By Sohaib Shams
DoorDash announced Thursday it will acquire grocery delivery rival Instacart for $17 billion, a deal that consolidates two major players in the online grocery market.
Deal details
The acquisition will allow DoorDash to expand its grocery delivery capabilities, which CEO Tony Xu described as "one of the hardest things to get right online." Instacart's brand and app will remain, and its 600,000 independent shoppers can continue fulfilling orders. Grocers will have the option to work with either platform.
Market context
Instacart, founded in 2012, specializes in grocery and convenience store delivery in the U.S. and Canada. Its shoppers completed 338 million orders last year, and the company holds a market value of $14 billion. DoorDash, founded in 2013, operates in 40 countries, completed over 3 billion orders last year, and has a market value of $73 billion.
DoorDash entered grocery delivery in 2020 during the pandemic. It recently expanded partnerships with major chains such as Kroger, whose full inventory from 2,700 U.S. stores is now on DoorDash, and Costco, added last month. The company's market share in U.S. delivery spending grew from 44% to 59% over five years, while Instacart's share fell from 26% to 18%, according to Consumer Edge.
Partnership questions
The deal raises questions about existing partnerships. Instacart currently delivers for Walmart, but DoorDash ended its Walmart delivery partnership in 2022. It remains unclear how the acquisition will affect that relationship.
