute you’d choose yourself, and get the ice cream to you before it melts,” Xu said. “Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery.”

Market share data from Consumer Edge indicates a shift in consumer preference over the past five years. Instacart’s share of U.S. delivery platform spending declined from 26% to 18%. During the same period, DoorDash’s share increased from 44% to 59%, while Uber Eats remained stable at just under 20%. The proposed deal introduces uncertainty regarding existing partnerships, such as the delivery arrangement between Instacart and Walmart, which DoorDash discontinued in 2022.