116 3rd St SE
Cedar Rapids, Iowa 52401
A new type of delivery service is making spirits bright just in time for the holiday season.
Following the Iowa Legislature’s passage of House File 766, which took effect July 1, several apps this month have started to offer delivery of alcohol through various retail outlets in Iowa. Nonetheless, despite the new freedoms realized as the state loosened regulations during the pandemic, restaurants still are hesitant to pursue third-party delivery of alcoholic beverages.
Entering new territory
With substantial demand seen with the services available so far, Iowa is in uncharted territory.
“The reality is that alcohol delivery still is relatively new,” said Blaine Grinna, director of retail partnerships at Drizly, an Uber-owned alcohol delivery app that’s been serving other states for nearly nine years. “It still doesn’t have the awareness food and grocery (delivery) have, but it is growing rapidly. Within new states with recent legislation, there’s a level of excitement that exists.”
Drizly, one of a few apps that recently started serving the Corridor, is now serving 18 cities in Iowa, in addition to serving cities in 30 other states. Recent expansion is thanks to temporary regulatory changes made last year in many states in the midst of the pandemic. Those changes to support restaurants and businesses eventually led to the legalization of third-party delivery of alcohol.
“We’ve been very encouraged by what we’ve seen in the last 12 to 18 months in awareness and adoption,” said Grinna. “The pandemic forced the conversation to happen faster than some states had anticipated.”
Drizly, based in Boston, is focused exclusively on alcohol deliveries, as well as drinking accessories like cups, ice and mixers. The app, which touts itself as the largest alcohol e-commerce and on-demand delivery platform, soon anticipates expanding to Waterloo and Cedar Falls.
Drizly’s services in Cedar Rapids, Coralville and Iowa City are mostly available through Kum & Go locations. Kum & Go, which offers its delivery services in Iowa exclusively through the app, started delivering alcohol Oct. 27.
“Third-party alcohol delivery has given us the opportunity to take convenience to the next level for our current customers, and also reach customers that have not shopped in our stores yet,” said Christian Rogers, alcohol department manager for Kum & Go. “We view this as incremental to the business we currently do inside our stores.”
Other delivery services that already had a presence in Iowa, like Instacart, are now expanding to allow alcohol deliveries with other orders, such as groceries and convenience store items.
Instacart now offers same-day alcohol delivery through Costco and Aldi across the state, joining 300 other retailers in the United States offering alcohol delivery through the service. David Healy, a retail partnerships representative for the company, said same-day delivery and pickup has “become essential for consumers across the U.S.” With its expansion to Iowa, its alcohol service now reaches 85 million American households in 26 states, he said.
"The addition of alcohol to our marketplace in Iowa not only provides convenience for customers, but also helps lift our brick-and-mortar retail partners who see a 25 percent increase in customer basket size when they add alcohol to their e-commerce offering,“ he said.
Others less spirited
Passage of the new delivery law was driven by the grocery industry — not the restaurant industry, according to Jessica Dunker, president and chief executive officer of the Iowa Restaurant Association. When it went into effect in July, the new law was “a mixed bag” for restaurants.
After already rocky relationships with other third-party delivery services for food, restaurants remain lukewarm, at best, to the idea of services delivering cocktails for them, too — despite the profitability of cocktails themselves.
“This was not something that restaurants asked for. This was not a compelling, winning business model for the restaurant industry,” Dunker said. “It was, however, for the grocery industry, because they were being overwhelmed.”
For restaurants, there are stricter liability standards for serving alcohol than retail stores that sell liquor but technically don’t serve it. Dunker said restaurants would like to see strict rules with the onus falling on restaurants to be loosened slightly, especially with the advent of alcohol through formats not available in the past.
“Cocktails-to-go was a place our state chose to lead. Third-party delivery of alcohol is not a place our state wants to jump out ahead of everybody else,” she said. “We simply cannot risk not having every safety measure in place. We’re going to watch this one shake its way out a little bit.”
Alcoholic beverages are almost always the most profitable item for restaurants — one reason she said the industry is determined to find a winning formula. The point at which restaurant liability ends and third-party liability begins in delivery in something Dunker would like to see clarified.
Some other delivery services remain reluctant to offer alcohol delivery. Chomp, a local delivery service, has declined to add booze to the menu.
Though there are technical barriers to implementing age verification in the ordering system, the primary barrier is the age of the drivers, according to Adam Weeks, co-founder and managing member of Chomp. About a third of the company’s 120 drivers are under 21.
The ordering experience
For apps like Drizly, the logistics of ordering booze to your door has been tailored from start to finish.
Starting with your smartphone, customers can see what’s available at their local store in real time, down to the number of bottles left on the shelf. Drizly sells only from merchants who partner with the app, meaning stores will not have their alcohol sold through a delivery driver without their knowledge.
When a customer completes the order, an automated call goes to an associate at the Kum & Go, for example, advising to check the computer system and ready the order for a delivery driver. All order information goes directly to the merchant, allowing it to see who’s buying.
When an order is delivered, the driver scans the recipient’s photo ID using a smartphone camera. There, the app on the phone verifies age and identity using the bar code on the back of the ID.
Retailers fulfilling orders have the option of using third-party delivery drivers — orders in the Corridor are being filled by drivers at services like Uber Eats — or supply their own delivery drivers. Stores are charged a licensing fee based on the percentage of sales driven to them through the service.
Consumers pay a delivery fee directly to the store, a service fee to the service and an optional tip to the delivery driver.
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