Distill Ventures doesn’t have holding music when you call it up. It does not quite cut the image of the world’s first hip and happening spirits drinks accelerator company. But if it did then The Pet Shop Boys lyrics “I’ve got the brains, You’ve got the looks, Let’s make lots of money” would be perfect. For that, in a nutshell, is what Distill Ventures does. Admittedly with Diageo’s money. Founded in 2013 it finds start up drinks brands it believes have what it takes to make it on a global scale. If its partner, Diageo, agrees, then it gets the green light to use Diageo funding to help develop and build that brand up. To potentially the point when Diageo offers to make it part of its own portfolio. Like it already has done with the world’s first non-alcoholic spirits brand, Seedlip. But how does it work in practice? What makes a brand so unique and exciting that Distill Ventures would want to take it on? Co-founder Frank Lampen explains to Richard Siddle the step-by-step process it goes through before it’s prepared to share its “brains”, or “money” with any potential drinks entrepreneur.
It’s one thing having a good idea for a new brand, it is very different and difficult actually bringing it to market, which is why Distill Ventures and similar accelerator funding models are proving to be such an important part of the drinks industry.
Adam Smith’s classic line from the Wealth of Nations that the British are “a nation of shopkeepers”, is, in many ways, as accurate today as it was when he wrote it in 1776. Only now it would be more accurate to call us a “nation of entrepreneurs” all with dreams of making it big on our own.
The Office for National Statistics now estimates that are over 5 million self employed people in the UK, up from 3.1 million in 2001, and rising fast all the time. A combination of a lack of job security and advances in technology mean we can now set up shop, as it were, in any part of a house or garden shed. All you need is a good idea and a bit of self confidence and away you go.
All driven by the arrival of shows like BBC’s Dragon’s Den (first screened in 2009) further enticing us to follow our dreams and start up companies of our own. But for all the ones that succeed there is a long tail of failures out there as good ideas soon whither away overwhelmed by the double whammy of start up costs, and late payments.
Which is where a business like Distill Ventures comes in. Born, as its says, “out of a realisation that there were many visionary drinks entrepreneurs” out there, but most lacked the know-how, the contacts, never mind the resources to take a good idea and actually come close to making it happen.
As its website says: “We wanted to change that. We brought together a passion for drinks and a range of experts to fill the void.”
But when it was formed in 2013 by co-founders, Frank Lampen and Shilen Patel, who had their own track records and careers in the drinks industry, they too were a start up in need of help if they were going to be able to offer any support of their own.
They then had the brainwave of approaching Diageo to see if they would be interested in working with them to help set up what effectively became the world’s first accelerator company for the spirits industry. At a time when there was no such thing as an accelerator business model for new drinks brands.
Nearly seven years on and Distill Ventures has grown and then grown again and now has teams in London, Dublin, New York, San Francisco and Amsterdam.
Lampen says both he and Patel had experience previously of working with start-up companies in other consumer sectors and had themselves invested in digital and technology companies.
The Diageo factor
But when they looked at a potential start-up for a gin brand they quickly realised there was not the back up and support infrastructure that existed in the digital sector. Hence the decision to approach Diageo.
The arrangement is straightforward enough. Distill Ventures is run as an independent business but has Diageo as its sole investor. Distill Ventures will find potential new drinks brands to help grow and then take those projects to Diageo to see if it wants to invest in them.
Crucially any financial support that Diageo gives will always be as a minority stake, leaving the brand owner in charge as it grows. Only when it gets to a certain stage might that relationship then change. For, as Distil states, “all deals do include a call option for Diageo to buy the business outright at an agreed future point”.
As it has done this summer when Seedlip, the world’s first non-alcoholic spirit and most definitely the most famous and successful band to be developed by Distill Ventures, was officially bought out by Diageo when its founder Ben Branson, agreed it could takeover his remaining 80% stake. Diageo initially took a 20% stake in Seedlip through Distill Ventures in 2016.
The first brand to be bought out by Diageo from Distill Ventures was the German vermouth brand, Belsazar, from the Black Forest in 2018. It was one one of the first brands that Distill first worked having signed them up in 2014.
Its website explains the relationship with Diageo as being a “great way for entrepreneurs to grow independently and remain fully in control of their business while providing Diageo with a way to invest and support the most exciting up and coming businesses”.
From Distill’s point of view it can go to Diageo and ask it to help start-ups with technical expertise, production support and marketing expertise. “Together, we can help those founders turn great small drinks brands into big, successful businesses,” says Distill’s website.
