Uber Technologies Inc.
UBER 7.01%
He said he had reached an agreement to buy the Drizly alcohol delivery service for $ 1.1 billion in inventory and cash, signaling the company’s ambitions to deliver a broader range of items to consumers’ doorsteps.
The deal could further accelerate the growth of online alcohol sales, traditionally a small share of US alcohol consumption, which widespread orders for shelters at the site increased last year. Tuesday’s announcement marks the biggest deal to date in the U.S. online alcohol market, according to Wine & Spirits Wholesalers of America, a commercial group that represents more than 350 distributors.
The delivery became an unexpected lifeline for Uber as the pandemic hammered its main hitchhiking business. The company acquired rival Postmates Inc. in the food delivery market last year in a $ 2.65 billion stock deal.
This combination made its Uber Eats business the second largest food delivery company in the US, after DoorDash Inc.
Both companies increased their delivery offers during the health crisis. Uber started delivering groceries in the United States and Canada last year, after acquiring the Chilean startup Cornershop. DoorDash started delivering over-the-counter cleaning and prescription drugs to 7-Eleven, Walgreens and CVS convenience stores, among others.
The pandemic has boosted online sales of alcohol, a category that has long lagged behind other consumer products in the U.S. and in some other important markets due to tight regulations and entrenched drinking habits. E-commerce accounted for just 1% of U.S. alcohol sales by retailers in 2019 in volume, but is expected to grow to 7% by 2024, says industry tracker IWSR.
The company estimates that online sales of alcohol in the US grew 80% in value last year compared to the previous year and that the country is now about to overtake China this year as the world’s largest online alcohol market. The IWSR says that 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 started doing so last year.
“This was a sleepy online category,” Drizly Chief Executive Cory Rellas said in an interview in December. Before the pandemic, consumer surveys of Boston-based Drizly showed that less than half of consumers knew they could buy alcohol online. “Covid changed that overnight,” he said, and online alcohol sales “have reached a real tipping point.”
The United States is particularly ripe for delivering alcoholic beverages at home, as most beverages are purchased at supermarkets and liquor stores to be consumed at home, rather than in “premeditated” places like bars and restaurants. During the pandemic, a number of states temporarily relaxed regulations to allow bars, restaurants and artisanal distilleries to make alcoholic beverages available for delivery and pick up at home. These regulations allow an Uber Eats food order to be paired with a drink, and the alcohol industry is betting that the changes will be maintained.
Analysts expect the United States to overtake China this year as the world’s largest online alcohol market. A Drizly employee answered an order in Boston in December.
Photograph:
David Degner for The Wall Street Journal
“Where people drink and how people think about it, I think it has fundamentally changed,” said Rellas.
While home delivery of alcohol has been legal in many states for years, most retailers have chosen not to offer alcohol, in part because of concerns about the legal age of the orderer. Drizly, whose app connects consumers to nearby retailers that handle alcohol sales and order delivery, has equipped delivery people with iPhones with software that can scan an identity document and determine its validity.
Uber said on Tuesday that Drizly complies with local regulations in 1,400 U.S. cities. The company said it would eventually integrate the Drizly market with the Uber Eats app. The acquisition is subject to regulatory approval and is expected to be completed in the first half of this year.
Demand for food delivery has skyrocketed 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 rates and provide more protection for their workers. Video / photo: Jaden Urbi / WSJ
—Jennifer Maloney contributed to this article.
Write to Preetika Rana at preetika.rana@wsj.com and Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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Published in the February 3, 2021 print edition as ‘Uber Adds Drizly to Its Mix, Expands on Alcohol Delivery.’