Liquor Distributors Double Down On Drizly

The Wine & Spirits Wholesalers of America – the trade association representing the largest liquor distributors in the United States – has acquired a minority stake in Drizly Inc. The investment comes as real-world liquor merchants are turning to the tech company – which has been delivering booze to smartphone wielding consumers since 2012 – to better leverage eCommerce in the alcohol industry.

It is not yet known how much the 72-year old organization invested in the Boston-based startup – except that it was sufficient enough to earn the association a seat on Drizly’s five-member board of directors, reported The Wall Street Journal. Drizly has indicated with the new investment that it will now seek to up its national presence this year by expanding advertising from 12 cities to 18 and by expanding into 30 cities nationwide. The firm is aiming at $100 million in sales by year’s end, WSJ said.

Drizly’s app connects consumers to alcohol merchants that handle alcohol sales and deliver orders. The retailers pay Drizly a monthly fee.

The investment comes as Drizly faces potential direct competition from Amazon on the horizon, as the eCommerce power player is moving to expand its grocery delivery service in the Seattle area to include wine and beer. Last month, WSJ reported, Amazon officially submitted three applications for liquor licensing in the Seattle area, according to the Washington State Liquor Control Board.

Danny Wirtz, president of Wirtz Beverage Group (a member of the wholesale consortium that just bought in), the nation’s sixth largest distributor by sales, noted that Drizly offers a “great solution to retailers, to buyers and to users to get product responsibly to consumers” on demand.

Apart from allowing alcohol merchants to ride the wave of the sharing economy, the Drizly investment is also about protecting wholesalers’ position in the alcoholic beverages industry from disruption-oriented firms like Amazon. Wholesalers sell to retailers, who in turn sell to consumers. Theoretically, this prevents suppliers from “owning” retailers and protects consumers on variety and pricing – two things that were an issue pre-Prohibition.

Wine & Spirits Wholesalers’ President Craig Wolf noted alcohol’s status as a “socially sensitive product” that “needs to be properly regulated and controlled,” as the three-tier system currently does. He further noted Drizly’s “business model to be three-tier compliant and not disruptive but complementary.”