DoorDash Instacart Deal Puts $17 Billion on Online Grocery Control

A $17 billion bet on grocery delivery

DoorDash has agreed to buy Instacart for about $17 billion. The deal would put the largest U.S. restaurant delivery company and the largest online grocery platform under one owner.1 Instacart shareholders would get $65 a share. That is a 26% premium over Instacart's closing price on October 22, the last trading day before reports of a possible deal came out.7 Both boards have approved the agreement.1 At least 75% of the price will be paid in cash. Shareholders can take all cash, all DoorDash stock at 0.3372 shares per Instacart share, or a mix. The companies expect the deal to close at the end of 2027 or in the first half of 2028.3

The news did not come as a surprise. Last week, The Information reported that Instacart was exploring a sale and had talked with Uber and DoorDash. By Monday, several outlets said DoorDash was in advanced talks at roughly the price it ended up paying.4 Bloomberg had earlier reported that Uber walked away from its own discussions with Instacart.3 This is also the second attempt. The two companies talked in 2021, when Instacart was reportedly valued at $40 billion to $50 billion, and those talks fell apart partly over regulatory concerns.14

The key point is that this deal is less about delivery than about who controls the software grocers use to sell online. That is where the regulatory fight is most likely to happen.

Why DoorDash wants groceries

The reporting broadly agrees on DoorDash's reasons. Restaurant delivery is a maturing business. Morningstar analyst Martin Szumski argued that growth now lies in more frequent, larger orders such as weekly grocery shops, convenience items and general retail.13 Grocery orders are bigger and may earn more per order than a single restaurant meal, so buying Instacart is a fast way for DoorDash to gain scale in grocery.1

The two companies' latest results show why. DoorDash reported 993 million orders in the third quarter, up 28% from a year earlier, with customers spending nearly $34 billion and revenue of $4.6 billion.1 Instacart's second-quarter results showed 90.3 million orders worth about $10.4 billion and revenue of just over $1 billion.1 Instacart's third-quarter report, released the same day as the deal, put orders at about 91.4 million and order value at $10.5 billion.10 Instacart handles about a tenth as many orders as DoorDash but roughly a third of the dollar volume, so its average basket is much larger.10 That basket size is what DoorDash is paying for.

DoorDash CEO Tony Xu described the deal in operational terms. He said grocery is one of the hardest things to sell online, because someone has to pick ripe produce, choose sensible substitutes and deliver frozen items before they thaw.3 On the investor call he also made clear this was an aggressive move. With the core business performing well, he said, the company had room to do "something offensive."1 DoorDash's quarterly results support that: adjusted earnings of $1.06 a share beat the 84-cent consensus, and revenue of $4.62 billion also topped estimates.4

Instacart's decline

Instacart's side of the story is a long slide. Private investors valued it at $39 billion during the pandemic grocery boom, and its market value was around $14 billion before the deal.1 Consumer Edge data show its share of U.S. delivery-platform spending falling from 26% to 18% over five years. Over the same period, DoorDash's share rose from 44% to 59%, while Uber Eats stayed just under 20%.16

Much of that pressure came from DoorDash itself. Last year it started offering full grocery delivery from nearly 2,700 Kroger-owned stores, and Instacart's stock fell sharply on the news.1 Last month DoorDash added Costco.8 Instacart also had problems of its own. In December it agreed to pay $60 million to settle Federal Trade Commission allegations of misleading advertising and improper subscription sign-up practices.12 With its shares up about 25% this year, Instacart may have seen this as a good moment to sell before competition got worse.3

Instacart founder Apoorva Mehta, who left after the 2023 IPO, said he and Xu had discussed combining the companies for years because the business logic was obvious.2 His argument is that people have 21 meals a week to plan, and restaurants and groceries each cover part of that.16

