Stay sharp with our email newsletter. DoorDash recently explored the possible acquisition of Instacart in a deal that would have likely been valued at USD 40 - 50 billion. While the deal did not go through—reportedly (in part) - owing to concerns over antitrust regulator approval— it underscored the heightened interest in the on-demand grocery delivery space over the pandemic period. The sector has seen a proliferation of venture-backed startups with over USD 10 billion in funding already raised this year alone. Several online food delivery (OFD) companies have also moved into the grocery space, while M&A activity in the sector has also intensified—largely as an entryway into new geographies.

What is driving the recent wave of interest in the grocery delivery space, and will it pay off for both investors and new entrants? Our analysis outlines 1) the underlying reasons for this surge in demand; 2) market dynamics, including potential points of consolidation; 3) strategies and models used by OFDs to move into grocery delivery, and 4) the underlying unit economics.