Need Liquor Delivered Now? The Startup World's Got You Covered

Alcohol delivery startups grow by playing nice with the industry

Courtesy Drizly

Nick Rellas recalls sending a text around 3 a.m. on March 4, 2012. Like lots of college guys, the Boston College senior was thinking about beer. “Why can’t you get alcohol delivered like you can an Uber car?” he texted a friend, who replied, “Because it’s illegal.” That exchange prompted Rellas’s first all-nighter with Massachusetts’ liquor laws.

Rellas, 24, is co-founder and chief executive officer of Drizly, a year-old startup with an app and a website that let people order quick deliveries of beer, wine, and liquor on their phones. The U.S. alcohol industry, tightly controlled since the end of Prohibition by a tiered system of producers, distributors, and retailers, has largely kept e-commerce companies out of the business. Boston-based Drizly is one of a handful of startups trying not to replace that system, but to graft themselves onto it.

“We don’t use the word ‘disruption,’ ” says Rellas, who’s been hobbling between Chicago, New York, and other Drizly markets on a partially torn Achilles tendon. “You don’t disrupt a $200 billion industry owned by 20 families. We want to help all the existing participants make more money.”

Home alcohol delivery is legal in many states but not widespread, partly because of the legal consequences for stores caught selling to underage drinkers. Unlike upstarts that mostly ignore laws governing entrenched rivals, Drizly has gone hat in hand to state regulators. “It’s important for us to say, ‘Here’s who we are, here’s what we do,’ ” Rellas says. “We can’t shoot first and ask questions later, like a usual startup.” He’s operating with official blessings in five cities and the District of Columbia, with plans to start in at least six more by yearend.

While the typical startup founder rhapsodizes about algorithms, Rellas calls Drizly “just a fax machine.” Download the app or go to the website, fill your digital cart, and check out with PayPal or a scanned credit card. Drizly routes the order to a retail partner able to deliver in 20 to 40 minutes. Each of those 100-odd stores has at least one Drizly-issued iPhone with the company’s proprietary scanning app that can verify IDs.

Beverage selection varies by retailer. Rellas says Drizly prices are identical to those in stores. Some shops add delivery fees. Denver superstore Argonaut Wine & Liquor has long offered delivery but signed up with Drizly to reach younger customers, says co-owner Ron Vaughn. “It’s been successful for us so far,” he says, declining to elaborate.

Drizly makes its money from monthly fees it charges retailers, ranging from a few hundred dollars to several thousand depending on the market. Drizly doesn’t need liquor licenses, because it doesn’t touch alcohol sales directly.

Fledgling competitors such as Minibar, Thirstie, DrinkFly, and Saucey say early results are promising. Minibar co-founder Lara Crystal says the 30 New York City stores that work with her company have increased sales by as much as 25 percent. The services aren’t shy about pitching themselves as the future. Rellas describes Drizly as a “lifestyle choice” like Uber and grocery delivery startup Instacart. “What you drink, where you drink, who you drink with says as much about you as what you wear,” he says, adding, “It’s not uncommon to see a $2,000 corporate order” for an office party. He drinks Coors Light.

Michael Binstein says he’s worried that the quick-delivery model could encourage excessive drinking. His 31 Binny’s Beverage Depot stores in Illinois offer same-day delivery but not within the hour. “At midnight, why does someone need a half-gallon of vodka delivered to their door in 30 minutes?” he says. “We aren’t in the nanny business, but we have ethical and regulatory obligations not to serve intoxicated customers.”

It’s too early to say which service, if any, might emerge nationally. Since starting in February, Minibar has expanded quickly in New York, while Saucey claims Los Angeles. Drizly appears to be leading in capital, with $4.8 million from angel investors and investment firms. Among its expenses: retainers for more than 10 law firms.

When Rellas was 14, his money manager mom and doctor dad made him learn to trade stocks. “A dinner conversation for us was the 10-year yield,” he says. At Boston College, he double-majored in finance and corporate reporting.

After Rellas’s late-night text exchange in 2012, he and two schoolmates worked with a forensic ID firm to develop Drizly’s verification app. Drizly offered it to law enforcement agencies so the company could tell liquor stores, “We’ve got the same system as the people looking to sting you,” he says. Rellas and co-founder Justin Robinson rented a small office, where they scrawled ideas on the walls. “You know how many coats it takes to paint over black Sharpie?” Rellas says. “Six.”

Last year he had breakfast with Paul Purcell, a partner in Chicago investment firm Continental Advisors and an early investor in mobile payment service LevelUp. Rellas was barely seated when Purcell said he didn’t intend to invest in an alcohol deliverer run by a virgin CEO barely old enough to drink legally. “I wasn’t nice,” Purcell recalls.

In May, a separate Continental fund led a $2.5 million investment round, and Purcell joined Drizly’s board, impressed by Rellas after all. “He’s disciplined, and he listens,” Purcell says, adding the real money is in the data on drinking habits that networks like Drizly’s are building.

A big question is what’s to stop e-commerce giants from wiping Drizly and its young rivals off the map. “Amazon keeps me up at night,” Rellas says. The upstarts’ advantage may lie in having cozied up to the U.S. booze establishment. Amazon.com isn’t known for playing well with others.

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