What’s the secret to unlocking the massive commercial potential of the non-alcoholic beverage space? Simple: treat it like alcohol.
It may not actually be that easy, but that’s one way in which companies are looking to create a stronger identity for a category that is defined by what it is not rather than what it is. Be it through complex flavors, eye-catching presentation or immersive on-premise consumer experiences, a segment of the low and non-alcoholic beverage market is taking inspiration from the craft spirits movement to help elevate the sober drinking experience. Earlier this week, BevNET visited New York City to meet with two companies doing just that.
Six months after the U.S. launch of Seedlip, the first venture it has backed in the non-alcoholic space, Distill Ventures is coming back for a second round. At a luncheon event in New York on Wednesday, the London-based beverage accelerator, which is backed by the British liquor and spirits conglomerate Diageo, invited members of the media to learn more about their plans to explore the potential of the non-alcoholic beverage market. Founded in 2013, company has invested over $70 million in 15 brands, with investments ranging in size from $215,000 to $12 million. Though it operates as an independent business, as part of its arrangement with Diageo, the spirits corporation takes a minority stake in the startup and retains a future option to acquire it in full.
In between sips of cocktails made with Seedlip, a plant-based distillate that debuted in the U.S. in January, presented as pairings with dishes from farm-to-table restaurant Blue Hill, co-founder and COO Dan Gasper emphasized that the group’s announcement of its intent to make four $12,000 investments as part of a business development program in non-alcoholic drinks is a clear signal of their belief in the category.
Gasper and Gonzalo de la Pezuela, managing director for North America, explained that Distill’s interest in the non-alcoholic space is based on a combination of overlapping macro trends that have lined up in the category’s favor. A greater interest in healthy or better-for-you choices, along with a wider acceptance of more complex and interesting flavors, were both cited as contributing factors. But consumers’ desire for a sense of occasion or a more memorable drinking experience may be where the greatest opportunity for innovation in the burgeoning sub-category of “what to drink when you’re not drinking.”
“If you’re having a drink with colleagues and you are having a non-alcohol drink while they are having an alcohol drink, you don’t want to feel like the poor relation,” said Gasper in an interview with BevNET. As presented at Blue Hill, the Seedlip-based cocktails reflected that eye towards attractive presentation: one featured a green herb sprig leaning out from the clear liquid, while another, made with smoked maple syrup, had a single small ice cube floating conspicuously in the middle.
“You want your drink to look amazing and be presented in the same kind of fashion that you’d expect a great cocktail to be,” Gasper continued. “More and more, at bars and restaurants around the world, the presentation of their non-alcohol [offerings] absolutely equals how they present alcohol drinks.”
In Seedlip, Distill identified a brand that fit their definition of an ideal investment opportunity in non-alcoholic beverages: a crafted production process, whether distilled or fermented or otherwise; complex and interesting taste profiles that reflect broad culinary influences; and the all-important sense of occasion. While Seedlip’s positioning as a mixologist-friendly base spirit for creating distinctive non-alcoholic cocktails makes it a unique proposition, Distill is also looking beyond the bar space towards existing categories, such as shrubs, kombucha, bitters and coffee, for potential investment opportunities.
“The constructs we may have today may be very different from what entrepreneurs are creating a year or two from now,” said de la Pezuela. “In terms of Distill Ventures, we may have our initial ideas, but we’re really opportunity led. Our goal is really to have exposure to these creators and learn from them, and then take their lead.”
“There are so many bartenders and people who work in the restaurant trade who are making interesting non-alcohol drinks, and there’s definitely a demand for it,” added Gasper, “so we implore people who are making non-alcoholic drinks to think about how they can actually make more of them and make them commercially available because there’s definitely a demand in the market.”
Just a few blocks away from Blue Hill, the concept of a dedicated non-alcoholic beverage bar is being put to the test, if only for a limited time. The Drug Store, which opened last week in Manhattan’s NoLIta neighborhood and will be in place until at least Labor Day, is a pop-up brick-and-mortar bar from functional drink brand Dirty Lemon, best known for its text message-based direct-to-consumer ordering system. Dirty Lemon’s base has grown to over 100,000 customers in four countries, according to the company.
On a hot summer afternoon, customers filtered in and out of the store, studying the five drinks on offer from a menu scrawled in paint on a wall mirror behind the bar, itself hung beneath a vintage neon sign that reads “DRUGS.” Dirty Lemon CEO Zak Normandin was busy installing a new flower hanger outside, another small design detail in a space that took weeks to renovate into a retro soda counter that serves up freshly prepared elixirs with a modern flourish. The rich green tones of the matcha-based drink, made with vanilla, fresh cardamom, rhodiola and fresh squeezed lemons, perked up as a touch of coconut cream drizzled on top slowly moved through a layer of crushed ice. The three elements that Gasper and de la Pezuela identified — craft production, complex flavors and a sense of occasion, both in the drink and the venue itself — are all clearly laid out to see.
“We thought it would be great to show some of the craft that we have going into the bottled beverages in a real life format,” said Normandin. “I think for the Dirty Lemon brand, this brings full circle the entire value proposition of what we are offering to consumers, which is direct access to a brand, products that are delivered directly to home or office quickly, but we’ve never really had a physical presence to gauge consumer feedback or really talk to our customers, and this is what this location allows us to do,”
If successful in New York, Normandin said he plans on possibly extending the lease at the current location or potentially bringing the concept to different cities. Having a dedicated space allows him to think in terms of how to present the brand through different consumer experiences, like after-hours events (with booze-spiked drinks) and inviting guest mixologists to step behind the bar. There’s also room to explore new ways of drinking: for example, the Flavor Trip shot, comprised of one Miracle Berry, a fruit that can make sour foods instead taste sweet, one shot of fresh pressed lemon juice, and a lime wedge.
Normandin noted he hasn’t seen a surge in online business since The Drug Store opened, but that may be missing the point. Instead, he’s focused on building the conversation around Dirty Lemon by creating an overall sensory experience for the brand, one that lends itself to word-of-mouth buzz and sharing on social media.
“It was a great opportunity for us to come in and build an environment that is reflective of the brand,” he said, name-checking several major brands that have explored similar immersive, experiential pop-ups in New York. “The things that are separating those is that people want to come in, they want to have an experience they won’t get anywhere else; they want to share it on social media; they want to be able to tell their friends about it and say they went there. Creating that takes a lot of thought and preparation and dedication to really creating something different.”