The world's first "alcohol-free spirit" bought by Diageo's alcohol giant; A "revolutionary" innovation?



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Seed"The world's first alcohol-free alcohol" has been acquired (for an undisclosed amount) by global beverage company Diageo, owner of Smirnoff, Johnnie Walker and Guinness. This is a bold acquisition for a company traditionally focused on alcohol.

The acquisition comes five years after the founder, Ben Branson, left his marketing position to follow his corporate instinct, experimenting with distillation and plants on his family farm. Diageo's clear message is that they now believe that there is a great market opportunity for non-alcoholic premium drinks; that Seedlip is a product innovation "game changer" in FMCG.

Blue Ocean Innovation Success

Tennis founder and guardian Ben Branson, 36, succeeded in creating a new category of non-alcoholic beverages for adults. "Distilled spirits without alcohol". The company has demonstrated extraordinary sales potential and maintains a remarkable price, which normally costs around $ 48 per liter. A non-alcoholic Seedlip cocktail in The Savoy will cost you £ 12 ($ 14.44). & Nbsp;

Ben's first sale was 1,000 bottles at Selfridges, a London department store that was sold in a week. In August 2018, three years after its launch, the little known and underrated UK start-up produced 30,000 bottles a month and now distributes in 25 countries. Growth was announced at 170% Y-Y-Y by the Financial Times.

The amazing selling price of Seedlip compared to its competitors, and it's easy to recognize it as a Blue Ocean innovation story, breaking all the rules to create white space. Compare this with Bottle Green Elderflower Presse, another high-end refreshing drink. Both require mixers. The elderflower is retail trade at £ 4.30 / liter, positioned as a cordial (just add water). Seedlip costs almost 10 times more, positioning itself as a "spirit" for "adults"; Served by 300 Michelin-starred restaurants, and highly aligned with top-quality gin, bottled, retail and recommended blenders. It is therefore perhaps not surprising that the world's largest spirits manufacturer has acquired a majority stake in Seedlip at this exciting stage, following their previous investment.

Timing Innovation – The Kairos Moment

Timing seems decisive for the success of any disruptive product innovation. The philosophers of ancient Greece called this kairos – why now? It is very difficult to imagine this success 10 years ago. Ben was lucky at the right time. Seedlip was indeed Diageo's first investment in soft drinks, acquisition of a minority stake in 2016, through Distill Ventureswhich contributed to start-up costs, distribution and marketing. & nbsp;

This investment violated the 257-year rule of betting exclusively on alcoholic beverages. How times change Perhaps they were encouraged by the meteoric rise of the brand of drinks Tree of fever, the unicorn UK start-up who also challenged incumbent operators and went public on the London Stock Exchange. The FeverTree share price has risen more than 1,000% since the IPO in 2014, with a market capitalization of 2.63 billion dollars (2.19 billion pounds sterling). This is not a bad result for start-up innovators who have the vision and passion to reinvent the tonic water market.

At the same time, there has been negative pressure to innovate, with the consumption of alcohol in the UK 26% drop between 2002 and 2012. The evolution of tastes led to some winners, gin becoming a surprise hit. help Fever Tree to no more finish. Booze is down, but gin is up. Macro-market forces are pushing big liquor companies to think differently; sufficient incentive to risk capital on this counter-intuitive startup innovation, which many would have considered bizarre. Or crazy. Diageo, however, seems to have been very successful thanks to this start-up investment, getting from the start a privileged vision of the company. It's up to them to play with now.

& nbsp;

Product positioning

The seductive positioning of Seedlip's products has been its basic genius. The 3 current products create elegant bridges between a conventional non-alcoholic drink and "adult" drinks such as wine or whiskey. It is an option that attracts people who like gin, but can not drink because they drive or in the growing ranks of curious sober. & Nbsp;

You do not even need to like gin to love Seedlip, although the taste of tonic water is essential. Do not drink it alone. No, the novelty is definitely a good conversation to break the ice at corporate events and it works well as a placebo for those who experiment Dry January. For the increasing number of tee-totallers, it's a new way to drink at events, in bars or at home, and feel completely at ease. Classic and sophisticated even. Definitely adult.

