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Diageo invests in German non-alcoholic ‘spirit’

Drinks giant Diageo has bought a minority stake in a German gin producer that created the country’s first non-alcoholic ‘spirit’ alternative.

Rheinland Distillers’ founders Raphael Vollmar and Gerald Koenen have received investment from Diageo through the drinks giant’s venture capital arm. (Photo: Rheinland Distillers)

Distill Ventures, the venture capital business funded by Diageo, has invested in Rheinland Distillers GmbH, a company founded in 2014 by long-term friends Raphael Vollmar and Gerald Koenen.

Distill Ventures is designed to help small brands scale up their business, receiving a percentage of interest in return. It has already invested in a number of non-alcoholic brands including US startup Ritual Zero Proof and, more famously, UK ‘spirit’ alternative Seedlip.

The pair claim they launched their brand with just €4,000 to their name, after deciding they wanted to “disrupt the gin category” with their Siegfried Rheinland Dry Gin. Four years later, Vollmar and Koenen brought a non-alcoholic alternative to market, called Siegfried Wonderleaf. Wonderfleaf is Germany’s first non-alcoholic spirit alternative, and is made with the same botanicals as the company’s full-strength gin.

Siegfried Rheinland Dry Gin and alcohol-free alternative Siegfried Wonderleaf (Photo: Rheinland)

“At the beginning, we asked ourselves how far we, as people from outside the industry, would be able to go in such a competitive market with a handcrafted product, €4,000, hard work and a lot of passion,” Vollmar said.

“With today’s step, we are answering this question for ourselves and are delighted to be able to carry the Siegfried brand and the associated attitude to life even further into the world than we ever dreamed possible.”

This deal means that Diageo is extremely likely to acquire a controlling stake in the company in a few years. Speaking to the drinks business last year, Distill Ventures’ co-founder Shilen Patel said that when brands join their accelerator programme, they “set a threshold, such as a certain sales volume” to determine when Diageo will make its acquisition.

There has been a surge in interest in non-alcoholic drinks designed for grown-up occasions in recent years, and even during lockdown. According to Nielsen, like-for-like sales of low- and non-alcoholic alternatives in the UK rose 25% to £116.6 million last year, and there are now more than 50 non-alcoholic spirits on the market in the UK.

The company follows in the footsteps of UK brand Seedlip, which was launched by Ben Branson in 2015, and received investment from Distill Ventures a year later. Diageo bought a majority stake in the company in 2019.

Siegfried is the first brand with both an alcoholic and a non-alcoholic product to join Distill Ventures’ portfolio, around 25% of which is now made up by non-alcoholic brands.

Rheinland Distillers is also known for its unique brand campaigns and partnerships with designers and brands across various industries. In 2019, the distillery collaborated with German pen maker Edding on a custom gin bottle.

Frank Lampen, co-founder and CEO of Distill Ventures, said consumers want “the freedom of choice whether with or without alcohol. We look forward to working with Gerald and Raphael to take the Siegfried brand to the next level, imagining a future world of spirits together.”

Elizabeth Brown, group strategy director at Diageo, said Siegfried has a “digital-first business model, offering great consumer choice.”

“We are thrilled that they have joined the Distill Ventures portfolio and look forward to supporting Raphael and Gerald on accelerating the Siegfried business.”

Diageo looks to the US for next non-alcoholic ‘spirit’ 

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