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Where next for Diageo's Distill Ventures? Interview, co-founder Frank Lampen

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Distill Ventures launched two years ago with a remit to fund new spirits start-ups. Since then, the Diageo-backed incubator has seen funding increase, as well as the first of its projects hit retail shelves. By the end of this year it expects to have committed GBP20m in total investments. just-drinks spoke to one of Distill Ventures' founders, Frank Lampen, at Bar Convent Berlin, about how Diageo paves the way to acquiring start-ups, and why exceptional liquid is only ever a beginning.

Distill Ventures Frank Lampen

Distill Ventures' Frank Lampen

just-drinks: Last year, just-drinks columnist Ian Buxton reported that you were very happy with the project, 12 months in. Are you still happy?

Distill Ventures' Frank Lampen: Yes, very much so. We were really happy after the first investment cycle because we thought it would take longer to get established in the market, longer to get people to trust us. But we clearly hit a nerve because we had a phenomenal response and the challenge is now to build on that. 

Our plan now is to get even better for the early-stage entrepreneurs and hone the offer for entrepreneurs who are a bit more developed and start to be seen as the place for expansion capital. The bigger investments take longer to land. Hopefully we're looking to close a couple of investments in the next couple of months. 

j-d: Max Wagner, the owner of Belsazar Vermouth, is from the first group of four that you funded. Which other people have you backed?

FL: We've always had a policy that we put the entrepreneurs' needs first, so its up the entrepreneurs to announce whether they received investment or not. So far, the only company that has made it public is Belsazar. The others are at a stage where they'd rather be talking about their amazing liquid or new packaging. 

j-d: Is the Diageo name a hindrance to these companies?

FL: Diageo is a minority shareholder [in the companies backed by the scheme] and doesn't have control over the business and while it may give the investment money its not Diageo people out selling it. It's not as if they have Diageo-level budgets for activations, so that's quite a complicated thing to have a discussion about with people. It's not that Diageo would be a hindrance, it's just around being precise about what the product is and isn't. It takes some time to explain and that's not something you want to do every time.

j-d: Does Diageo have a clear pathway to acquisition for these companies?

FL: Yes. The initial investment agreement foreshadows the mechanism about how the acquisition will happen. We agree with the entrepreneur a target, usually a volume target. If you can reach X thousand of cases a year then that triggers Diageo's ability to buy it.

j-d: Is it a lesser risk than going through private equity?

FL: Ideally you want to find the smartest money you can. Crowd funding has become popular but I was talking to an entrepreneur the other day and he's been doing crowd funding and he said he spends a lot of time corresponding with people who are querying really small things in the business plan. What it shows is that they don't really understand the industry. Do you want to be spending time explaining the margin structure in drinks or do you want to be working with investors that understand it?

j-d: What advice would you give to people looking to launch spirits companies?

FL: Back in the early days of alcohol marketing, you came up with one message. But we live in a world where the cycle of newness is so short  - so you have to constantly stay interesting. So don't come to us with one tag line. Come and tell me how you're going to be interesting tomorrow, or next year. If you've constantly got something to talk about on social media or with bartenders, if you have something which feels familiar but is a new expression, then that's the juice of modern brand building.

j-d: Are competitions important?

FL: I think it varies by category. Whisk(e)y is a category where there are some competitions that have a phenomenal effect. Jim Murray [of the Whisky Bible] giving the world's best whisky to Japanese whisky was a huge boost to Japanese whisky.

In other categories, it can't hurt but it's not enough on its own. There are so many of these competitions that there's a danger it devalues the currency of awards in general.

Also, we could go out and taste 20 exceptional liquids that are never, ever going to become successful brands because unfortunately exceptional liquid is not enough on its own. It's a necessary condition but not sufficient on its own.

j-d: You said you've seen about 600 spirits start-ups. What was the most outlandish?

FL: We have little cupboard of some of the things we've been sent. One gin that we found, they decided one of the botanicals sound be a particular type of seaweed. But the end result was that it smelt a bit like fish. Gin that smells of fish is not on my dream list of gin.


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