Uber Technologies Inc.


UBER 7.09%

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.

Uber’s core ride-hailing business has been hammered by the coronavirus pandemic and delivery has become its lifeline. Last year, Uber acquired food-delivery rival Postmates Inc. 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 has turbocharged online sales of alcohol, buoying a category that has long lagged behind other consumer goods products in the U.S. and some other key markets due to strict regulations but also 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 the pandemic has created enormous awareness among Americans that they can buy booze online and that 44% who buy alcohol via e-commerce only began doing so starting last year.

The U.S. is particularly ripe for home delivery of alcohol, with most booze purchased from supermarkets and liquor stores to be drunk at home rather than in so-called on premise locations like bars and restaurants. Through the pandemic a string of states have temporarily relaxed regulation to allow bars, restaurants and craft distilleries to make alcohol available for home delivery and pickup. Such regulation makes it permissible for an Uber Eats online food order to be paired with booze, and the alcohol industry is betting the changes will stick.

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 who handle alcohol sales and deliver orders, has equipped delivery workers with iPhones carrying software that can scan an identity document and determine it is valid.

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 deal marks the largest to date in the U.S. online alcohol space, according to the Wine & Spirits Wholesalers of America, a trade association representing more than 350 distributors.

Uber’s Drizly acquisition is subject to regulatory approval and expected to close in the first half of this year.

Demand for food delivery has soared amid the pandemic, but restaurants are struggling to survive. In a fiercely competitive industry, delivery services are fighting to gain market share while facing increased pressure to lower commission fees and provide more protection to their workers. Video/Photo: Jaden Urbi/WSJ

Write to Preetika Rana at [email protected] and Saabira Chaudhuri at [email protected]

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