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Diageo buys majority stake in non-alcoholic spirit brand Seedlip

Diageo, the world’s largest spirits maker, has increased its holding in “game-changing” non-alcoholic spirit brand Seedlip to a majority stake, as it seeks to cater to the growing number of teetotallers.

The deal follows a 20% investment in Seedlip by Diageo’s accelerator programme for small businesses, Distill Ventures, in 2016. The financial details of the transaction were not disclosed.

Seedlip is a premium-priced, non-alcoholic spirit that is often sold as an alternative to gin. It was launched in 2015 by Ben Branson, then a teetotal marketing executive, who created the bitter-tasting drink from distilled produce on his farm in the Chiltern Hills, England.

Since then, Seedlip has launched in more than 25 countries and is served in more than 300 Michelin-starred restaurants.

John Kennedy, president of Diageo’s European, Turkish and Indian operations, said in a statement that Seedlip was a “game-changing brand in one of the most exciting categories in our industry”.

£116.6m –Annual sales of low- and non-alcoholic alternatives in the UK — a year-on-year rise of 25%

Diageo, which owns Gordon’s gin and Smirnoff vodka, has benefited from a booming gin market in recent years. Last month the company said that annual profits had climbed 10% to £4bn, and highlighted that gin sales had jumped 22%, with its Gordon’s and Tanqueray brands proving most popular.

But with increasing numbers of consumers opting to drink less alcohol, companies are looking to expand beyond alcoholic beverages and provide premium low- and non-alcohol options.

According to research firm Nielsen, like-for-like sales of low- and non-alcoholic alternatives in the UK rose 25% to £116.6m in the year to June 15.

Gemma Cooper, a client partner at Nielsen, said that just over one in 10 consumers said they wanted to cut their alcohol consumption.

Javier Gonzalez Lastra, an analyst at Berenberg, said that while the deal would be “very small” in the wider context of the drinks giant’s portfolio, the success of Seedlip made it strategically important.

“The whole industry is looking at quality non-alcoholic products so it was a natural step for Diageo to take,” he said.

Seedlip is the first non-alcoholic spirit that Diageo has invested in. In the past year it has also launched Guinness Pure Brew, a 0.5% ABV version of the popular Irish stout, and an ultra-low alcohol gin-and-tonic-flavoured drink under the Gordon’s brand.

In February, Seedlip said it had achieved 270% year-on-year volume growth.

Ben Branson, who will retain a stake in Seedlip, will stay on as a director.

“Distill Ventures’ and Diageo’s shared belief in our vision has enabled us to build a business that’s ready for scale and I’m excited to continue working with Diageo to lead this movement,” he said.

Seedlip, which comes in three flavours, retails at about £27, similar to the price of a bottle of gin.

Non-alcoholic beverages are potentially lucrative for drinks companies as they do not need to pay tax on them in the same way that they do for alcoholic drinks. In the UK, there is no duty on drinks with less than 1.2 per cent ABV.

Some analysts warn that Seedlip’s price might be deemed unsustainable if other lower priced but similar quality competitors entered the market.

Source: Financial Times; BevNet.com

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