Diageo Finds Its Entrepreneurial Streak With Fresh Strategies For Product Development

November 18, 2015
Seeking to diversify on the new product front, Diageo is now deploying some entrepreneurial strategies that differ starkly from the development systems used for its major brands.

“Scale innovations of our big brands will always be critical to our growth, but we need more,” Diageo chief executive Ivan Menezes told investors in New York last week. “We need disruptive plays, but we need to do it in a way that doesn’t distract our innovation team from what it’s good at—growing scale brands.”

One effort to develop those “disruptive plays” is the company’s Distill Ventures unit, launched last year in Europe, then Asia, and now recently moving stateside. Diageo is Distill’s sole investor, but the operation is run by entrepreneurs who are “incubators and accelerators,” Menezes noted. “This is an established model in the world of tech start-ups, but no one except us is doing it in spirits,” he added. “The aim is to help the best entrepreneurs sell and scale up outstanding spirits brands.” Distill currently has eight seed investments across whisky, gin and vermouth as well as some categories that don’t have a name yet, Menezes said, adding that the company would likely unveil at least some of these brands within the next 12 to 18 months.

Elsewhere on the innovation front, Diageo has established Whiskey Union, an experimental craft offshoot billed as “a collective of whiskey makers, thinkers, believers and pioneers." Whiskey Union’s brief is to create unorthodox whiskies, and not necessarily in Scotch. Thus far, it has developed three products. One is Smoky Goat, a sweet and smoky blended Scotch. Another is Boxing Hares, an “easy-drinking spirit” at 35% abv, made from Scotch whisky infused with hops and classified as a spirit drink. The third is Huxley, a blend of Scotch, Canadian and American whiskies.

Smoky Goat and Boxing Hares launched in test markets last week in Berlin, Hamburg, Munich and Vienna, while Huxley is still in development. “We’ll learn what happens in (those cities) and then decide on the scale and pace of a global rollout,” David Gates, head of premium core spirits, said. Smoky Goat is positioned against mainstream Bourbons and retails at €24 ($25.50), while Boxing Hares is at €22 ($23.40).