DoorDash agrees to purchase Instacart for $17 billion

The grocery delivery market in North America is undergoing a major shift as two large competitors merge. DoorDash announced on Wednesday that it will acquire Instacart in a transaction valued at $17 billion.

The acquisition is designed to strengthen DoorDash's position in the grocery sector. By combining the two platforms, DoorDash will immediately give its customers access to 50,000 additional stores currently covered by Instacart. The company stated that the Instacart brand and application will remain separate, and its workforce of independent contractors will continue to fulfill orders for the Instacart service. Grocery retailers will retain the option to list their inventory on either platform.

Instacart, established in 2012, focuses on grocery and convenience store delivery across the United States and Canada. The company employs 600,000 independent contractors who completed 338 million orders in the previous year. Instacart currently holds a market value of $14 billion. DoorDash, founded in San Francisco in 2013, expanded from restaurant delivery to include pet food and electronics. The company operates in 40 countries and utilizes a network of 9 million independent delivery workers to complete over 3 billion orders annually. DoorDash's market value stands at $73 billion.

DoorDash entered the grocery delivery market in 2020 during a surge in pandemic-era demand. Major retailers were initially hesitant to partner with the company. Kroger, one of the largest US grocery chains, began a limited partnership in 2022 that allowed DoorDash to deliver only flowers, sushi, and prepared meals from select locations. That agreement expanded last fall, and DoorDash now lists the full inventory of all 2,700 US Kroger stores. The company also added delivery from Costco last month.

Tony Xu, co-founder and CEO of DoorDash, said the deal combines Instacart's grocery expertise with DoorDash's logistics capabilities. "Grocery is one of the hardest things to get right online," Xu said in a statement. "Someone has to pick a ripe avocado, find a substitute you'd choose yourself, and get the ice cream to you before it melts. Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery."

Market data from Consumer Edge shows that DoorDash has steadily gained share at the expense of Instacart. Five years ago, Instacart held 26% of spending on US delivery platforms, while DoorDash held 44%. Instacart's share has since dropped to 18%, and DoorDash's has risen to 59%. Uber Eats has maintained a share of just under 20% during that period.

Some existing retail partnerships remain in a state of uncertainty following the announcement. Instacart currently offers delivery from Walmart, but DoorDash ceased providing Walmart delivery in 2022.