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Why Alcohol Delivery is here to Stay and what it means for Restaurants

The coronavirus pandemic has forced the restaurant industry towards a reckoning. Over 6 million workers lost their jobs and the US economy risked losing nearly all of the industry’s billion-dollar input.

While the industry’s outlook seemed bleak at the time, lawmakers were hard at work devising a plan to keep as many restaurants afloat as possible. Their solution: declare the industry as essential and allow restaurants to sell and deliver alcohol to their customers.

The plan allowed small businesses to stay open primarily for take-out orders and has since allowed restaurants to tap into the $1.7 billion alcohol delivery market, one that has grown at an average pace of 3 percent per month, according to estimates by Pyments.

Combined, the essential service declaration and loosened restrictions on alcohol sales and delivery make up just two slices of a multidimensional pie that is sure to guide the restaurant industry into the future.

Here are just some of the reasons alcohol delivery is here to stay and what it means for restaurants in the near future.

Essential Declaration Shows Strength of the Industry

It should come as no surprise that the restaurant industry was declared an essential industry as states shut down over the coronavirus pandemic. Not only do businesses provide food to customers, but the industry itself also lives at the heart of 21st Century American life.

Think of all the ways restaurants have molded themselves into more than just eateries. Buffalo Wild Wings (BW) serves both food and an expansive sports entertainment experience. Movie Tavern exists in a similar capacity for movie buffs.

But, what Buffalo Wild Wings and Movie Tavern share in common is that alcohol sales make up a large slice of their pie. Executives from BW recently told CNBC that alcohol and beverage sales account for approximately 22 percent of the company’s annual sales. Similarly, about 50 percent of Movie Tavern’s concession sales is due to its full bar service.

However, to date, only BW has experimented with alcohol delivery. The company began looking into the business model in 2018 after Arby’s purchased the restaurant. At the time, chicken prices were weighing down BW’s sales and varying liquor laws made the move enticing.

Fast forward two years and to-go alcohol sales are a lifeline for the entire restaurant industry. Thanks in no small part to the increasing alcohol sales during the pandemic, there are signs the industry is recovering from the coronavirus slump in mid-March.

Restaurant Brands International, which owns brands such as Burger King, Popeyes, and Tim Horton’s, was recently upgraded to a 75 on Business Insider’s Relative Strength Index, which grades a stock’s performance on a 100-point scale over a one year period.

Leading the way in the stock market is Chipotle, which recently unveiled its quesadillas in an attempt to drive online business. Since mid-March, Chipotle’s stock has soared from $465 per share to well over $1000 thanks to the restaurant’s digital ordering efforts.

Meanwhile, Restaurant Business Online recently reported that restaurant sales are increasing slowly as states begin to lift coronavirus restrictions. Even so, the outlet reports the industry’s sales are down 39 percent from where they were last year.

Industry is moving toward Ecommerce

While Chipotle may seem like an outlier in the restaurant industry, it’s important to remember that the industry is moving toward an eCommerce-based model. Chipotle is simply leading the way.

Digital Commerce 360, an eCommerce research firm, released a study comparing total retail sales to eCommerce sales over the past decade. It found that eCommerce sales have steadily grown since the last big recession in 2009 while retail sales overall have remained stagnant.

ECommerce’s popularity growth is due in part to behemoths like Amazon and Shopify and their ability to deliver home goods quickly.

For restaurants, this trend is sure to stave off their customer’s desires for dine-in experiences. But, including alcohol delivery options to menus is a benefit for the industry overall.

Statista recently found that eCommerce sales will make up approximately 25 percent of all restaurant sales by 2025. Given the recent pandemic, however, it’s reasonable to assume this number will increase as restaurants turn to to-go and delivery orders to stay afloat.

Amazon recently announced its plans to expand its alcohol delivery services into India, a country 88 percent of citizens under 25-years-of-age consume beer and spirits, according to Statista. This move highlights both Amazon’s business prowess and the importance of alcohol delivery to restaurants worldwide.

India’s food and beverage industry is expected to lose over $10.5 billion by the end of the year, according to estimates by the National Restaurant Association of India.

However, two of the country’s largest alcohol delivery companies, Zomato and Swiggy, are pitching in to help restaurants stay afloat during the pandemic. India has lifted some restriction on alcohol delivery since the pandemic began. Meanwhile, the two companies have increased their restaurant portfolios in cities such as Hyderabad and West Bengal.

Third-party Delivery Services will need to Hire More Employees

Back stateside, third-party delivery services like Grubhub, Uber Eats, and Doordash have become increasingly popular for customers craving their favorite meals while under quarantine or stay-at-home orders.

While these services have the infrastructure to deliver alcohol, they are running into problems with many states that are requiring deliveries to be taken by employees of businesses who are 21 years or older. All of the aforementioned third-party services utilize 1099 contractors as their workforce. Meanwhile, states like Louisiana and Georgia allow third-party contractors to deliver alcohol but states like Colorado do not.

So, not only will alcohol delivery ultimately change the way restaurants operate in the future, but it will also change the way food delivery services operate in certain states. At least, until the regulations surrounding alcohol delivery are uniform.

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