- Diageo-backed accelerator Distill Ventures has taken a minority stake in U.K.-based non-alcoholic spirits producer Seedlip. Neither party disclosed financial terms of the deal.
- This is the first time Distill Ventures has invested in a non-alcoholic brand of distilled spirits.
- Seedlip offers a complex, "adult-like" beverage that consumers can drink when they're not drinking alcohol. It combines six individually distilled barks, spices, and citrus peels that drinkers often blend with tonic or with brine as a non-alcoholic martini.
When Distill Ventures backs a brand, that brand is generally on course for a future acquisition by Diageo, Distill Ventures co-founder Frank Lampen told just-drinks last year. This is becoming increasingly common across the food and beverage industry, and Anheuser-Busch InBev's venture arm, ZX Ventures, launched a similar accelerator in partnership with Techstars earlier this year, called Techstars Connection.
This investment could demonstrate Diageo's own interest in exploring the non-alcoholic spirits market. Consumers who can't or choose not to drink alcohol make up a sizable group that Diageo cannot currently target with its existing portfolio of alcoholic brands. The company could strategically diversify into a product category that is similar to its existing spirits brands but captures an entire new segment of consumers.
Diageo isn't a complete stranger to the non-alcoholic category, with products in its global portfolio including Guinness Zero in Indonesia, Guinness Malta in Africa, and Orijin Zero in Nigeria. But showing interest in a U.K.-based nonalcoholic spirits brand means the company could expand this product category into larger markets, such as Europe or the U.S., in the coming years.
Such innovation and expansion will be key for Diageo, which has struggled in recent years. The company's sales continue to slump in North America, where Diageo derives about 45% of its operating profits.
Diageo named a new chairman, Javier Ferran, in May, who will replace Dr. Franz Humer when he retires Jan. 1. Ferran has a more than 10-year career history at Bacardi, where he served as president and CEO, and he is currently a non-executive director at SABMiller. Ferran may be able to help CEO Ivan Menezes and Deirdre Mahlan, former CFO and now head of the North America unit, turn sales around in the region.