The rumors are true! DoorDash plans to buy Instacart for $17 billion. The deal will unite the country’s largest restaurant delivery platform and its largest grocery delivery platform. It was approved by the boards of both companies.
“Grocery is one of the hardest things to get right online. Someone has to pick a ripe avocado, find a substitute you’d choose yourself, and get the ice cream to you before it melts,” said Tony Xu, co-founder and CEO of DoorDash, in an early morning release. “Instacart has spent years learning to do that well for grocers, while DoorDash has built a delivery network and technology that local stores rely on every day. Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery. It’s still early innings, but we know that when more people shop local, more dollars stay local.”
DoorDash expects the deal to close in late 2027 or early 2028, pending regulatory and shareholder approval.
I didn’t believe the first whispers I heard about a potential acquisition, but DoorDash has proven it’ll spend big to win big. Its major acquisitions in restaurants — Wolt, Deliveroo, SevenRooms — bolstered a booming restaurant delivery and ordering operation. Now, a move to scoop up the leading third-party grocery delivery platform will elevate its grocery power.
In August, DoorDash CEO Tony Xu declared grocery the “fastest growing part of our marketplace business.” It seems like that growth is about to skyrocket.
Or, as a former colleague said best over text last night: “DoorDash really did win everything, huh?”
Sure did!
DoorDash has had its eye on Instacart for years, and its patience (literally) paid off.
The acquisition is DoorDash’s priciest to date, but Instacart could’ve been far more expensive. The company first considered an buy at the height of the pandemic with Instacart at the height of its valuation, a reported $40 to $50 billion. It ultimately fell apart over price and regulatory concerns — this was, you’ll remember, the Biden era when regulators truly regulated such deals. (Instacart eventually IPO’d in 2023 at a $10 billion valuation.)
Regulators seem friendlier now, perhaps the friendliest they might be toward a deal that combines two third-party juggernauts — and gives DoorDash’s grocery business a serious shot in the arm.
Once realized, the acquisition puts DoorDash on firm footing against even bigger competition. Amazon — which bought grocer Whole Foods for $13.7 billion in 2017 — and Walmart — which used DoorDash to deliver some grocery orders until 2022 — control roughly half of the online grocery market. (Perhaps ironically, both giants have dabbled in restaurant delivery over the last decade, though neither has made it far enough to challenge their newly energized grocery competitor.)
Then there’s the companies’ potentially complementary tech, including details more likely to fly under the radar unless you like to geek out on third-party delivery’s creep into brick-and-mortar stores (That’s me!): Both companies are building in-store tech to collect information and monitor inventory. In September, Instacart announced a new initiative to map, in real time, store shelves, giving in-store managers a virtual, aisle-by-aisle view of products inside stores. Days later, DoorDash launched a similar product, marketed to CPG brands, that uses couriers to photograph shelves while picking items for customers, mapping availability and sharing more data, like which items customers are likely to substitute when something is missing.
After the deal closes, DoorDash says it plans to Instacart’s brand, enterprise technology products, and app. The companies will operate separately and independently until then.
More soon!
