Alcohol Delivery: Disruptive Threat or Moneymaking Opportunity?

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What’s likely this industry’s biggest disruptor is now enjoying explosive growth. On-demand delivery is no longer a trend, it’s shaping into an industry standard.

Donna Hood Crecca dove deep into Technomic delivery data during the 2019 National Restaurant Association show in Chicago.

If the top 5 on-demand delivery services—Caviar, DoorDash, Postmates, Uber Eats and Grubhub—were combined they would be ranked among the top 10 restaurant chains. Delivery has seen 55 percent sales growth year to date.

That growth indicates a few things: delivery isn’t going anywhere; more consumers are going to expect more restaurants and bars to offer the convenience of on-demand delivery; operators who refuse to offer delivery may face extinction.

It used to be that delivery dominated just the quickservice restaurant space, according to Crecca. But now, the meals being ordered and delivered are much different: salads, entrees and desserts are more common. In fact, Crecca shared that dinner is the primary ordering daypart currently.

As for the primary opportunity identified by Crecca and Technomic, it’s beverage. One of the most profitable categories for restaurants is still mostly missing from on-demand delivery. As operators know, adult beverages are a key component of the guest experience.

The major challenge when it comes to the beverage alcohol opportunity is regulation. Alcohol delivery is highly regulated, impacting the ability for operators and services to scale that valuable element. There are, of course, chains that are experimenting with this segment of delivery; Buffalo Wild Wings, Fridays and BJ’s are dabbling with it.

The chain that’s leading the charge with alcohol delivery is Pizza Hut. They’re attempting to prove to lawmakers and the public that alcohol delivery can be executed responsibly by emphasizing alcohol handling, I.D. checking, and other forms of relevant training.

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Speaking of the public, consumers are playing a large part in alcohol delivery in some markets. According to Crecca, they’re the part of the delivery equation forcing regulatory changes. This is good news for operators who want to stay relevant with, profit from, and scale alcohol delivery.

Unsurprisingly, it’s the younger consumers that are driving demand for alcohol delivery. Crecca revealed that 81 percent of 21- to 34-year-old consumers order food delivery at least once per month. Almost half purchase alcohol for delivery most (if not every) time they order food.

For now, these consumers are engaging with just about every delivery service model:

  • 32 percent order from third-party delivery services like Drizly
  • 30 percent order from third-party services like Instacart
  • 29 percent order from restaurant delivery services like Uber Eats
  • 25 percent answered that they order from “other” services that offer alcohol delivery

The majority—61 percent—say that the delivery fee is worth the convenience of delivery.

As would be expected, the occasions for which consumers are ordering alcohol for delivery vary by age group. When those aged 21 to 34 order alcohol it’s mostly to accompany a weekend meal (30 percent), for an informal get-together (25 percent), or for a planned part or special event (25 percent). Those aged 35 and older order mostly for informal get-togethers (32 percent) and for planned parties and special events (32 percent). Both groups order alcohol for delivery with weekday meals the least: 21-34 coming in at 21 percent, 35-plus at 15 percent.

How consumers indicated they could be persuaded to order alcohol with their food orders was quite revealing. These are the top 10 answers gathered by Technomic:

  1. Discounted or bundled with food.
  2. Access to a variety of beverage alcohol drinks and types.
  3. Offering their preferred brand.
  4. Being able to order the unique and signature beverages available only at a specific venue.
  5. A variety of brands.
  6. A consumer’s preferred restaurant offering alcohol delivery.
  7. Using packaging that maintains a beverages ideal temperature.
  8. Multi-serving and shareable options.
  9. Mixer kits that allow consumers to create cocktails using the spirits they have at their homes.
  10. Resealable packaging.

Overall, 65 percent of consumers say they’d order more often from a restaurant if adult beverages and food could be ordered together. Along that line, 67 percent prefer to order from a single delivery service provider. In other words, most consumers don’t find it convenient to have to place one order through Postmates and one through Drizly, for example.

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Beyond regulation, a big challenge requires operators to consider how they can extend the guest experience from their restaurant or bar to a guest’s home. Number 9 in the list above was identified by Crecca as one of the best solutions. Not every market in the United States permits operators to sell alcohol to consumers for delivery but a kit that has everything (including easy-to-follow build instructions) but the spirits allows signature cocktails to be replicated at home.

Alcohol delivery and the disruption that comes along with it can be viewed one of two ways: as a negative or a positive. On the negative side, these disruptors are encouraging some people to stay home and order food and alcohol at their convenience. The main plus side to the negative of decreased visitor traffic is the conversion to delivery traffic for businesses able to offer their food and beverage alcohol.

The positive side of the delivery disruption is overall guest engagement. Delivery offers operators the opportunity to be top of mind with consumers for in-person visits and delivery. Technomic predicts that delivery will likely continue to grow, and their data shows that consumers want to be able to order food and alcohol from their preferred restaurants and bars.

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Savvy operators looking to enter this space can do a few things to start things off on the right foot. First, they must do their due diligence and research regulations. Crecca also suggests that operators should monitor the demand for alcohol delivery in their respective markets. Also, before a business owner chooses a delivery partner, they’d be wise to research what’s required of them to operate legally and ensure they’re in compliance. Operators would do well to run reports to identify their top sellers, find out what’s unique to their concepts, and come up with ways to deliver those top items in a manner that ensures quality and consistency. Finally, this is all for nothing if consumers don’t know an operation offers delivery, so marketing and partnerships (distributors are an excellent partner for alcohol delivery) should be leveraged to their fullest.

“Disruption” is often perceived as a “bad” word in business, but the savviest among us know it’s an opportunity to make more money.

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