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Exclusive: Diageo Tests The Non-Alcohol Sector Again With Stake In Chicago-Based Ritual Zero Proof

January 6, 2020

Diageo brand accelerator Distill Ventures has acquired a minority stake in non-alcohol spirits producer Ritual Zero Proof, bringing the Chicago-based company into the fold. Ritual’s alcohol-free whiskey and gin products are created with similar taste profiles to their alcohol-based counterparts, and are marketed as alternatives for use in classic cocktails like the Gin and Tonic or Whiskey Sour. The Ritual labels currently are available at retail in Chicago only, and online through Ritual’s website and Amazon, priced at $25 a 750-ml.

Brand co-founder Marcus Sakey tells SND he was inspired to create Ritual during a break from drinking. “More than anything else, I missed making a cocktail and sitting down with a book and a drink,” he says. “It was the ritual of the thing.” Sakey, his wife GG, and close friend David Crooch founded Ritual last year. The trio brings a combination of backgrounds from the worlds of advertising, natural foods, and management.

DTC sales are a key channel for the brand going forward, according to Sakey. “Direct to consumer provides a massive marketing platform in addition to an actual sales platform,” he says. “We’re using DTC as the crowbar to crack open the door to awareness and acceptance.”

Though consumer knowledge and category understanding of non-alcoholic spirits is still in its early stages, Ritual says its concept of direct substitution will facilitate growth. “It takes a little bit for people to wrap their heads around this category,” says Distill Ventures portfolio director and non-alcoholic portfolio lead Heidi Dillon Otto. “But with Ritual designed to be substituted, one-for-one, with alcoholic spirits in classic cocktails, it’s direct.”

At $25 a 750-ml., Ritual’s products are priced at parity with the super-premium spirits segment, but Dillon Otto says price sensitivity isn’t the main concern. “If consumers can get a mirroring of an occasion and experience in which spirits are normally used, pricing typically isn’t coming up,” she says.

Sakey is also confident that Ritual can succeed in the on-premise. “It’s used the same way that mixologists make inventive, sophisticated drinks,” he says. “Now they can just do it in a non-alcohol version.”

Non-alcohol brands now comprise 25% of Distill Ventures’ investment portfolio. The company kicked off its activity in the category back in 2016 with Seedlip (in which Diageo took a majority stake last August) and sees a strong future there. Dillon Otto notes that Whole Foods named non-alcoholic options one of its top 10 trends for 2020.—Shane English

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