Changes in the alcohol market in 2019

A cynic would say that Diageo uses this brand as a hunting horse to distract the attention of regulators, politicians and public health lobbyists. They could indicate Seedlip's low market share, or the percentage of sales compared to dozens of Diageo's alcohol-based products, or even Diageo's balance sheet on acquisitions. At this point, Seedlip's sales are minimal compared to those of the major brands. The relative sums involved in the investment will be equally small. Ignore all this.

Seedlip's growth assumption is about to be tested aggressively. Diageo clearly thinks it's the beginning of a new category of market – anticipating a significant change in the market. They will continue this as a major growth opportunity. Sales of artisanal beverages are on the rise. There is a measured and sustainable increase in the number of people actively seeking non-alcoholic beverages. January dry became a stream of consciousness; 10% of alcohol drinkers forecast for 2019 (4.2 million inhabitants in the United Kingdom).

There is evidence of a resilience trend for high-end products with information value; demand for "daily luxury". We've seen this trend in all kinds of consumer products over the last few years, from consumer-grade memory foam mattresses to $ 1,000 iPhones, to high-end burger brands that challenge quality. McDonald's. & Nbsp;

Scottish single malt brands have positioned themselves as a product of choice for many years, as has gin more recently. High margins make business sense, which ultimately comes down to branding and distribution. Diageo has made good profits by doing this with spirits for generations, cautiously buying products upwards and positioning its vast portfolio as a bonus; generally avoiding low margin merchandise games. Now, they are planning to do it again with soft drinks that could otherwise threaten their market share. They invest in disruptions to stay ahead.

How much does the Seedlip cost?

Seed production costs are a trade secret. It is too early to cancel an estimate of the company's accounts and reported sales figures. Diageo will find a way to keep the secret. We know that the company reports a 6-week production process. Although this requires distillation, this type of product does not need to age in barrels for 3 years (or 30 years), like whiskey. Some herbs are needed, and of course some water.

Seedlip has another secret in its prices that inflates profit margins considerably. Its peak price of $ 48 per liter is comparable to high-end gins and malt whiskeys, the type of products consumers are encouraged to compare. But alcoholic spirits are subject to a 61.1% tax through UK liquor law and VAT. To avoid the UK's alcohol tax, Seedlip has an estimated bonus margin of £ 11.49 ($ 13.83) per liter in its home market. Retailers will benefit from higher margins, which will encourage them to sell it. On the scale, Seedlip can afford to do crazy things with the brand. Maybe they will simultaneously sponsor three Formula One teams?

Manufacturing and distribution will likely cost less than the retail price of Cordial Bottle Green. The most expensive part of the product is probably the bottle, which has been elegantly designed to distinguish the brand and signal "a sophisticated adult beverage" without much effort. & Nbsp;

"Changing drinks game"

After proving the value hypothesis and spreading it widely, they can now expect fierce competition. The category will probably expand as well, welcoming new entrants Nine elms; a surprisingly sophisticated alternative to wine, which has also attracted the attention of the best restaurateurs, retailers and bars. Successes like this will not go unnoticed at Coca-Cola, for example, which recently acquired the British international coffee brand Costa for $ 5.1 billion. Diageo will in turn invest heavily in this brand to maintain its competitive edge and to move up a gear. That's what they do. But it will take a lot more money.

John Kennedy, President Europe, Turkey and India at Diageo said, "Seedlip is a brand that is changing the game in one of the most exciting categories in our industry. We are excited to continue working with & lsqb; Ben & rsqb; to grow what we believe to be a global giant of the drinks of tomorrow. "

The race to dominate the market is now engaged. Will competitors rush into the market with well-financed copied products? It remains to be seen if Seedlip can keep its prices under pressure, but it will be useful to have a history of genuine start-up and keep the founder involved. & Nbsp;

This is a great success for a UK start-up that is globalizing and deserves to be monitored. Bold moves and good timing paid for the founder. Seedlip is a marketing genius. The product is great. More than anything, the profit margins are great. Ben Branson has surpassed the market by seizing the moment and innovating in premium pricing. The founder retains a minority stake and a management position in the company, which gives him a free boost for his future success following this sale. Presumably, he is not yet ready to retire in his mid-30s. Hopefully it will come back soon, with another fascinating innovation that surprises and delights. & Nbsp;

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Seed"The world's first alcohol-free alcohol" has been acquired (for an undisclosed amount) by global beverage company Diageo, owner of Smirnoff, Johnnie Walker and Guinness. This is a bold acquisition for a company traditionally focused on alcohol.

