Saucey, an L.A.-based alcohol delivery company, has raised $5.4 million in Series A funding led by Bullpen Capital, with participation from earlier and new investors, including Blumberg Capital, Structure Capital and HashtagOne.
Saucey, which has now raised $10.2 million altogether, is competing against a dizzying number of alcohol-delivery companies. In addition to direct rivals like Drizly, Thirstie, and Swill, delivery companies like Postmates and Instacart are increasingly focusing on new categories, including alcohol delivery. Amazon is also beginning to offer beer and wine delivery in a growing number of cities.
Some CEOs might find the landscape daunting. In a chat with TechCrunch yesterday, Saucey CEO Chris Vaughn didn’t seem deterred by his company’s many challengers, partly because the market opportunity these companies are chasing is humongous, and partly because he thinks Saucey can become the favorite of regulators in the states where it operates.
We chatted with Vaughn yesterday about the company. Our conversation has been edited for length.
TC: You were working for a series of startups in L.A.; what motivated you to leave and start Saucey?
CV: I guess I caught the tech bug in college, so after school, I wound up going to work for a couple of startups, including a company called textPlus, where I met and became super good friends with my Saucey cofounders.
As for the idea, my girlfriend at the time — now my wife — is an operating room nurse, and she’d come home and want something to drink. We’d be halfway through dinner and she ask, “Can you get some wine?” I found I was always running out to get this stuff, and that maybe 80 percent of the time, it was last minute, on impulse. I talked about that with Dan [Leeb, now Saucey’s chief product officer] and Andrew [Zeck, its CTO], and they were like, yes, let’s do it.
TC: Were liquor stores easy to convince?
CV: It was fall of 2013 when we got started, and we met with at least 40 to 50 liquor retailers who said no. Finally, a guy in his early 30s who’d inherited his dad’s West Hollywood store said within a minute, “Yeah, that’s awesome.” So we [started working with him]. He was doing about $300,000 a year in sales, and in that first year, we brought him an additional $600,000 in sales.
We were working night and weekends and eventually made the move and left textPlus. We were doing all the deliveries ourselves. Sometimes, there would be a spike in demand and we’d only realize afterward that, oh, “The Bachelor” season had started.
TC: How many employees do you have today?
CV: We have 25 full-time employees and work with 2,300 couriers.
TC: Are these Uber and Lyft drivers and people who drive for other services?
CV: Most have a professional courier background or drive for Postmates or Instacart and are used to interacting with customers and navigating around cities. We spend a lot of time optimizing our courier routes, so the average courier [delivers] substantially more orders than with these other services. When they’re going to the [liquor] store, the chances are they aren’t picking up one order but three or four, so they can be efficient with their time.
TC: How are drivers paid?
CV: On a per order basis; it’s a flat fee per order, plus a percentage based on how big the cart is. If they’re delivering a big order, they’ll get 50 cents for every additional item in the cart.
If we open a new territory or new zone, couriers are still paid per order, but we’ll guarantee an hourly minimum to ensure we have coverage no matter what.
TC: Do you insure them?
CV: They bring their own insurance. We also do background checks on everybody.
TC: What about your customers? How do you make certain they’re of legal drinking age?
CV: We require an ID to be checked and scanned on every single order. It doesn’t matter if you’re a super loyal customer of ours or you’re 100 years old. When you check out, you have to provide ID on delivery. And you have to be the person who placed the order. If someone’s wife answers the door and says her husband [who ordered from Saucey] will be back shortly, we don’t deliver.
TC: Do underage people try to game the system? And what happens with product you can’t or won’t deliver?
CV: Not many people try to game the system. We’ve never advertised to colleges or college campuses. Some [of our rivals that] operate on the East Coast tried to fuel that early growth by hitting fraternities, sororities, football games. We weren’t going to do that.
If you do order and you don’t have an ID or passport, you’re charged a service fee of $5.50 and we return the [alcohol] to the store.
TC: You say Saucey has positive unit economics — by marking up products? Through delivery fees? Both?
CV: We have no order minimum and no delivery fee. What we do to get there is by poring over pricing for tons of retailers in the area and working with them on education. We’ll tell them, “Your Tito’s Vodka is priced right, but this other product is priced astronomically.” Because we charge them a fee based on the order volume we send them, they might fold that into the price on Saucey but it works out to around the same price as [if you were to shop at the store yourself]. We work with BevMo and other [bigger] retailers, so pricing is cheaper than at the corner liquor store.
TC: Saucey is available in several California cities and Chicago. What’s next?
CV: California is the biggest market by far, accounting for 25 percent of retail consumption, which doesn’t include on-premise consumption, like at restaurants. L.A. alone sees upwards of $5 billion a year in sales, and the broader U.S. industry sees $113 billion in retail sales a year.
We’ll move into Texas and Florida in the future; they also feature big markets. The longer term vision is to provide customers with everything you’d expect to find if you were going to the store yourself: mixers, snacks, cocktail packages, cheeses.
TC: Will you get into food delivery?
CV: I don’t think we’ll expand that into food. Delivering food is extremely difficult. All the companies that deliver food are losing tons of money.
I think alcohol is a different shopping experience for people. A BevMo attached to a Whole Foods does well. Why? Because people think of alcohol separately. You might get a bottle of wine at Whole Foods, but you’ll shop separately for more. In fact, more than 80 percent of wine is consumed within just a few hours of being purchased. It’s a prime category that you’ll see catch up to other kinds of online sales in coming years.