The Buyer | How Distill Ventures has spent 10 years disrupting drinks industry

The drinks industry is constantly crying out for drinks brands to come in and disrupt the status quo and in Distill Ventures it has a business 100% focused on looking for the next big thing in drinks – and has invested £245m in the last 10 years trying to do so. But how does it work? Adam Withrington, in his first piece for The Buyer, looks to find out.

Distill Ventures was created in 2013 by drinks industry start-up experts, Shilen Patel and Frank Lampen, who set up an agreement with Diageo to partner it in finding and funding entrepreneurial drinks brands. The concept was simple: once Diageo agrees to fund that start-up, Distill Ventures then lends its expertise to build the enterprise in partnership with its “Founder”.

The aim is for Diageo to take on the start-up. This is by no means a given: 10 years, $300m and 35 start-ups later, Diageo has taken controlling interest, or outright purchased, five of these brands and businesses.

Now as Distill Ventures enters the second decade of its life it has a new chief executive: Heidi Dillon. She is a Distill alumnus of five years standing, having spent that time building the organisation’s expertise in non-alcohol – not least its first shining star, Seedlip.

Seedlip was the first breakthrough brand success for Distill Ventures which has helped pioneer the non-alcoholic spirits category

One could reasonably assume that taking over from original founder Lampen would be a daunting task – but spend 45 minutes in her company you can see how her experience, personality and drive completely fits the vision and purpose of the business. She is engaging company. Talking over a Zoom call from her home in California, she possesses that energy and zeal that is necessary to make a venture like this work.

Dillon’s career has not always been in drinks – but common threads run through it all. Her background lies, mainly, in small brands in the US food industry; brands that are disruptors in their categories – from the likes of Luna Bar, to organicgirl. Through these experiences she developed a real taste for disruptive innovation.

“The consumer need is always the most important thing,” she says, “but what always really interested me was how can you move a product into a new space to meet that consumer need – taking the foundational element of a category and then disrupt it, through the lens of the consumer.”

Her favourite example of this was taking the Luna Bar (part of The Clif Bar business] in the early 2000s from a product aimed at athletes, sold at athletic events and then targeting it very differently towards the [then] fledgling consumer energy bar market.

“We decided to refocus the product on the consumer need for wellness and nutrition. So, you’re always thinking about your product mix and your messaging,” she says.

Disrupting drinks

Heidi Dillon says the key to Distill Ventures success is finding a way to work “in balance” with the “Founders” of the drinks brands it invests in that is creatively successful for both

Fast forward to her move to Distill Ventures in 2018, where she took on the role of portfolio director, non alcoholic drinks, she believes the disciplines she learnt in food stood her in good stead: “So you ask, ‘ok well what is happening in the spirits industry that we can almost really disrupt? How are consumers drinking now? How are they moderating?’”

Unsurprisingly, no and low alcohol will remain a key opportunity for Distill Ventures in the coming decade: “We are seeing so much opportunity around occasionality. Coming out of Covid occasions are much more fluid. You can come up almost with a drinking occasion from the moment you wake up from the moment you go to bed. Thinking about that occasion and matching it is the challenge,” she says.

So how does she look back on the first 10 years of Distill and how it has evolved?

“Our model remains ‘Founder’ led. Our job is to help that ‘Founder’ deliver on their vision. We want to support their vision – but we also have 10 years’ experience and a model helping us do that. We come at it from both directions. Within our teams we’ve got subject matter experts from across commercial, brand, supply, operations, finance. Then we ask how can we take this expertise and blend that with the ‘Founder’s’ unique and special vision?” she explains.

What does she see as Distill’s biggest brand success stories from the last decade? She fires back immediately with two: the organisation’s two biggest practices: non-alcohol and New World whiskey. But interestingly she also identifies the organisation’s pre-accelerator program as a third.

In 2021, Distill launched a pre-accelerator programme, seeking to fund entrepreneurs from under-represented communities; in the last two years it has received over 400 applications and invested over $10m in brands across the US and rest of the world, including VERVET, Atōst, Vascano Tequila, Kromanti, as well as in the UK with London based super premium flavoured tequila Idle Hands.

Culture driven

It becomes very clear throughout our chat that company and ‘Founder’ culture is a crucial issue for Dillon. Naturally, the ideas and products are vital, but it is her passion for people, sustainable business and culture that piques my interest. Throughout our interview she refers constantly to the relationship between the ‘Founders’ and her Distill Ventures’ team.

