Softbank-backed delivery startup goPuff enters the California market with its deal to buy alcoholic beverage chain BevMo!

Softbank-backed delivery startup goPuff on Thursday said it will acquire alcoholic beverage chain BevMo! for $350 million, paving the way for the company to enter the California market.

The agreement also means goPuff, which currently provides on-demand delivery of household goods in 500 cities, will significantly expand its infrastructure with the addition of BevMo!’s 161 stores in California, Arizona, and Washington.

The announcement comes less than a month after goPuff raised $380 million in a round led by Accel and D1 Partners. Investors also included the Softbank Vision Fund and Luxor Capital, bringing the company’s valuation to $3.9 billion. GoPuff was started by co-founders Yakir Gola and Rafael Ilishayev seven years ago when they were students at Drexel University.

“Our view is, BevMo! is an amazing brand. It’s an iconic brand, great customer base, great distribution network, and we thought this is a logical move for us and a big move to bring goPuff to California,” Gola said.

The deal makes sense particularly during the pandemic, according to some industry experts. 

Nielsen data show off-premise sales of alcohol (which includes grocery and liquor stores) during the pandemic period which started in early March are up 22% compared to the same time period last year, as customers boosted alcohol purchases as they spend more time at home.

“Both in-home alcohol consumption and food and beverage delivery are up, which indicates demand,” said Darren Seifer, food industry analyst at The NPD Group. “My thinking is that the combination of the two, if executed well, is a good idea as it helps consumers recapture some of the restaurant experience they’ve been lacking.”

For BevMo!, the partnership is an opportunity to capture more of that heightened demand.

“Joining goPuff, a company that has created a truly differentiated approach and defined the instant needs category, will allow us to better meet our consumers’ evolving needs, including delivering everyday essentials directly to their doorstep,” said Josiah Knutsen, CEO of BevMo!.

GoPuff’s Gola said it’s not clear how the company will leverage BevMo!’s assets to eventually provide delivery of household items to Californians, nor would he disclose a timeline. He said, however, the company is examining how to best use the beverage retailer’s stores.

“The idea is utilizing the infrastructure, and the liquor licenses that BevMo! has built up and brand and customer base — how do we take that and use that as a platform to launch goPuff in California,” Gola said, reflecting on some of the questions the company faces as it thinks about launching in California. He said the deal with BevMo! will bring many jobs to California, but declined to say how many.

The announcement follows California’s passage of this week of Proposition 22, which dealt a win to gig economy companies like Uber, Lyft, and DoorDash by allowing them to continue using independent contractors.

Gola said that while goPuff uses independent contractors as drivers, the workers in its 200 micro-fulfillment centers are W-2 employees. He added that its business model is also different from delivery rivals Instacart, DoorDash, and Postmates, all of which have added convenience store and drugstore partners since the pandemic.

For starters, he said, goPuff works directly with consumer packaged goods companies to stock its fulfillment centers, which the company owns, with items ranging from diapers to wine. As a result, Gola says goPuff can purchase at scale, keeping delivery fees at $2 per delivery, and making deliveries within 20 to 30 minutes.