DoorDash ends grocery delivery rivalry by buying Instacart for $17 billion

DoorDash will purchase Instacart for $17 billion, a deal that merges the two leading players in American grocery delivery. The acquisition ends a period of intense competition where DoorDash rapidly expanded its market share while Instacart struggled to keep pace.

The conflict between the two companies has defined the grocery delivery sector for years. DoorDash, which began delivering groceries in 2020 during the pandemic, has aggressively targeted Instacart's core business. According to market research firm Consumer Edge, DoorDash's share of US delivery spending grew from 44% to 59% over the last five years. During that same period, Instacart's share dropped from 26% to 18%. Uber Eats remained stable at just under 20%.

Instacart, founded in 2012, focuses on grocery and convenience store deliveries in the US and Canada. The company employs 600,000 independent contractors called shoppers. These workers completed 338 million orders last year. Instacart has a market value of $14 billion. DoorDash, founded in San Francisco in 2013, started as a restaurant delivery service. It now operates in 40 countries and uses a network of 9 million independent drivers. DoorDash completed more than 3 billion orders last year and holds a market value of $73 billion.

DoorDash executives believe the merger will combine Instacart's grocery expertise with DoorDash's logistics infrastructure. Tony Xu, DoorDash's co-founder and CEO, said in a statement that the partnership will help stores of all sizes. "Groceries are one of the hardest things to get right online," Xu wrote. "Someone has to pick a ripe avocado, find a substitute you'd pick yourself, and get you your ice cream before it melts." He added that the combined company could unlock the potential of grocery delivery.

Under the deal, the Instacart brand and app will remain. Current Instacart shoppers can continue to work for Instacart. Supermarkets will have the choice to work with either Instacart or DoorDash. Instacart customers will gain access to 50,000 additional stores covered by DoorDash's network.

DoorDash has been expanding its grocery partnerships in recent years. It began limiting deliveries from Kroger in 2022 to flowers, sushi, and prepared foods. That deal expanded last fall to include the full inventory of Kroger's 2,700 US stores. DoorDash also added Costco deliveries last month. However, the new merger raises questions about existing alliances. Instacart currently offers delivery from Walmart, a service DoorDash dropped in 2022.

The acquisition is scheduled to close later this year. The deal will consolidate the two largest grocery delivery platforms in North America under a single corporate umbrella.