Kroger's delivery expansion with DoorDash is bad news for Instacart, analysts say

Instacart's shares fell 6.6% after Kroger and DoorDash announced an expanded partnership to offer full grocery delivery from nearly 2,700 Kroger stores starting October 1st, directly challenging Instacart's market position. Analysts view this collaboration as a significant threat, noting that Kroger previously accounted for over 10% of Instacart's gross transaction value and that Instacart's market share in third-party grocery delivery has already declined from 70% in 2022 to 58% due to increased competition from platforms like DoorDash and Uber.

Analysis

Instacart's (CART) market position is under significant pressure following the announcement of an expanded strategic partnership between Kroger (KR) and DoorDash (DASH). The immediate 6.6% drop in Instacart's share price reflects the material impact of this development, as analysts estimate Kroger accounts for over 10% of Instacart's Gross Transaction Value (GTV). This move is not an isolated event but rather an acceleration of a pre-existing trend; Instacart's market share in third-party grocery delivery has already eroded from approximately 70% in 2022 to 58% in 2023 due to intensifying competition from DoorDash and Uber. The new agreement, which rolls out full grocery delivery from nearly 2,700 Kroger-owned stores via DoorDash, suggests a demotion of Instacart from its perceived status as Kroger's preferred partner. Furthermore, the collaboration extends beyond simple delivery logistics to include high-margin retail media and future delivery models, indicating a deeper, more integrated relationship that further sidelines Instacart and strengthens DoorDash's foothold in the grocery vertical.

Key Decisions for Investors

• Investors in Instacart (CART) should re-evaluate their positions given the clear evidence of market share erosion and the heightened risk to a revenue stream that constitutes over 10% of its GTV.
• The partnership is a strategic positive for both DoorDash (DASH), solidifying its expansion into the grocery delivery market, and Kroger (KR), which diversifies its delivery channels and enhances its retail media ecosystem, suggesting a bullish outlook for these entities.
• Monitor upcoming quarterly reports for specific metrics on customer retention and GTV concentration from Instacart, as any further degradation in its relationship with major grocers could signal a fundamental impairment to its long-term business model.