DoorDash offers $17 billion to buy Instacart after adding 2,700 Kroger stores to its app. Then the CEO reveals how they plan to compete with Walmart

DoorDash is making a massive move to reshape the delivery industry by spending $17 billion to acquire Instacart, the Associated Press reports. This potential merger, which could be finalized by the end of 2027 or early 2028, aims to combine DoorDash’s global logistics network with Instacart’s specialized grocery technology. The companies claim this partnership is designed to help local grocers compete against major retailers like Walmart, Costco, and Amazon.

Tony Xu, the co-founder and CEO of DoorDash, explained his vision during a conference call with investors on Thursday. He believes the largest companies are winning because they invest heavily in modern technology and fast delivery.

Xu said, “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.” He added that the goal is to give every retailer a fighting chance in the modern era.

If the deal goes through, the Instacart app and brand name are expected to remain

DoorDash notes that the 600,000 independent contractors who currently shop for Instacart would keep their roles. For customers, the change could mean paying one fee for a combined membership instead of paying separately for both DashPass and Instacart+. Furthermore, Instacart users would gain access to 50,000 additional stores already available on the DoorDash platform.

This move follows a period of aggressive expansion for DoorDash, which started as a restaurant delivery service in 2013. The company recently added the full inventory of 2,700 Kroger stores to its marketplace and secured a partnership with Costco just last month. These gains have impacted Instacart, as data from Consumer Edge shows Instacart’s share of U.S. delivery spending dropped from 26% to 18% over the last five years, while DoorDash grew from 44% to 59%.

Despite the potential benefits, the acquisition faces significant scrutiny. Some experts worry that less competition could lead to higher prices for consumers. Randall Sargent, a partner at Oliver Wyman, noted, “They were competing for a share of consumers’ wallet. As a general economic principle, less competition and more consolidation tends to be worse for consumers.”

Antitrust concerns are also at the forefront. Attorney Ethan Litwin pointed out that if DoorDash controls Instacart’s technology, it could monitor competitor pricing or cut off access to other platforms. Litwin said, “DoorDash could therefore cut rivals off, outmatch them on targeting and logistics, or monitor competitors’ pricing and discounting in real time, which could facilitate coordination on pricing.” He suggested that while the companies will highlight efficiencies, a monopoly-like advantage might not stay friendly to consumers for long.

There is also uncertainty regarding the impact on delivery workers. Litwin observed that in many markets, these two companies represent two of the three major buyers of shopper labor, which could leave workers with fewer options. The Service Employees International Union has not yet commented on the situation.

Apoorva Mehta, the founder of Instacart who left after the company’s 2023 initial public offering, mentioned that he and Xu had discussed this combination for years. He believes the industrial logic is clear, as the move brings together restaurant and grocery delivery to solve the problem of consumers needing to figure out 21 meals every week.

Following the announcement, DoorDash shares rose 5% in Thursday afternoon trading, while Instacart shares were down 1.6%.