Uber Technologies Inc.
UBER 6.61%
said it had reached an agreement to buy Drizly’s alcohol delivery service for $ 1.1 billion in stock and cash, signaling the company’s ambitions to deliver a wider range of items to consumers’ doors.
The deal could further accelerate the growth of online alcohol sales, traditionally a small part of US alcohol consumption, on which large-scale sheltered orders have risen last year. Tuesday’s announcement marks the largest offering to date in the online alcohol space in the US, according to Wine & Spirits Wholesalers of America, a commercial group representing over 350 distributors.
Delivery has become an unexpected lifeline for Uber, as the pandemic has hit its core business. The company has acquired food delivery rival Postmates Inc. last year, through a share transaction valued at $ 2.65 billion.
This combination has made its Uber Eats business the second largest food delivery company in the US after DoorDash Inc.
Both companies supported their delivery offers during the health crisis. Uber began delivering food to the United States and Canada last year after acquiring Chilean starter Cornershop. DoorDash began delivering cleaning products and over-the-counter medications from 7-Eleven, Walgreens and CVS, among others.
The pandemic has fueled online alcohol sales, a category that has long lagged behind other US consumer products and other key markets due to strict regulations and ingrained drinking habits. E-commerce accounted for only 1% of US alcohol sales by retailers in 2019 in volume, but is expected to grow to 7% by 2024, says IWSR, the industry’s tracking industry.
It is estimated that online alcohol sales in the US increased by 80% in value last year compared to the previous year and that the country is now ready to overtake China this year as the largest online alcohol market in the world. The IWSR says the pandemic has created a huge awareness among Americans that they can buy drinks online and that 44% of those who buy alcohol through e-commerce only started doing so last year.
“This has been a sleepy online category,” Doryly CEO Cory Rellas said in a December interview. Prior to the pandemic, surveys conducted by Drizly in Boston showed that less than half of consumers knew they could buy alcohol online. “Covid changed that overnight,” he said, and online alcohol sales “reached a real turning point.”
The US is particularly ripe for home delivery of alcohol, as most alcohol is bought in supermarkets and liquor stores to be consumed in homes, rather than in “on-premise” locations such as bars and restaurants. . During the pandemic, a number of states temporarily relaxed regulations to allow bars, restaurants and craft distilleries to make alcohol available for home delivery and pick-up. Such regulations allow an Uber Eats food order to be associated with alcohol, and the alcohol industry is betting that the changes will remain.
Analysts expect the US to overtake China this year, being the best online alcohol market in the world. A Drizly worker completed an order in Boston in December.
Photo:
David Degner for The Wall Street Journal
“Where people drink and how people think about it, I think this has changed fundamentally,” Mr Rellas said.
Although home delivery of alcohol has been legal in many states for years, most retailers have chosen not to offer it, in part because of concerns about the legal age of those who place orders. Drizly, whose app connects consumers with nearby retailers that manage alcohol sales and deliver orders, has equipped workers who deliver deliveries with iPhone devices that carry software that can scan an ID and determine its validity.
Uber said Tuesday that Drizly complies with local regulations in 1,400 U.S. cities. The company said it will eventually integrate the Drizly market into the Uber Eats app. The acquisition is subject to regulatory approval and is expected to close in the first half of this year.
Demand for food has risen amid the pandemic, but restaurants are struggling to survive. In a highly competitive industry, delivery services are struggling to gain market share, while facing increasing pressure to reduce commission fees and provide more protection for their workers. Video / Photo: Jaden Urbi / WSJ
—Jennifer Maloney contributed to this article.
Write to Preetika Rana at [email protected] and Saabira Chaudhuri at [email protected]
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