AB InBev’s investment arm ZX Ventures seeks ideas the world ‘hasn’t yet even imagined’
To achieve this ambitious goal, the venture group is looking beyond just alcohol for premium but accessible products in categories “that are big enough and stretchy enough to meet a pretty relevant size population’s needs,” can live across channels and ultimately “develop a pretty big consumer base,” Liz Tomic, the global director of ZX Ventures’ Explore Fund, told attendees at BevNet Live in New York City last week.
She recognized that this is a “big, pretty wide mandate,” but it also is one that gives the group the necessary flexibility to “be where consumers are” as they quickly change where they shop and what they buy.
An omni-channel approach
In particular, Tomic noted, ZX Ventures is interested in products that play well across a range of channels from convenience to natural.
“We have to be where consumers are and what is exciting is consumers seem to be discovering products all over, whether it is grab-and-go in 7-Eleven or whether it is traditionally in Whole Foods or whether it is online. So, we have to figure out how to be functional, conversional and effective in all of those,” Tomic said.
She acknowledged that “convenience is a channel that we have a lot of experience in” and in which the group currently may be better-suited to help brands grow, but she added because “we see so much innovation and so many new brands happening in natural, we are learning that space and building muscles there.”
She added that the group can also help brands play in between those two extremes by leveraging its expansive “traditional partnerships with the banner chains across the country.”
With that in mind, Tomic said that ZX Ventures is looking for companies with a “replicable model” that can deliver traction in different channels and geographic regions.
A need-state of mind
In terms of which categories most interest ZX Ventures, Tomic said the group is building an investment strategy around “need-states.”
She explained, “We have kind of stayed away from category specific ingredients because those feel small and kind of boxed in for us.”
But an example of a “need-state” that has strong growth potential in which the group is interested is “fuel,” Tomic said.
“Fuel is really interesting. So, there used to be categories called functional, energy, coffee,” but “the categories are all blurring together” so that today’s consumer wants hydration, flavor and energy all from the same product, she said.
This evolution, combined with the fact that the category plays well to AB InBev’s strengths in convenience, can and single-serve, makes the category “exciting for us,” Tomic added.
Another category in which the group is interested is “fermented fizzy stuff,” which Tomic says “is near and dear to what we make. So, the fermentation process is something we know very well and there are a ton of products that are unlocking benefits through fermentation.”
People are pivotal
Even more important to ZX Ventures than the product or space in which it plays, are the people behind a potential investment, Tomic said.
“We are trying to partner with folks who are obsessed with their problem, obsessed with testing and learning and building the category and brands with us as partner,” she explained.
In addition, the group is looking for entrepreneurs who know where their consumers are, where their velocity is and have a plan to maximize both.
Tomic explained that while the group operates a bit like a “training camp” with the idea that it should “scout early, get in position, partner up and get to work” as quickly as possible, it also has aspirations that are “bigger than the learning lab,” which means it wants to work with people who can fail fast, learn and tighten up the feedback loop to grow quickly.
This requirement, if met, opens the door to companies of all sizes, Tomic added. “There is no such thing as too small. … If there is something super early stage, but there is a team behind it who seems to know” what they are doing and where they are headed “we are happy to be there,” she said.
Investment in Wave Soda exemplifies ZX Ventures’ interests
Tomic noted that a good example of the type of company and product in which ZX Ventures is interested is the naturally caffeinated sparkling water company Wave Soda, which the group announced an investment in June 13.
The two-year-old startup was founded by industry veteran Nat Noon out of his personal desire to kick his 12 diet cola a day habit, according to a ZX Ventures spokeswoman. She added in an email that the low-calorie, low sugar beverage’s blend of sparkling water, all natural fruit juice and 42 mg of caffeine “fills a gap in the sparkling water sector,” which is expected to grow 75% by 2020.
“Flavor, bubbles and a little bit of caffeine seems like a really big space and is one we understand consumers to be actively looking for new things,” Tomic added, noting it also is a combination that plays well to AB InBev’s strengths in energy, fizzy and convenience.
Wave Soda also delivers on the combination with a solid product that “is delicious, high quality and loveable,” which from an investment standpoint checked ZX Ventures’ product box “pretty quickly as meeting a big need in a new way,” Tomic said.
In addition, she said, the product checked the group’s desire for products that can be marketed across a variety of channels, and the box for a solid growth plan with ZX Ventures’ help.
Finally, Tomic said, “the cultural fit is great. Nat is super humble and knows what he knows and knows what he doesn’t and has a clear point of view on he wants to engage with some of that right now.”
All of which, she added, sounds like a recipe for success to the venture group.
