Diageo acts like a venture fund by taking minority stake in spirits start-up
- April 25, 2007
||acquisition of minority shareholding announced, April 2008;
||Nuvo (UK), ultra-premium French sparkling spirit start-up;
||Diageo plc (UK), worldâs leading premium drinks business;
||The London Group LLC (UK), backed by entrepreneur Raphael Yakoby;
||âground floorâ investment in exciting innovative brand /product formula;
||backing of large group for distribution in US market;
||Yakoby earlier started up Hpnotiq, a similar ultra-premium drinks proposition
âThis is a great example of a big company acting small to leverage the entrepreneurial spiritâ, as Diageoâs news release neatly put it. The deal confirms yet again the trend for the global beverage players, whether alcohol or soft, to invest in bright new-generation products even at a very early stage in their development. You couldnât get much smaller than Nuvo, which hasnât even been launched yet; it almost look as though a big group like Diageo is doing what venture capital used to do.
At least with Contellation Brandâs acquisition of Svedka, or Cokeâs buying of Fuze, the target companies had a few yearsâ history, portfolio evolution, volumes and growth to justify being on the buyersâ radar screen.
With Nuvo, it appears we have a brand that hasnât even be launched yet â âNuvo will initially roll-out in New York and Miami with additional US cities to followâ. Diageo is clearly taking a âpuntâ on Nuvo, taking a minority stake presumably with no risk of being criticised for over-paying, as CB was over Svedka.
As for Yakoby, why would he admit a big strategic investor at the start-up phase? Most entrepreneurs wouldnât like to do this. Although little data is available, our hunch is that Yakoby learnt lessons from his Hypnotiq experience â that a new brand needs big distribution power from day one.
We should also take a look at the Nuvo product proposition, as it provides a curious insight into consumption and marketing trends, at least in the somewhat exceptionalist US market.
Both Hpnotiq and now Nuvo leverage the French flair for luxury, innovative product formula and packaging, and product positioning. Nuvo sounds like an up-market Bacardi Breezer, being a mix of vodka, sparkling wine and fruit nectar.
The fact that itâs to be packed in single-serving bottles suggests that it will be sold through horeca rather than retail. Of course, an elaborate product like this has a high risk of being faddish and shortlived.