“In some instances, you are choosing partnerships (Founders and our partnering teams) that are going to last, in some cases (especially in whiskies), seven years or longer,” she says. “There is such a human element to being a ‘Founder’ and entrepreneur which means our work is personal. We need to be able to work together.”

She talks about the three key characteristics she wants to see from those in her team and the ‘Founders’ they work with. One is ensuring they work with clarity and focus; second is they show influence – adding value to the industry with the way they all show up to work and connect with stakeholders.

But her third mantra is most the interesting… simply put: being human.

Heidi Dillon celebrates 10 years with the Distill Ventures team and ‘Founders’ of the drinks brands it invests in

“How can I help support the team to help them connect and improve collaboration. Starting companies is really, really hard. Being able to know the balance of when to help ‘Founders’ push and prioritise and when to step back and say this is not the moment for that is really important,” she says.

“There is a human portion that has to come into this, because this affects their families and their life and their thinking. We’re in such a unique place of building these brands and in the end it is really all about people and human connection.”

The Diageo factor

Then there is the Diageo factor. What is Distill Ventures, and her relationship with Diageo? How does she see that developing in her tenure as chief executive? She is clear. The absolute objective remains the same: “Distill Ventures mission is to create the brands of the future that are going to match this evolving consumer that Diageo is interested in acquiring. That’s our job. Within that you can peel back the layers – our team needs to be set up in such a way that it can provide a consistent path to provide that funding.

“To achieve our funding objectives on that journey you have to be very clear on what you are trying to do. That planning has to fit in with Diageo’s Society 2030 10-year plan, so we make sure we do our planning in collaboration with them.”

This includes scenario planning – for example, looking for the next big thing. When asked what her prediction is for the next big is, she simply points to the key ingredient in the world’s biggest cocktail.

Pimentae is a female-founded premium cocktail brand backed by Distill Ventures

“The world’s number one cocktail is the margarita, so by extension tequila is something we are looking at,” she says. “But it is not just about tequila, it is about agave. I am so fascinated by the idea of building an agave practice. Currently the tequila shelf is the most confusing in retail – more than bourbon. So, I am really looking to the wine and coffee industries for inspiration – how sustainable is the product, how does it affect the [producer] communities, what are their growing strategies?”

So while those are long terms plans, what is next for Dillon and for Distill Ventures?

“The focus of everyone outside the company has been on the five exits that we’ve seen in the last decade,” she says. “But we have been working on a lot of other things during this time; there are a lot of exciting things that are about to happen, so I would say the number one target is making sure that all of that can come to fruition, that the hard work we have done can prepare for more strategic exits. And if that happens then exits mean more openings in the portfolio.”

Heidi Dillon on finding their next ‘Founder’ – how to apply?

Heidi Dillon and the Distill Ventures team wants to make the application process as easy and as relevant as possible for new drinks brands

“We want to hear from everyone,” stresses Heidi Dillon. “One of the easiest ways to get in the pipeline is via our online application that you can fill in. What we have started to do is make it a bit more multi-dimensional in how you can get your initial ideas across. Some people are really good at writing, others at video, others at design. The process now allows you to apply how you feel most comfortable. Or of course via LinkedIn. These then go to our search team and we respond to everybody.”

She adds: “If we start to work with you, then at the beginning it is just all about refining that elevator pitch – articulating what you are doing and why. You have to be clear on what you are in business to do: your mission, vision and bigger picture versus literal product detail. If you and we are not here to service some broader vision then no one will care – it needs to be more than just a simple tweak of another product. And then… why you? And why is your team the best team to do this?

“Then when you are moving into more of a formal pitch stage that is where we look in more detail at the consumer and product; liquid credentials, taste, product profile etc. We help people get through that process, regularly narrowing it all down.

“And then we get to a place where we start collaborating with Diageo – talking about why these are some of our favourite brands [in the pipeline] and here’s why. Then we have a process focused on what we present to them, then we narrow it down again and then we take a smaller group of people into a more formal pitching model – what we call it an investment board. The brands are then put in front of the Diageo team to see if that is something they are interested in. And then if Diageo like what they see then we will go to an “Approval of Partnership”.