U.S. Markets open in 1 hr 12 mins

Aspirin-by-Drone Closer in Alphabet-Walgreens Delivery Test

Alan Levin and Thomas Black

(Bloomberg) -- One of the nation’s largest drug store chains and a shipping service giant are joining forces, with Alphabet Inc.’s Wing to begin a first-of-its-kind drone delivery service in October.

Walgreens, FedEx Corp. and Wing, an offshoot of Google that was the first U.S. drone operator to receive partial certification as an airline, will begin the exploratory deliveries in the small town of Christiansburg, Virginia, the companies said in an announcement Thursday.

The companies aim to go beyond the small-scale delivery demonstrations that have occurred so far in the U.S., typically under controlled environments conducted over short ranges, they said.

“Wing has spent the last seven years developing a delivery drone and navigation system for this purpose,” Chief Executive Officer James Ryan Burgess said in the release. “By delivering small packages directly to homes through the air in minutes, and making a wide range of medicine, food and other products available to customers, we will demonstrate what we expect safer, faster, cleaner local delivery to look like in the future.”

Read more: Amazon Poised to Test Chopper-Plane Mashup for Drone Deliveries

The announcement is a sign of the rapid maturation of the drone industry, as multiple titans of industry race to find their place in what could become a transforming technology. At the same time, the U.S. government hasn’t created a regulatory structure or formal safety standards for small, low-flying drone operations, so such demonstrations continue to be conducted using waivers to existing rules.

Wing has conducted demonstrations of how its deliveries would work before, including lowering a Popsicle to a toddler in Virginia last year. But the project with Walgreens and FedEx is designed to send actual merchandise to customers on a far bigger scale.

The demonstration project is being conducted near the campus of Virginia Tech in Blacksburg and is associated with the Mid-Atlantic Partnership, one of the groups selected by the U.S. government as testing entities for drone commerce. While there is growing demand for using drones to deliver goods and to perform many industrial functions, the Federal Aviation Administration is still in the process of developing regulations to govern them.

Robotic Race

Wing is one of the leading companies in the race toward having robotic unmanned craft zip through the sky to people’s homes to drop off goods, and has received waivers to allow longer-range flights.

Amazon.com Inc. and United Parcel Service Inc. are also developing their delivery services. A number of smaller companies, including Flirtey Inc. and Zipline International Inc., are either doing demonstration projects or have made deliveries in other countries.

The partnership between Wing, Walgreens and FedEx has benefits for all three in the race to exploit the drone economy.

Walgreens, a division of Walgreens Boots Alliance Inc., and other large drugstore chains have seen their sales chipped away at by Amazon and other online retailers, as the convenience of a brick-and-mortar pharmacy a short drive away has been supplanted by a package delivered to a customer’s front door. Amazon has also moved into the prescription drug business, offering patients conveniently-packaged pills through its PillPack unit.

Drugstores Fight Back

In response, the drugstore chains have begun offering competing services to defend themselves. Walgreens offers a delivery service for prescriptions, and has partnered with FedEx to use its stores as package drop-off points. It’s also partnered with Kroger Co. on a pilot program for customers to pick up groceries at Walgreens stores.

The partnership with Wing gives FedEx leverage to compete against UPS, which is using the small flying devices for revenue-generating health-care deliveries, such as blood samples, within a hospital campus in North Carolina.

UPS is also seeking FAA authorization to operate like a small airline and expects to get that designation soon. UPS Chief Executive Officer David Abney has said the focus of drone deliveries would be the health-care industry at first, and then expand from there.

(Updates with other companies in ninth paragraph.)

--With assistance from Drew Armstrong.

To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net;Thomas Black in Dallas at tblack@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman, Ros Krasny

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.