Is an Instacart-Uber Eats Merger on the Horizon?

The news that two leaders in the delivery space are entering a new partnership has given food for thought to industry observers. The collaboration between Instacart and Uber Eats, through which Instacart users can now order restaurant delivery from an Uber Eats tab on the app, has led at least one M&A expert to speculate that the mash-up could be a prelude to a possible merger.

Aron Bohlig, managing partner at boutique investment bank ComCap, talked to Progressive Grocer about the marriage between the two food delivery players at a time when rivals Walmart and Amazon are shoring up their own delivery businesses. “In short, a theoretical acquisition would be a great idea for Uber but not as much for Instacart because Instacart is still relatively early in its business,” he remarked, adding that grocery delivery accounts for a respectable percentage of Uber's order traffic. “Uber would view that as an interesting category and, at 10 to 15% of volume, it would be good for them.”

For now, Bohlig noted that the recent partnership helps Uber and Instacart expand their delivery services while enabling them to pursue new pockets of growth. “Instacart has been diversifying its business away from simple grocery delivery into advertising products and other B2B products for grocers. Both Uber and Instacart's delivery businesses really take off with "network density" – or a high number of trips for a fixed number of drivers. As such it makes perfect sense for Instacart to potentially share some delivery margin with Uber drivers in order to improve the quality of service overall, as well as enhance the P&L for the delivery business,” he explained. “Uber has an incentive to do anything to increase the volume going through its delivery network as well. So we see this as a strong win-win for both companies.” 

Another upside of the current and possible future arrangement is the conduciveness of the audience. “Obviously, each of them is a known brand and trusted partner to consumers. Especially if the other one has a hole in their network and they feel they are not competitive in an area, it makes sense for them to have a revenue share,” Bohlig remarked, adding. “And they are actually quite nimble and innovative, for their size.”

To Bohlig's point, Instacart has been widening its operations into other areas of grocery retail. Last week, the company released results from its first fiscal quarter ending March 31, recapping the success of the Instacart Ads program with brand partners and the expansion of its Caper Carts in delivering satisfying omnichannel experiences. “We made an early bet that smart carts would be the winning technology for transforming the in-store grocery experience because it’s a form factor people recognize and it doesn’t require retrofitting a whole store with large capex investments,” said CEO Fidji Simo in a letter to shareholders.

[RELATED: Save Mart Expands Partnership With Instacart to Deploy Smart Carts]

Simo also addressed the new partnership with Uber. “Additionally, we’re giving Instacart customers more options for getting food on the table by launching restaurant delivery via a new strategic partnership with Uber. By combining our leading grocery selection with delivery and pickup options from hundreds of thousands of restaurants that will be available and fulfilled through Uber Eats, we can now serve even more of our customer’s food needs within the Instacart app,” she declared, adding, “Instacart+ members will also get $0 delivery on grocery and restaurant orders over $35, making our Instacart+ membership twice as valuable overnight.”

Overall, Instacart fared well in the first quarter. The company reported a fourth consecutive period of expanding year-over-year gross transactional value (GTV) growth, net income and adjusted EBITDA profitability. “We remain well positioned to deliver Q2 year-over-year growth in GTV that represents a continued step up compared to the growth we delivered in 2023, and we’re well on track to expand adjusted EBITDA profitability in 2024,” Simo wrote.

Uber Technologies, Inc. also reported its first quarter results this month, with a 15% increase in its audience, a 6% bump in order frequency and a new quarterly record for adjusted EBITDA. The company highlighted progress in grocery, including new partnerships with Weis Markets, Fresh Thyme Market, Carlie C’s and Bashas’. 

San Francisco-based Instacart partners with more than 1,500 national, regional, and local retail banners to facilitate online shopping, delivery and pickup services from 85,000-plus stores across North America on the Instacart Marketplace. Part of San Francisco-based transportation company Uber, Uber Eats partners with more than 1 million restaurants and merchants in more than 11,000 cities across six continents. 

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