The acquisition comes five years after the founder, Ben Branson, left his marketing position to follow his corporate instinct, experimenting with distillation and plants on his family farm. Diageo's clear message is that they now believe that there is a great market opportunity for non-alcoholic premium drinks; that Seedlip is a product innovation "game changer" in FMCG.

Blue Ocean Innovation Success

Tennis founder and guardian Ben Branson, 36, succeeded in creating a new category of non-alcoholic beverages for adults. "Distilled spirits without alcohol". The company has demonstrated extraordinary sales potential and maintains a remarkable price, which normally costs around $ 48 per liter. A non-alcoholic Seedlip cocktail in The Savoy will cost you £ 12 ($ 14.44).

Ben's first sale was 1,000 bottles at Selfridges, a London department store that was sold in a week. In August 2018, three years after its launch, the little known and underrated UK start-up produced 30,000 bottles a month and now distributes in 25 countries. Growth was announced at 170% Y-Y-Y by the Financial Times.

Benchmark's amazing Seedlip retail price compared to its competitors, and it's easy to recognize this as a Blue Ocean innovation story, breaking all the rules to create a white space. Compare this with Bottle Green Elderflower Presse, another high-end refreshing drink. Both require mixers. The elderflower is sold at a price of £ 4.30 / liter, in the form of a cordial (just add water). Seedlip costs almost 10 times more, positioning itself as a "spirit" for "adults"; Served by 300 Michelin-starred restaurants, and highly aligned with top-quality gin, bottled, retail and recommended blenders. It is therefore perhaps not surprising that the world's largest spirits manufacturer has acquired a majority stake in Seedlip at this exciting stage, following their previous investment.

Timing Innovation – The Kairos Moment

Timing seems decisive for the success of any disruptive product innovation. The philosophers of ancient Greece called this kairos – why now? It is very difficult to imagine this success 10 years ago. Ben was lucky at the right time. Indeed, Seedlip was Diageo's first investment in non-alcoholic beverages, with a minority stake in 2016, through Distill Ventures, which contributed to start-up costs, distribution and marketing.

This investment violated the 257-year rule of betting exclusively on alcoholic beverages. How times change They may have been encouraged by the meteoric rise of the Fever Tree beverage brand, the UK unicorn start-up that also challenged incumbent operators and then floated on the London Stock Exchange. FeverTree's share price has risen more than 1,000% since its IPO in 2014, reaching a market capitalization of $ 2.63 billion (£ 2.19 billion). This is not a bad result for start-up innovators who have the vision and passion to reinvent the tonic water market.

At the same time, there was negative pressure to innovate, with UK alcohol consumption falling by 26% between 2002 and 2012. Changes in taste led to some winners as gin became an unexpected success; help Fever Tree to no more finish. Booze is down, but gin is up. Macro-market forces are pushing big liquor companies to think differently; sufficient incentive to risk capital on this counter-intuitive startup innovation, which many would have considered bizarre. Or crazy. Diageo, however, seems to have been very successful thanks to this start-up investment, getting from the start a privileged vision of the company. It's up to them to play with now.

Product positioning

The seductive positioning of Seedlip's products has been its basic genius. The 3 current products create elegant bridges between a conventional non-alcoholic drink and "adult" drinks such as wine or whiskey. It is a type of gin without gin that appeals to people who like gin, but can not drink because they drive or in the growing ranks of curious sober.

You do not even need to like gin to love Seedlip, although the taste of tonic water is essential. Do not drink it alone. No, the novelty is definitely a good conversation to break the ice at corporate events and it works well as a placebo for those who experiment Dry January. For the increasing number of tee-totallers, it's a new way to drink at events, in bars or at home, and feel completely at ease. Classic and sophisticated even. Definitely adult.

