Uber Bets Big on Alcohol Deliveries
Uber (NYSE: UBER) is betting big on its delivery business. The company’s claim to fame is its ride-sharing app, but with the COVID-19 pandemic closing most businesses, meaning fewer people needing to get around, the company has been relying on its food delivery service, Uber Eats, to bring in money. Bringing food and other items to people has become a more viable source of revenue for the company, which explains why it wants to add alcohol to its delivery options.
On Tuesday, Uber announced that it would be acquiring the delivery startup Drizly for $1.1 billion in stock and cash. The deal has not yet been completed, but the plan is Drizly will be integrated into Uber’s food delivery app while also remaining a standalone app.
Drizly was founded back in 2012 and has partnered with thousands of retailers in more than 1,400 U.S. cities to sell alcohol (delivered in under an hour) through its platform.
Shares of Uber rose to 8% on Tuesday after the company announced its purchase of Drizly. Uber’s CEO, Dara Khosrowshahi, said this in a statement relating to the acquisition:
Wherever you want to go and whatever you need to get, our goal at Uber is to make people’s lives a little bit easier. That’s why we’ve been branching into new categories like groceries, prescriptions, and, now, alcohol.
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Basically, a person can get everything they would need for a night in from Uber. They can have food and drinks delivered to their door without ever leaving the house. Considering we’ve all been staying at home and trying to stay safe for nearly a year, I believe that in a post-pandemic world people will have grown accustomed to this type of night. It’s going to be very strange to ease back into the lives we knew before the coronavirus pandemic, so most of us will be still sticking to the routines we’ve developed over the past year.
Acquiring another delivery service is a no-brainer. Delivery services have seen skyrocketing demand during the pandemic. In July 2020, Uber acquired one of its smaller competitors — Postmates — for $2.65 billion in an all-stock deal. Uber has been focusing on where it sees its future. It has abandoned ambitious plans like autonomous vehicles and flying taxis. In December, the company sold both its autonomous vehicle research division and its flying taxi operations. Uber is finally focusing on what works. It’s the only way the company is going to survive — sticking to what it does best.
Uber acquiring Drizly is another step toward gaining market share within the delivery services industry. The deal is expected to close in the first half of 2021. According to Technavio, the food delivery services market is expected to grow by $215.56 billion from 2020 to 2024 — representing a CAGR of over 12%. In the second quarter of the fiscal year 2020, Uber Eats had $1.2 billion in revenue compared to $819 million in the first quarter of 2020.
Uber anticipates that more than 90% of the consideration to be paid to Drizly shareholders will consist of shares of Uber common stock and then the balance paid in cash. Uber is taking the necessary steps to become an even larger player in its industry. The company hopes that these big acquisitions will pay off in the long run — and hopefully make its shareholders happy.
Until next time,