DoorDash Pays $17 Billion to Absorb Rival Instacart

DoorDash Inc. is purchasing Instacart Corp. for $17 billion in a move to dominate the grocery delivery market. The transaction, announced on Thursday, would combine the second-largest online grocery service in North America with the largest restaurant delivery platform. DoorDash stated that the Instacart brand and application will remain separate, while its 600,000 independent contractor shoppers will continue fulfilling orders under their current terms.

The deal addresses a cost structure issue for consumers who currently pay for dual subscriptions. Customers paying $9.99 monthly for both DashPass and Instacart+ memberships will switch to a single fee. DoorDash also noted that Instacart users will gain access to 50,000 additional retail locations available on the DoorDash platform. Grocers will retain the option to choose either delivery service, a flexibility Tony Xu, DoorDash's co-founder and CEO, said will help local stores compete with national chains.

Market data from Numerator shows Walmart holding a 21% share of U.S. grocery spending, with Costco and Amazon at 8% each. Xu argued that large retailers have invested heavily in technology and fulfillment models, leaving smaller grocers at a disadvantage. He stated on an investor call that the merger will give retailers a better chance to compete in the modern era. The combined entity will also face pressure from Walmart, which recently expanded its delivery network to include 2,400 restaurant locations, including partnerships with Subway, Dunkin', and Papa Johns.

DoorDash, founded in San Francisco in 2013, operates in 40 countries and processed more than 3 billion orders last year. Its workforce includes 9 million independent delivery workers. Instacart, founded in 2012, fulfilled 338 million orders in the same period. DoorDash has a market value of $73 billion. The company began grocery delivery in 2020 and has since expanded its retail partnerships. It currently lists the full inventory of 2,700 U.S. Kroger stores and added Costco to its platform last month.

Instacart's market position has eroded since DoorDash entered the grocery sector. According to Consumer Edge, Instacart's share of U.S. delivery platform spending dropped from 26% to 18% over the past five years. DoorDash's share grew from 44% to 59% during that time, while Uber Eats remained stable at just under 20%. Apoorva Mehta, Instacart's founder who exited after the 2023 initial public offering, said he and Xu had discussed a merger for years. He noted that the combination solves part of the 21 meals a week consumers need to source, and that shoppers will have more earning opportunities.

The transaction requires approval from Instacart shareholders and government regulators. Officials expect the deal to close by the end of 2027 or in early 2028. DoorDash shares increased by 6% in early trading on Thursday, while Instacart shares remained unchanged.