You might think that the head of a major wine delivery service would be worried about the prospect of Uber’s $1.1 billion acquisition of 60-minute alcohol ordering platform Drizly, but for Drinks.com Co-Founder and CEO Zac Brandenberg that’s not the case.
In fact, he sees the tie-up as huge news for a budding industry that grew 80 percent during the pandemic, and as a validation that there’s a massive unmet opportunity.
“Conveniently for us, we don’t compete with Uber,” Brandenberg said in a recent telephone interview from his office in Los Angeles. “The Uber-Drizly competition is going to be DoorDash, goPuff and Instacart,” he said, noting the last-minute impulse market is aimed at an entirely different consumer.
“That’s the customer that is traditionally shopping in a retail store. Like if Uber wasn’t there, or Drizly wasn’t there, I would be walking down the street to my local liquor store or I’d be getting in my car and driving over to a [local store] to buy that product. It’s a different type of customer and a different way of buying products.”
Complementary But Complicated
“I want to shop in different ways depending on what I want, since I don’t always need something in an hour,” he said. When you add in the additional cost of delivery service fees and gratuities, as well as the binding social contract that mandates you be home to accept your order, Brandenberg said the market for this type of service has limitations.
That’s not to say he’s skeptical of omnichannel retailing, because he’s not. He just sees the three main avenues of purchasing alcohol as complementary, and accretive, rather than a buying shift that will lead to cannibalization.
So whether consumers want to buy in-store, online, have it delivered in an hour or handpick specialty items that are shipped to their home in a one or two days, the key driver is providing consumers with more choices and meeting them where they want to buy.
“You would hope that by offering more mediums for consumers to purchase, and more forms of engagement, that their aggregate purchasing volume is going to grow,” he said.
That said, alcohol sales face a complex regulatory matrix that differs from state to state (and in some cases by city, too) as well as separate rules for off-premises retail sales as well as laws that restrict what can and cannot be delivered in certain states.
“You have existing hurdles that have proven to be difficult to navigate for years on what can be sold, when and to who,” he said, pointing to the differing “chain of custody” laws that exist in the states.
“Even now you have states where Uber and DoorDash cannot deliver alcohol from a store, but you can do ship-to-home in those states, or still purchase it in the physical retail [location].”
Innovation Versus 80 Years Of Protectionism
“Folks in the [alcohol] industry are leaning on 80 years of protectionism,” Brandenberg said, adding that he expects to see a lot of movement within all channels of the beverage alcohol industry again this year.
“We estimate that by 2025, 20 percent of the industry is going to be ship-to-home, and that’s up from a really small percentage today,” he said.
As much as last year saw a general movement to be more digitally enabled, Brandenberg said the evolution of the high-margin, high-volume alcohol industry is showing no signs of slowing down, mainly because consumers want it.
“If I were to go to Costco.com right now, I could click on pretty much anything and have it at my door in two days, but I can’t get a case of wine,” he said. “That’s ridiculous as that’s going to be something that’s completely expected by consumers, it just hasn’t been powered and enabled yet.”
At the same time, he said, large retailers will continue to push states to modify their rules and regulations.
“I can’t believe that a Costco or Trader Joe’s is going to sit back forever and have this huge beverage alcohol business in their physical locations and not look to meet the needs of customers who don’t want to walk into a store anymore,” he said.
