WASHINGTON—Uber Technologies Inc. has agreed to purchase Drizly Inc., an on-demand alcohol delivery app, for $1.1 billion to accelerate the ride-hailing company’s growth in food and beverage delivery services for consumers, especially the fast-growing market for online alcohol sales, Bloomberg reports.
Uber reportedly beat out rivals DoorDash, which partners with many c-stores on delivery services, and GoPuff, which competes against brick-and-mortar c-stores in certain markets, for Drizly. Uber bought rival Postmates last year in a deal valued at $2.65 billion, and the combination moved Uber Eats to second place after DoorDash among food-delivery companies in the U.S.
Drizly, which delivers in more than 1,400 U.S. cities, connects consumers with local retailers to order liquor, wine and beer. Among its competitors are Instacart, Minibar, Saucey, Total Wine, and in the c-store space, delivery services like 7-Eleven’s 7Now app.
The deal, which is expected to close in the first half of this year, doesn’t include Drizly’s cannabis delivery service. The Uber Eats app is expected to integrate Drizly’s marketplace.
Online alcohol sales in the U.S. increased 80% by value in 2020 compared with 2019, according to industry tracker IWSR, the Wall Street Journal reports. Many consumers discovered online alcohol sales for the first time last year during the pandemic.
“This was a sleepy online category,” Drizly Chief Executive Cory Rellas said in a December interview with the Wall Street Journal. “COVID switched that overnight,” he said.
What’s more, Americans are increasingly splurging on pricy tequila, whiskey and other high-end liquor, boosting sales to the highest level in four decades, the Wall Street Journal reports. Unable to attend concerts, watch live sporting events or travel much, U.S. consumers are pouring money into spirits for their home bars. As a result, U.S. distillers’ revenue jumped 7.7% to $31.2 billion in 2020, according to the Distilled Spirits Council (DISCUS).
“Consumers’ behavior has shifted as a result, in part, of certain things they’re unable to do or not do to the same degree,” Kathryn Mikells, finance chief of Diageo PLC, told the Journal. “They’re spending more money on food and beverage. They’re interested in treating themselves.”
Liquor priced at more than $40 per 750 milliliters registered 40% of the U.S. spirits industry’s growth in 2020, up sharply from 34% in 2019, according to DISCUS. The premium trend is also seen in the consumer goods industry overall, as Americans are snapping up more expensive candles, household cleaners, paper towels and spaghetti, according to IRI.
Diageo recently reported soaring sales for its U.S. spirits in the second half of last year, with higher-end brands driving those sales. For example, tequila brands Don Julio and Casamigos, which both sell for around $50 for a 750 milliliter bottle, saw North America sales bump up by 55% and 137%, respectively.
Unlike most of the world, Americans have long consumed more alcohol at home, but the pandemic accelerated that trend. Total beverage alcohol sales by volume increased 3%. Ready-to-drink cocktail sales jumped 39%, driven by at-home consumption, new products and product convenience.