DoorDash offers $17B for Instacart in takeover
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DoorDash is offering $17 billion to buy Instacart in a deal that could consolidate the grocery delivery business in the U.S. and abroad.
The companies say the tie-up would combine DoorDash's global reach and expertise in logistics with Instacart's purpose-built technology and long relationships with grocers. It could also help the companies better compete with rivals like Amazon.
But it could also lead to less competition in the delivery space, which could raise prices for consumers and give grocers fewer partners to negotiate with.
"They were competing for a share of consumers' wallet," said Randall Sargent, a partner specializing in grocery and retail at the consulting firm Oliver Wyman. "As a general economic principle, less competition and more consolidation tends to be worse for consumers."
The deal is expected to be finalized by the end of 2027 or in early 2028 if it's approved by Instacart shareholders and government regulators.
Instacart's name and app will remain
Instacart, founded in 2012, specializes in grocery and convenience store delivery in the U.S. and Canada. DoorDash said the Instacart brand name and app would remain, and Instacart's 600,000 shoppers -- who are independent contractors -- would be able to continue fulfilling orders as before.
Consumers who are currently paying $9.99 per month for separate DashPass and Instacart+ memberships, which give them free delivery on most orders and other perks, would be able to pay one fee instead of two, DoorDash said. Instacart customers would also have access to 50,000 additional stores that are on DoorDash's platform.
Grocers would also be able to choose either delivery platform. Tony Xu, DoorDash's co-founder and CEO, said the deal could help local grocers compete with larger players. Walmart is the largest U.S. grocer, with 21% share of spending, followed by Costco and Amazon, which each have 8% share, according to Numerator, a market research company.
"Over the past decade or even two decades, what you see is the largest companies are only eating more and more of the pie. Why is that? It's because they've invested aggressively into capabilities like a modern technology stack, like fast delivery, like new fulfillment models," Xu said Thursday during a conference call with investors. "That's what this combination is really about, where DoorDash and Instacart can give every retailer a fighting chance at competing in the modern-day era."