Gopuff and the Future of Retail Liquor
Had you asked me what “Gopuff” was before Monday, I would have guessed it was the battle cry of the 4-20 crowd. “Go puff, dude!”. (I offer my sincerest apologies to you, the reader, for that truly horrible joke.) Since the announcement that Gopuff was buying Kentucky-based Liquor Barn/Party Mart, I’ve learned more of what the company really is. And despite the silly-sounding name, Gopuff is a rapidly-growing force in America’s retail landscape.
Gopuff is consumer goods and food rapid delivery service handling primarily convenience store or “instant need” items: snacks, home essentials and…alcohol. You place your order on an app and within 30 minutes it is delivered to your door for a $1.95 fee. Gopuff operates in 650 cities and has recently gone international by acquiring a company in the U.K. Founded in Philadelphia in 2013, Gopuff has grown at a remarkable rate through aggressive expansions and acquisitions. The most recent acquisition by Gopuff was Monday’s purchase of Liquor Barn from Blue Equity, a Louisville private equity group. Liquor Barn, now operating 23 stores in Kentucky, was purchased by Blue Equity in 2017 for $26 million. The sale price paid by Gopuff to Blue was not disclosed.
The Liquor Barn deal is the second acquisition of a liquor retailer made by Gopuff in the last few months. In December 2020 Gopuff purchased BevMo! and it’s 161 liquor stores for $350 million. BevMo! operates in three states: California, Arizona and Washington.
The government lockdowns in response to COVID-19 revealed that there could be a demand for alcohol delivery and Gopuff is betting that demand is here to stay. The 161 stores from BevMo! and the 23 from Liquor Barn also provides Gopuff with fulfillment centers for their main-line delivery business. These dual-purpose locations are called “omni stores”.
The acquisitions also bought Gopuff immediate expertise in the retail alcohol industry. The company is looking to create a Liquor Acquisitions Department as they are advertising open positions for a departmental manager, an analyst and other support positions. Given Gopuff’s aggressive acquisition nature and the investment they are making in their own liquor acquisition infrastructure, I would expect many more purchases of alcohol retailers by Gopuff in the coming months.
So, what does this mean for liquor retailers? Historically, the retail liquor business has been a heavily segmented market. There were no dominant players. The trend for liquor – like most everything else – has been towards mega stores and, more recently, on-line sales. Gigantic retailers like Wal-Mart and Costco are becoming more and more active in alcohol sales as are many large, national grocery chains. Amazon obtained hundreds of liquor licenses with its purchase of Whole Foods and they are also applying for licenses for their Amazon Go stores. Then there is the largest independent alcohol retailer, Total Wine & More. Total Wine has tripled their locations since 2010 and seems to be a force in each market they enter.
Add Gopuff to this mix and we are seeing what appears to be an increased concentration of market share to a handful of retailers. Control of market share translates to buying power. In the whiskey world that means not only better pricing for the big guys, but it also means greater access to allocated product and private barrel picks. In other words, this will likely be a further squeezing-out of the local liquor store by the big brand distilleries.
And what does this mean for the whiskey consumer? It’s time to support the local liquor store like never before. I don’t mean the local store that keeps a bottle of Blanton’s locked in a cabinet for $250 or a shelf of Weller Special Reserve for $100 a pop.
What I do mean is the local store that is truly owned by small business entrepreneurs. That has a staff that actually knows Bourbon. That cares about the community. That gets to know its customers. That speaks to you when you walk in the door and gladly (and accurately) answers your questions. These stores are a vital part of each local whiskey community and they need to survive and thrive despite a playing field that is increasingly being tilted against them. This can only happen for the local liquor store with your support.
