Diageo's non-alcoholic bet is seen as an endorsement of high-end drinks for teetotalers

The group increased its shareholding in Seedlip as consumer tastes for alternative beverages catches on.

By Conor McMahon Deputy editor, Fora

DIAGEO’S BET ON non-alcoholic spirits has been heralded as an endorsement for the untapped world of high-end drinks for teetotalers.

The drinks giant behind Guinness, Smirnoff vodka and Johnnie Walker scotch announced yesterday that it has taken a majority stake in Seedlip, a premium-priced, non-alcoholic spirit that is marketed as an alternative to gin.

Diageo first invested in the brand in 2016 through its Distill Ventures accelerator programme.

The move was described by one analyst as an endorsement for the “unexploited” space of high-end beverages for non-drinkers.

“We see this as an interesting and sensible move by Diageo,” pundits at UK-based Shore Capital told investors in a briefing note this morning.

“The zero/low alcohol alternatives segment is … on trend and has long-term global potential in our view. Diageo, with its distribution muscle, should be well-placed to further scale the premium non-alcoholic spirits segment with the Seedlip brand.”

‘Unexploited’

Shore Capital analysts highlighted that over the past three years Seedlip has grown from a startup brand to being stocked in more than 7,500 high-end bars, restaurants and hotels, with an increased presence in off-licenses and supermarkets.

“We view Diageo’s move as an endorsement of the non-alcoholic spirits category’s prospects in what appears to be a relatively thus far unexploited space,” they said, adding that the move is an “interesting read” in light of Irn-Bru owner AG Barr’s million-pound investment in Elegantly Spirited, maker of alcohol-free spirits brand Stryyk. 

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As previously reported by Fora, Bord Bia has described the growing consumer interest in non-alcoholic drinks as one of the biggest trends in the industry, though it was highlighted in a February report by research company IWSR Drinks Market Analysis that the sector globally is “poorly served” with few category leaders.

The non-alcoholic category in general accounts for just 1.3% of the UK’s total alcohol market and holds a 0.5% stake in the US.

A report published last week on 2018 beer sales showed that sales of non-alcoholic beer rose by 60% last year, albeit from a low base, with the category accounting for 0.6% of the overall market.

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