Interview: Why Diageo Invested in No-ABV Alcohol

“Wellness” is one of the most talked about consumer trends in 2020. People have become increasingly conscious about what they put into their bodies. A growing offshoot of this cross-category movement is the rise of no-ABV alcohol. Led by products like Seedlip, these mimic the flavors, aromas and mixability of alcohol products, but without the actual booze — or ABV-fueled calories.

Heidi Dillon Otto, portfolio director and non-alcoholic lead for Distill Ventures North America.

A newer brand making headlines in no-ABV is Ritual Zero Proof. Diageo recently announced an investment in this fast-expanding company. To understand how Diageo (which also invested in Seedlip) sees this category, and the strategies and demos behind no-ABV, we recently spoke with Heidi Dillon Otto, portfolio director and non-alcoholic lead for Distill Ventures North America (an incubator division of Diageo), and Marcus Sakey, founding partner and chief brand officer of Ritual Zero Proof.

Beverage Dynamics: What consumer trends are driving no-ABV?

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Marcus Sakey: To me it’s a matter these days of people being more conscious in what they’re drinking — rather than just drinking more — and wanting options within that. We’re trying to give them higher-quality options, and higher standards, for no-ABV. This is better than just having a club soda with a squeeze of lime. Now you can make a cocktail that you know and love, and without the alcohol calories.

Marcus Sakey, founding partner and chief brand officer of Ritual Zero Proof.

Heidi Dillon Otto: Adding onto what Marcus said, Diageo did a study in 2017 and released on a white paper on the areas of consumer growth. We found that people were really looking for options, and had curiosity in flavors, with a greater focus on wellbeing. We just released a similar study from 2019, and that all still rings true, with the biggest story now being about consumer choice. ‘What do I want, where do I want it, and in what form do I want it?’

BD: So how does wellness tie into that?

HDO: Wellness is a trend you see around the globe, and you see it the most from the Millennial demo. It comes from having access; people have so much information now at their fingertips. Wellness is about choice and experience, with people now expecting so much more, because so much more information is accessible. They want a great beverage while also maintaining wellness.

MS: Once it occurs to people, there’s no backing off of it. There was a time when ‘no-alcohol’ meant coffee or coke. Now there’s a massive range of options.

BD: How do you design a product that mimics alcohol, but without the actual alcohol?

MS: We’re looking to be familiar yet different. We’ve recreated the familiar flavors so that people can have the cocktails they know and love, but without the calories. It leaves the choice in their hands. If you want to stay out later, Ritual makes for the perfect third drink.

Getting the flavors right wasn’t easy. The recipes went through 500 iterations. This is not whiskey with the whiskey part removed. That doesn’t work. We look at this more as a cooking process. It’s a matter of sourcing the best ingredients and mixing everything together carefully. This is as close as it is possible to get with gin and whiskey in their non-alcohol forms.

And I want to be clear. We’re not people who are against drinking alcohol. That couldn’t be further from the truth. We’re whiskey snobs. We have huge gin collections.

In our mind, it’s all about abundance. This is another option if you’re pregnant, in training, or looking to stay out longer by reducing your alcohol.

BD: Is no-ABV a trend? Or is this sticking around longer term?

MS: No-alcohol is not a trend. It’s a movement, because you’re giving consumers a choice to have something that’s adult, nuanced and also pairs well with food, all without the calories. This is not going away. It’s growing.

HDO: To the point about food pairings, non-alcohol products go with every food occasion, providing new and exciting experiences where alcohol can sometimes be limited during certain times of the day.

BD: What’s the demo behind non-ABV?

MS: It’s quite broad. The original interest was from Millennials, who started the whole trend of drinking less. But there’s also people in their 40s and older, who want to hang out with their kids while also having a cocktail, or be able to stay out longer.

Bartenders have been very receptive. The education for them is minimal. If you can make a cocktail with whiskey or gin, then you can make it with Ritual. It provides a ‘two-touch’ cocktail when bartenders are slammed. And a lot of bartenders have liked playing around with it.

High-end cocktail bars and destination restaurants, many of those places already have a no-ABV part of their menu. In 18 months, every restaurant that’s worth anything is going to have a no-ABV menu. These products are simply too widespread and too useful. Instead of just selling the same club soda over and over again at a low price, now restaurants and bars can sell a series of sophisticated cocktails at higher price points, which people are willing to pay.

Kyle Swartz is editor of Beverage Dynamics magazine. Reach him at kswartz@epgmediallc.com or on Twitter @kswartzz. Read his recent piece Does Terroir Matter in Whiskey?

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