Uber Technologies Inc. said it reached a deal to buy alcohol-delivery service Drizly for $1.1 billion in stock and cash, signaling the company's ambitions to provide a wider range of items to consumers' doorsteps.
The deal could further accelerate the growth of online alcohol sales, traditionally a small slice of U.S. booze consumption that widespread shelter-in-place orders boosted last year. Tuesday's announcement marks the largest deal to date in the U.S. online alcohol space, according to the Wine & Spirits Wholesalers of America, a trade group representing more than 350 distributors.
Delivery has become an unexpected lifeline for Uber as the pandemic has hammered its core ride-hailing business. The company acquired food-delivery rival Postmates Inc. last year in a stock deal valued at $2.65 billion.
That combination made its Uber Eats business the second-largest food-delivery company in the U.S. after DoorDash Inc. Both companies have shored up their delivery offerings during the health crisis. Uber began delivering groceries in the U.S. and Canada last year, after acquiring Chilean startup Cornershop. DoorDash started delivering cleaning supplies and over-the-counter medicines from 7-Eleven convenience stores, Walgreens and CVS, among others.
The pandemic turbocharged online sales of alcohol, a category that has long lagged behind other consumer goods products in the U.S. and some other key markets due to strict regulations and entrenched consumer habits. E-commerce made up just 1% of U.S. alcohol sales by retailers in 2019 by volume but is expected to grow to 7% by 2024, says industry tracker IWSR.
It estimates online alcohol sales in the U.S. grew 80% by value last year from the year earlier and that the country is now poised to overtake China this year as the world's largest online alcohol market. IWSR says that the pandemic has created enormous awareness among Americans that they can buy booze online and that 44% of those who buy alcohol via e-commerce only began doing so last year.
"This was a sleepy online category," Drizly Chief Executive Cory Rellas said in a December interview. Before the pandemic, Boston-based Drizly's consumer surveys showed that less than half of consumers knew they could buy alcohol online. "Covid switched that overnight," he said, and online alcohol sales "hit a real inflection point."
The U.S. is particularly ripe for home delivery of alcohol, as most booze is purchased at supermarkets and liquor stores to be consumed in homes rather than at "premise" locations like bars and restaurants. During the pandemic, a string of states temporarily relaxed regulations to allow bars, restaurants and craft distilleries to make alcohol available for home delivery and pickup. Such regulations allow an Uber Eats food order to be paired with booze, and the alcohol industry is betting the changes will stick.
"Where people drink and how people think about it, I think that has fundamentally shifted," Mr. Rellas said.
While home delivery of alcohol has been legal in many states for years, most retailers have chosen not to offer it, partly due to concerns about the legal age of those placing orders. Drizly, whose app connects consumers to nearby retailers that handle alcohol sales and deliver orders, has equipped delivery workers with iPhones carrying software that can scan an identity document and determine its validity.
Uber said Tuesday that Drizly was compliant with local regulations in 1,400 U.S. cities. The company said it would eventually integrate Drizly's marketplace into the Uber Eats app. The acquisition is subject to regulatory approval and expected to close in the first half of this year.
