IMPLICATIONS OF THE UBER/DRIZLY DEAL

The recent announcement about UBER acquiring Drizly for stock and cash caught my attention the other day. Admittedly, before I saw this press release, I had not paid much attention to Drizly or their service in the alcoholic beverage space.

However, I became curious when a friend and industry veteran called me asking for my opinion on the deal. I was caught a bit flat-footed and said I would investigate and get back to him.

Upon doing some quick research, I was surprised by what I found, which led me to dig deeper into Drizly as a company and the money behind it. Lo and behold, the wine & Spirits Wholesalers Association of America showed up. I discovered they had entered into an agreement described as an Alliance with Drizly sometime shortly before the announcement of a Series “A” funding totaling $13M lead by a private equity group in the spring of 2015. As part of the Alliance, WSWA gained a minority interest in the company. It must have been some minority interest as
they secured a seat on the Board of Drizly as part of the Alliance. I do not know about you, but that got me thinking, what is their end game?

One can only speculate. Knowing the positions on issues affecting the Wine
Industry and the Alcoholic business in general that WSWA has in the past taken, I am sure it is not to the advantage of the small wine producers and ultimately the consumer.

What do I mean by that? Let me explain. While it is illegal for a winery or
wholesaler to give something of value to a retailer or restauranteur in return for favorable placement or sale of their wine, Drizly is not the alcoholic beverage license holder in this situation. Technically, they do not legally take possession of alcoholic beverages; therefore, they are considered a marketplace. If my understanding of the law for alcoholic beverages is accurate; (I am not an attorney: this is just my opinion of what I have read), it is possible that Drizly can be paid a fee to place a particular wine or other alcoholic beverage at the front of their website. So, when the consumer uses the Drizly app to search and buy an alcoholic beverage for delivery to their home, they will see the preferred brand in each category first. In essence, it is like what grocery stores get from their preferred
suppliers; a hidden cost called a slotting fee—something illegal in the Alcoholic Industry. If my interpretation of the law is accurate think about the implications of this.

Speaking about the WSWA. I noticed last week, Wine and Spirits Wholesalers of America (WSWA) joined American Beverage Licensees (ABL), American Distilled Spirits Alliance (ADSA), and National Beer Wholesalers Association (NBWA), in sending a letter to members of Congress in opposition to the proposed legislation that would allow the USPS to ship beverage alcohol.

Their letter used the same old Canard stating this could lead to unreported sales and excise taxes by out-of-state retailers and other sellers who might forego or neglect to remit taxes, thereby creating holes in state and local government budgets that would go unfilled. To that, I say, REALLY! Such nonsense and gibberish. I would think they could be more creative in their lobbying efforts than continuously setting up a straw man argument. Whether it is a good or bad idea to let USPS compete with UPS and FED EX for this business is an argument you could have, but this is yet another way for these Monopolistic organizations to try and prevent any activity that somehow, they believe is going to cut into their revenue or most likely their power.

There has been tremendous progress during the past 15 years in consumer access to wine throughout this country. However, behind the scenes, the forces against this continue to chip away at that progress. We cannot go to sleep on this Folks.

If I have said it once, I have said it many times—pay attention to what WSWA does, not what they say.

Fred Reno is an author and wine industry executive with over 40 years’ experience in building wine brands and providing forward-looking strategic advice for wine producers both in the U.S. and Internationally. You can reach him at fredr@finewineconfidential.com or find him at http://www.thomasjeffersonwine.com/ & http://www.finewineconfidential.com/

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2 Comments

  1. Dan Reno on February 22, 2021 at 8:34 pm

    All the things you tried to do . This issue of independence for the consumer never seems to be resolved

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