Changes in the alcohol market in 2019

A cynic would say that Diageo uses this brand as a hunting horse to distract the attention of regulators, politicians and public health lobbyists. They could cite Seedlip's tiny market share, or the percentage of sales against Diageo's dozens of alcohol products, or Diageo's history of acquisitions. At this point, Seedlip's sales are minimal compared to those of the major brands. The relative sums involved in the investment will be equally small. Ignore all this.

Seedlip's growth assumption is about to be tested aggressively. Diageo clearly thinks it's the beginning of a new category of market – anticipating a significant change in the market. They will continue this as a major growth opportunity. Sales of artisanal beverages are on the rise. There is a measured and sustainable increase in the number of people actively seeking non-alcoholic beverages. January dry became a stream of consciousness; 10% of alcohol drinkers had expected in 2019 (4.2 million people in the UK).

There is evidence of a resilience trend for high-end products with information value; demand for "daily luxury". We've seen this trend in all kinds of consumer products over the last few years, from consumer-grade memory foam mattresses to $ 1,000 iPhones, to high-end burger brands that challenge quality. McDonald's.

Scottish single malt brands have positioned themselves as a product of choice for many years, as has gin more recently. High margins make business sense, which ultimately comes down to branding and distribution. Diageo has made good profits by doing this with spirits for generations, cautiously buying products upwards and positioning its vast portfolio as a bonus; generally avoiding low margin merchandise games. Now, they are planning to do it again with soft drinks that could otherwise threaten their market share. They invest in disruptions to stay ahead.

How much does the Seedlip cost?

Seed production costs are a trade secret. It is too early to cancel an estimate of the company's accounts and reported sales figures. Diageo will find a way to keep the secret. We know that the company reports a 6-week production process. Although this requires distillation, this type of product does not need to age in barrels for 3 years (or 30 years), like whiskey. Some herbs are needed, and of course some water.

Seedlip has another secret in its prices that inflates profit margins considerably. Its peak price of $ 48 per liter is comparable to high-end gins and malt whiskeys, the type of products consumers are encouraged to compare. But alcoholic spirits are subject to a 61.1% tax through UK liquor law and VAT. To avoid the UK's alcohol tax, Seedlip has an estimated bonus margin of £ 11.49 ($ 13.83) per liter in its home market. Retailers will benefit from higher margins, which will encourage them to sell it. On the scale, Seedlip can afford to do crazy things with the brand. Maybe they will simultaneously sponsor three Formula One teams?

Manufacturing and distribution will likely cost less than the retail price of Cordial Bottle Green. The most expensive part of the product is probably the bottle, which has been elegantly designed to distinguish the brand and signal "a sophisticated adult beverage" without looking too much.

"Changing drinks game"

After proving the value hypothesis and spreading it widely, they can now expect fierce competition. The category will probably expand as well, welcoming newcomers like Nine Elms; a surprisingly sophisticated alternative to wine, which has also attracted the attention of the best restaurateurs, retailers and bars. Successes like this will not go unnoticed at Coca-Cola, for example, which recently acquired the British international coffee brand Costa for $ 5.1 billion. Diageo will in turn invest heavily in this brand to maintain its competitive edge and to move up a gear. That's what they do. But it will take a lot more money.

John Kennedy, President Europe, Turkey and India at Diageo said, "Seedlip is a brand that is changing the game in one of the most exciting categories in our industry. We are delighted to continue working with [Ben] to grow what we believe to be a global giant of the drinks of tomorrow. "

The race to dominate the market is now engaged. Will competitors rush into the market with well-financed copied products? It remains to be seen if Seedlip can keep its prices under pressure, but having a history of genuine startups and keeping the founder involved will make things easier.

This is a great success for a UK start-up that is globalizing and deserves to be monitored. Bold moves and good timing paid for the founder. Seedlip is a marketing genius. The product is great. More than anything, the profit margins are great. Ben Branson has surpassed the market by seizing the moment and innovating in premium pricing. The founder retains a minority stake and a management position in the company, which gives him a free boost for his future success following this sale. Presumably, he's not ready to retire in his mid-30s, so hopefully he'll be back in the market soon, with another fascinating innovation that surprises and delights.