A win, win
It’s a partnership that seems to be a win, win for Distill and Diageo, but also for the brands that are willing, and eager to get the funding.
You are also at a stroke gaining access to a pool of expertise that is in itself extremely powerful and hard to put a price on. It’s what Distill’s co-founder Shilen Patel calls “smart money”. “It’s important to get that initial financial support, but if you can also tap into someone’s entrepreneurial skills and talent that’s really important,” is what he said in a session on funding in the Innovation Zone at the London Wine Fair.
But is it a slow process and Distill Ventures is very cautious, particular and demanding about the brands it looks to work with and invest in. Since 2013 Distill Ventures has invested over £60m in only 15 drinks brands, like Belsazar the vermouth brand.
It is also, therefore, only interested in working on projects that fit into Diageo’s overall branded strategy. Which means focusing on spirits, aperitifs and the low/no alcohol category. So no beers or wine. “Which still leaves a lot of opportunities for us,” says Lampen.
Step by step
“Every project we take on we do so on an individual basis,” explains Lampen. There is no one Distill approach to make a new drinks brand a success. “It’s very much step by step process.”
“We have been lucky to work some entrepreneurs who are redefining the drinks industry,” he adds.
In fact for Lampen and Distill Ventures it is the skills, vision, passion and desire of the people behind the products they see that is the most important factor in deciding which brands to back.
“It is the team behind the brand that is the overriding factor,” said Lampen. “You can have an amazing product, but it won’t go anywhere unless you have the team to execute it. It’s why we will always start by spending time with the founders and the people behind the product.”
“How good are you at listening and learning?” says Patel. “You also need to have a ruthless focus on what really matters. The right balance between having a vision and the attention to detail of what is happening in the business today,” he added.
You also have to be able to trust them implicitly, says Patel. To convince an accelerator business like Distill Ventures to get on board you need to be completely open, transparent and honest about what it is you are looking to do and how you are going to do it. Just one tiny skeleton in your cupboard and they will walk away. Or as Patel calls it: “One little lie on your CV.”
But clearly you also need to have a genuinely new product that is authentic and is going to connect with a specific target consumer. “What is its purpose?” asks Patel.
The next step is to look at what sort of investment will it take for that product to get off the ground. That’s when they will talk to Diageo to see if it is interested.
For that to happen the brand or product in question has to have global appeal and scale, stressed Lampen.
Which is potentially where some people in the trade get the wrong idea about what Distill Ventures is all about. Yes, it is an accelerator business, but it is also looking at the long term. It’s not about quick investments, getting brands launched and moving on. It only gets involved in brands and products it believes have what it takes to make it big. And that means around the world. That’s what Diageo wants.
That’s also when the power of the network comes into play. Be it the personal contacts of the Distill Ventures’ team or the global reach of Diageo itself
Lampen admits the last six to seven years have been a massive learning curve for himself and the rest of the Distill Ventures team.
“We have got a lot better in terms of what we can offer,” he says. Particularly around cross channel support, be it retail, on-trade, online and e-commerce and distribution.
“We are able to use all that experience.”
It’s also why it has offices in the US and Europe so that it can be as close to its key consumer markets. “You need that local expertise. It’s one of the key reasons why Diageo wants to be involved.”
Distill Ventures is also more in tune in helping brands determine what it is that has helped it become such a success in its own home market. “What are the elements that can then help it work in other markets?” he said.
For you might be able to make “quite a noise” about your product in your own market, but it so much harder replicating that in other countries. “What is it that helps make it a local hero? How do you get local, national and international success?”
If you are taken on by Distill Ventures, then it means there is an exit strategy in place for some time in that brand’s future. A future with Diageo. “You need to have that scale in order for Diageo to look at you,” said Lampen.
Part of that process is in your own hands, but some of it comes down to how successful that particular category is going to be in a few years time. Like the lower and no alcohol sectors. Seedlip might have been a “game changer” in non-alcoholic spirits, but it also needed that consumer market to grow and “transform” in order to become the brand it has.
Interestingly it sees New World whiskies as being another hot trend for the future and why it has made so many investments in the area including Melbourne-based whisky producer, Starward, and American single malt whiskey, Westward that Diageo has taken a minority stake in.
It is also equally, added Lampen, looking at formats and packaging as well. So that you are ahead of big changes in consumer attitudes, like its recent rejection of plastic.
Which is again where Distill Ventures’ skill comes in plotting such trends and looking for brands that might make it big a few years from now.
So if you think you have got an alternative Seedlip in you, you know who to call.