DoorDash is acquiring Instacart for $17 billion, creating a delivery giant that combines food and grocery services. The deal, announced Thursday, will allow DoorDash users to order from Instacart’s network of over 50,000 stores, in addition to the nearly 100,000 already available on the Instacart platform. DashPass and Instacart+ members will consolidate their memberships into a single fee. DoorDash intends to maintain the Instacart brand and its technology. The acquisition follows a trend of consolidation in the delivery industry, with DoorDash previously acquiring Deliveroo and Uber owning Postmates and Delivery Hero.
DoorDash currently commands approximately two-thirds of the US food delivery market, according to Bloomberg data, though its share price has declined by roughly a third in the past year due to rising costs. Instacart experienced peak growth during the Covid-19 pandemic but has struggled to sustain momentum, facing increasing competition from Amazon and Walmart’s grocery delivery services. The merger is expected to generate cost savings through workforce reductions and expense sharing, though the potential for further cost reduction remains unclear.
Consumers have expressed concerns about the rising cost of food delivery, exacerbated by soaring fuel costs and associated fees. Both companies have faced scrutiny regarding their treatment of delivery workers; DoorDash recently settled with New York City regulators for $131.5 million over alleged tip deprivation. Instacart also settled a Federal Trade Commission complaint in December for $60 million, related to misleading advertising and subscription practices. Analysts note the combination could attract antitrust scrutiny given the companies’ overlapping market share. Wedbush analysts wrote that assessing the online grocery market from the perspective of grocers as enterprise customers could complicate regulatory approval.
Speculation about a deal surfaced last week, with initial reports indicating discussions between Instacart and companies including Uber and DoorDash. Shares of DoorDash rose more than 8% in premarket trading following the announcement, while Instacart’s stock remained relatively flat.
Our reading is that DoorDash is aggressively pursuing market dominance through acquisition, leveraging its existing position to absorb a struggling competitor. The deal appears driven by a desire to consolidate memberships and cut costs, despite both companies already facing scrutiny over worker treatment and consumer pricing. The potential for antitrust challenges seems significant, given the combined market share and the complexities of defining the relevant market from the perspective of grocery stores.
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