What customers and grocers are being promised

DoorDash's promises are aimed directly at regulators. The Instacart brand and app will stay. Instacart's 600,000 independent-contractor shoppers can keep working as they do now. Grocers can choose either platform.2 Customers would pay one membership fee instead of paying for both DashPass and Instacart+, which each cost $9.99 a month today.2 Instacart users would gain access to more than 50,000 additional stores on top of the nearly 100,000 already on the platform.8 DoorDash also said local grocers will not have to sign exclusive agreements with the combined company.1

One thing is missing from those promises. There is no clear answer on whether membership prices will rise after the deal closes.5 Analysts disagree on this. GlobalData's Neil Saunders said fee increases beyond normal inflation are unlikely, given strong competition from Walmart and Amazon in grocery.9 Oliver Wyman's Randall Sargent pointed out that the two companies were competing for the same customers' spending, and that less competition generally tends to hurt consumers.16 The current gap between delivery and in-store prices adds to the concern. In one comparison, a basket that cost $319 in the store came to $378 on DoorDash and $419 on Instacart once taxes and fees were included.9

The antitrust fight will be about how the market is defined

The biggest disagreement in the coverage is over how large the combined company would actually be. Measured by spending across all delivery platforms, Instacart's share is 18%.16 Measured within third-party grocery delivery, one estimate puts Instacart at about 70% and DoorDash at about 10%. Measured against total U.S. grocery spending, both companies look small next to Walmart's 21% share and the 8% each held by Costco and Amazon.2 Wedbush analysts identified this problem before the deal was announced. Third-party delivery is a small part of overall grocery spending, they wrote, but defining the online market more narrowly, or looking at grocers as business customers, could make approval harder.4

DoorDash will almost certainly argue that it competes with Walmart, Amazon, Target and Gopuff, which all offer same-day grocery delivery from their own stores and warehouses.15 Critics will focus on a different issue: Instacart's role as a technology supplier. Antitrust lawyer Ethan Litwin warned that because many grocers run their online stores on Instacart's software, DoorDash could cut rivals off, outmatch them on ad targeting and logistics, or watch competitors' pricing in real time. He also said the two companies are two of the three main buyers of shopper labor in many markets.16 Analysts say Instacart's advertising and software businesses may be worth as much to DoorDash as the delivery marketplace itself. Sargent noted that a combined company could offer food brands a fuller picture of each customer, covering both grocery orders and takeout lunches.16

The coverage also disagrees on how likely a challenge is. Vanderbilt law professor Rebecca Haw Allensworth put the chance of a federal challenge as "low but not negligible," given the Trump administration's lighter approach to mergers. She added that states or private plaintiffs could still sue, because grocery prices are a sensitive political issue.1 Reuters took a more cautious view. The FTC, which usually reviews grocery mergers, has focused on affordability. It has a pending case against Uber over subscriptions and launched a study this week into how companies including DoorDash and Instacart use personal data to set prices and driver pay.15 Groundwork Collaborative's Lindsay Owens called the deal "obviously illegal."15 New York City's consumer and worker protection agency described it as part of a "troubling trend" of corporate consolidation.13 The deal also needs approval in Canada and Israel.

What the stock price shows

The market reaction is telling. Reports on Instacart's stock differed, with one noting a premarket gain of nearly 5% and another saying it traded near flat.14 Either way, the stock stayed around $58.35, well below the $65 offer. The long timeline to closing, the $1.25 billion fee DoorDash would owe Instacart if the deal collapses in certain circumstances, and CFRA's warning that the extended closing window leaves the deal exposed to policy changes all point to the same risk. DoorDash shareholders reacted more favorably, sending the stock up more than 6%.4

The likely outcome is that regulators will not block the deal outright but will press DoorDash hard on Instacart's enterprise software and data. Behavioral commitments, such as no exclusivity requirements and guaranteed open access for grocers, will probably decide whether it closes. The 2021 talks failed on regulatory grounds.14 This time DoorDash is betting that a friendlier Washington and a stronger Amazon and Walmart have changed the situation. Even if that bet pays off, the FTC's current focus on prices and data means the review is unlikely to be quick or easy.