Grubhub’s recent partnership with Instacart may seem unusual, but it’s a smart move. Grubhub, always the underdog in the delivery app world, is teaming up with Instacart to focus on its strengths while providing grocery services through Instacart.
Historically, Grubhub has struggled to capture market share. Before being acquired by Wonder, it held about 8% of the third-party delivery market, compared to DoorDash’s 68% and Uber Eats’ 24% (source: McKinsey and Second Measure Bloomberg).
Rather than fight for grocery delivery, Grubhub decided to let Instacart take the lead. Users can now order groceries directly via the Grubhub app, enabling Grubhub to concentrate on its primary markets. “By expanding access to groceries and everyday essentials, this partnership makes it even easier for customers to rely on Grubhub for more of what they need,” said Grubhub CEO Howard Migdal.
Previously, Grubhub experimented with grocery delivery during the pandemic. However, it faced tough competition as online grocery shopping evolved. Many customers turned to major retailers like Walmart and Amazon, which dominate the market.
Instacart, too, is adapting. Its CEO, Fidji Simo, noted that by creating partnerships with various retailers, Instacart can enhance its data advantage and improve efficiency to drive growth. However, their year-over-year growth slowed from 15% to 11%. Despite this, adding 40 new retailers this year is a positive step to keep the momentum going (source: Brick Meets Click).
For Grubhub, teaming up with Instacart opens the door to new customers and could lead to consistent growth, especially in a time when consumers are budgeting their food expenses more carefully.
Wonder’s Ambitious Goals
Grubhub’s acquisition by Wonder, led by entrepreneur Marc Lore, shows a grand vision for the future. Lore aims to create a “super app” that can cater to all food needs, from grocery shopping to restaurant delivery. “Our ultimate goal is to autonomously feed families based on their budgets and preferences,” he said during a conference.
Wonder is broadening its operations to include meal kits and food media, while also establishing physical food markets. However, its current model lacks a comprehensive “cook-at-home” option beyond meal kits, leaving a gap that Instacart can help fill.
This partnership is more than just a practical solution; it’s a reflection of how the food delivery landscape is changing. As consumer habits shift, brands are realizing the importance of adapting quickly to stay relevant and meet evolving demands.
As the food delivery market continues to grow, the collaboration between Grubhub and Instacart highlights an interesting trend: sometimes, partnering with competitors can result in a more robust service for everyone involved.
