After over a decade of investing in emerging spirits and adult non-alc brands, last week it was confirmed that Diageo’s Distill Ventures will cease bringing new brands into its portfolio. Diageo’s official line is that it has “undertaken a strategic review” of its approach to early stage, venture investments and a smaller team will manage a reduced portfolio. It’s not the first time an accelerator attached to a strategic has folded, but DV has been one of the most visible. So does the wind-down say anything about the state of the spirits business? Yes and no. Accelerators often go through cycles, and after six acquisitions, Diageo’s goal may have been accomplished. Beyond that – but still from a multinational’s point of view – it does signal that the group is looking at “their marquee brands for future growth,” said UK-based Olivier Ward, distillery consultant and founder of platform Everglow Spirits. Just as we’ve seen major spirit groups offload non-core brands, priorities are shifting to milk more out of flagship products for future growth, with new products likely to come out of core extensions. And as for Diageo’s M&A outlook? When smaller incubators within larger multinationals fold, it’s often because the larger company may plan to focus on core brands, divest tail brands, and pursue larger and more transformational M&A opportunities, versus spending time and energy on smaller brands, said CEO of No Sleep Beverage Nick Papanicolaou, who headed the mergers and acquisitions team for Pernod Ricard USA before launching its former incubation division, New Brand Ventures. As for emerging brands, with the demise of some of these incubators and accelerators, pressure is on to raise capital, possibly at less favorable terms, without the benefits of consolidated operational, distribution or marketing expertise. That means innovation in spirits across the board will continue to shift: the thesis behind a lot of these corporate-owned incubators and accelerators was to cultivate greater thinking about innovation, new categories and new consumer touch points that maybe “a more rigid corporate architecture had lost touch with,” said Southern California marketing and sales consultant Arthur Gallego. With the spirits market saturated and sales down, the closure also “shows just how hard it is to go from craft operation to major name, no matter how much money you throw at it and who is backing you or their expertise,” said Ward. Insiders can read the full article. | 
