AB-InBev’s ZX Ventures has topped USD 1 billion in turnover

USA | After the abandoned IPA and the sale of Australia’s brewer CUB to Asahi in July 2019, AB-InBev must have felt compelled to issue some genuinely positive news, and pronto: The head of its incubator, ZX Ventures, Pedro Earp was giving interviews to CNBC and Bloomberg.

The gist is, the stand alone unit, which was founded in 2015, has already seen its turnover break through the USD 1 billion threshold.

Like all corporate behemoths, AB-InBev’s board had become increasingly worried that its size and structures would prevent it from being quick on its feet. As points out Mr Earp, AB-InBev had not focused enough on innovation and needed to speed it up. “The problem with innovation is that innovation takes time, it requires effort, it doesn’t pay back overnight. So, whenever you let some of the innovation efforts compete with a core business, you know innovation in the long term is also second priority.”

Hence ZX Ventures was set up. It was housed it in a different building from AB-InBev’s offices in New York and was given its own separate business functions, such as HR and finance.

What Mr Earp chose to disclose is this: Today ZX has 1,500 employees, owns stakes in more than 60 companies, and in 2018 accounted for 10 percent of AB- InBev’s global sales growth (!). We checked: From 2017 to 2018, AB-InBev’s turnover declined by USD 2 billion while EBITDA and EBIT remained basically flat. So we are not sure on which set of financials Mr Earp bases the latter claim.  

The cheeky claim notwithstanding, Mr Earp revealed that there are few limits on what ZX can invest in. It seems that ZX mainly focuses on novel types of beverages and data, all aimed at tracking and predicting future consumer swings.

Guess our surprise, that Mr Earp failed to admit that in July, his unit sold the homebrew equipment company Northern Brewer to a private-equity firm. ZX bought Northern Brewer in 2016, saying then that it was “excited to enter the homebrew space”. Northern Brewer, which was founded in 1993, also sells cider, kombucha and winemaking kits. At the time, many thought the home brew supplier was a great investment as it would allow ZX to suss out potential competitors – those about to make the leap from homebrewer to professional craft brewer. Perhaps they were wrong.

Instead, Mr Earp boasted that ZX is working with the company Zea10, which makes protein snacks from spent grain left over after brewing. These are marketed to the yoga crowd. Another company, called Cutwater Spirits, offers premixed cocktails in single-serve cans.

However, more interesting are ZX’s investments in websites such as Britain’s BeerHawk.com and France’s Saveur-Biere.com, through which it gains insights into purchasing trends and emerging flavours. It is also involved with the beer delivery app Ze Delivery and vending machine firm Beer Box. As reports Bloomberg, ZX has a sister innovation lab that has invested in WeissBeerger, an Israeli start-up that installs software in bars’ cash registers to collect data on what drinks sell best at different times of day.

Part of Mr Earp’s task is to find new ways for AB-InBev to grow sales, whether this means different products like low or non-alcoholic beverages, or selling beer differently.

ZX claims it owns more than 500 bars internationally. It has launched e-commerce sites too. On its Brazilian e-commerce site Emporio da Cerveja, for example, it noticed that people were searching for Beck’s, which wasn’t available in the country. So, it added the brand to the website and it shot straight into the top five beers.

Eventually, ZX’s learnings will be applied to the rest of AB-InBev’s business. “We’re going to a second phase, which is how can you bring some of these learnings … to the core business, how can we become more agile, how can you come closer to start-ups?” he told CNBC. At the same time, Mr Earp will use some of AB-InBev’s huge reach to scale some of the products coming out of ZX.

Investing in start-ups is probably the easy bit. Making AB-InBev change its ways could prove a lot harder.