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‘Tequila is the big winner right now,’ Drizly CEO says

Drizly CEO Cory Rellas joins Yahoo Finance Live to discuss company growth, consumer spending on alcohol, and beverage trends like canned cocktails.

Video transcript


- Welcome back to Yahoo Finance Live. Well, here's a question for you. Can the can maintain its relevance?

Consumers this year favoring pre-mixed canned cocktails when drinking at home. This as some newer generations considered sober curious options.

A look at the business of food delivery. We've got Drizly CEO Cory Rellas as well as our very own Brooke DiPalma joining in on the conversation.

Cory, I want to start big picture before we get into the canned drinks, though, because you are one of those businesses that saw huge gains during the pandemic. How much of that demand have you seen pull back since?

CORY RELLAS: Well, it's actually been probably the most beneficial category from an awareness perspective, pre-COVID relative to post-COVID, in terms of can I get alcohol online? Can I purchase anything online?

So we haven't seen the pullback that we might have expected even as consumers are going on premise, wanting to travel, wanting to get out there. I think we've seen gains that have really solidified based on that awareness of being able to purchase legally online.

BROOKE DIPALMA: And Cory, lots of delivery services are getting pressure over delivery fees from consumers. I know that Drizly has a $5 fee in most markets.

But what exactly are you hearing from consumers about that fee? And do you have intentions to raise that fee?

CORY RELLAS: No intentions to raise that fee. Actually, the fee is set by the retailers themselves. So this is an open marketplace. The retailers can decide how they want to participate in it.

And it's actually highly variable, depending on how far they're going, what they're selling, who they're selling to.

So in fact, we actually see that fee declining over time, especially as inflation and some of the just overall price pressure takes hold. We're trying to find different ways to lower the overall cost of e-commerce for consumers.

- So Corey, let's talk about what you are seeing in terms of what consumers are ordering. I'm personally curious about the nonalcoholic because I'm not an alcoholic drinker.

But we teased the canned mixed cocktails. So let's start there. How big of a demand on that front?

CORY RELLAS: Well, this has been a huge change. And I think one thing that's really fun about the alcohol space right now is the pace of innovation.

Canned cocktails were not a thing four or five years ago. And actually, consumers saw hard seltzer, which is usually malt beverage, relative to cocktail base cans as sort of the same category.

That has now been able to be split apart through education and merchandising. So that is growing significantly.

It started on the beer side. Now, it's moving to spirits and wine. This is one of the fastest growing segments for alcohol, overall.

And it's gone from effectively 0% market share to over 3% market share on Drizly, just in the last 18 months.

BROOKE DIPALMA: And earlier this year, we heard from Pernod Ricard executive that at-home cocktails were stirring up a resurgence here, that we're seeing a lot more people making drinks at home.

Of course, earlier this year, the Espresso Martini getting lots of attention there. Where exactly are you seeing customers flock to right now? Are they still making those drinks at home?

CORY RELLAS: Well, you reset this whole thing with COVID. As more and more people started to embrace cocktail culture, wanting to try new things at home when you didn't have access to the bar and to the bar scene, all of a sudden, you started to see people trying new things.

It's extended now into the ready-to-drink cocktails. I think tequila is the big winner here and the type of alcohol people are drinking at home.

So it's slowed a little bit relative to the last two years. But overall, I think we reset the ability for consumers to basically try to make cocktails at home, relative to, previously, they would just go to the bar for that moment or that experience.

- And Cory, we were showing the numbers earlier in terms of who's really interested in these non-alcoholic drinks. We were talking about this earlier this morning.

I know, a younger demographic. I'm certainly not Gen Z. I haven't been drinking. As a platform that started with alcoholic drinks, how do you cash in on that trend?

CORY RELLAS: Well, I actually think it very much fits our mission. And we want to be there for the moments that matter, the people who create them. That is a lot of times right now with non-alcoholic drinks.

It started, again, more so on the beer side. And now, it's moving towards wine and spirits as well. And I think there's great options. I think there's a lot of great innovation going here.

You're talking about 25% of millennials, and nearly a 40% of Gen Z, who are substituting some sort of non-alcoholic drink into those occasions.

And it's really, actually, quite something to see how seamlessly it's done and how it isn't taking away from what was previously a very alcohol forward moment.

So a lot more innovation here. I don't see this one slowing down for a long time.

BROOKE DIPALMA: And one category I want to dive into quickly is hard seltzers. Last year, we saw Boston Beer Company throw away millions of cases of their Truly Hard Seltzers.

Gen-z certainly getting influenced by other categories out there. So what exactly are some name brands that Drizly customers are flocking to here?

CORY RELLAS: Well, I think you're still seeing the big brands, obviously. Boston Beer, making one of the top three there.

But this is a little bit of a tough story not because the deceleration has happened most recently, but this is again a category that went from 0 to over 3.5, nearly 4, percent of Drizly and then also on-premise sales over the last two and a half years.

It's just slowed down in the last 18 months. So I think it's created a new category. I don't think it's decelerating or actually decreasing as a total amount.

But there is a little bit of a shift, more from the hard seltzer to the ready-to-drink cocktails as consumers appreciate the difference between the two.

So I think it's still a big category. The second derivative growth rate has definitely slowed down on it.

- Yeah. Well, alcohol or no alcohol, it all adds up to a healthy revenue for your company. Drizly CEO Cory Rellas. Always good to have you on the show. And our thanks to Brooke DiPalma as well.