The investment principal of the sustainability and circularity pillar of the frontier funds at AB InBev explains how the world’s biggest brewer taps into the future of food
By Murielle Gonzalez
Brewery giant AB InBev is paving its way to the next generation food industry through partnerships and by nurturing new ventures inside and outside of its core business. The company made headlines in April as BioBrew, the technology platform of its corporate venture capital arm, ZX Ventures, teamed up with start-up Clara Foods to produce alternative protein through fermentation at scale — and Lauren Rodriguez, investment principal of the company’s sustainability and circularity pillar, tells NutritionInvestor there are more announcements on this front on the drawing board. “We’re having a lot of exploratory conversations with different companies along the food supply chain, trying to figure out how we can get involved in this space through partnerships, and be a kind of enabler for the bioengineered food space,” she says.
Rodriguez, who joined the investment firm as a venture partner in 2017, says the investment strategy of ZX Ventures makes it stand out from other corporate venture capital firms. “ZX Ventures was launched six years ago, and it was kicked off to help AB InBev disrupt itself in the craft and speciality beer segment — its core focus was on acquisitions and development of competitive craft beer brands and breweries with a thesis around direct-to-consumer. It was pretty early on for the company to have a CPG route, but AB InBev was focused on e-platforms to establish those connections with consumers,” she explains.
ZX Ventures evolved quickly and is now structured in four different funds — one for beverages, another for direct-to-consumer businesses, and two so-called ‘frontier funds’, which share the same investment thesis, but are separated by the stage and maturity of the business they look into.
“I’m part of what we call ‘new venture fund’ and we look at seed through to Series B stage businesses. We also have a growth equity fund that is focused on late-stage investments, ” says Rodriguez, noting the sustainability and circularity pillar is one of three verticals of the new venture fund, alongside supply chain and logistics and the future of socialising.
Rodriguez came aboard two years after the launch of ZX Ventures, having spent a year working on the sustainability front with global meal-kit provider HelloFresh and Marine Well Containment Company. Her role in ZX Ventures evolved alongside the restructure of the firm, which was completed last year.
“When I joined ZX Ventures, AB InBev had made a number of pretty progressive sustainability goals,” says Rodriguez. “It wanted to have 100% renewable energy for all its breweries and a number of goals around water and packaging — it was pretty bold, and I was excited about working for a company that has baked the sustainability function within its operation.” For Rodriguez, the opportunity to continue to work in the start-up scene was another reason for joining the company.
ZX Ventures — a strategic investor
ZX Ventures has seen the launch and growth of more than 100 companies over the years. Rodriguez reveals that a large number of those ventures have matured and are now part of the core of AB InBev while others continue in the portfolio of ZX Ventures. “The new venture and growth equity funds comprise 25 businesses, and about two-thirds are minority investments,” she says.
Rodriguez explains that the company either invests in building businesses using the resources of AB InBev and ZX Ventures, and those are wholly owned businesses, or makes direct investments in external start-ups where there is a strategic relationship with the company. “Typically, we look for opportunities where our relationship can be mutually transformational,” she says.
The transformational mindset is precisely what drives the sustainability and circularity pillar of ZX Ventures, which is Rodriguez’s core focus. Under this pillar, she looks for opportunities to upcycle or repurpose AB InBev’s assets and capabilities into new businesses — and protein and fibre company EverGrain is one such example. Launched last year and backed by AB InBev, EverGrain transforms spent barley into high-quality, sustainable ingredients to create nutritious food and beverages.
Take Two Foods, a US company that produces and commercialises Barleymilk in the US, is a wholly-owned subsidiary of EverGrain. The start-up uses upcycled ‘rejuvenated’ brewer’s spent grains, which otherwise would have gone to waste or used in animal feed or fertiliser applications, to create a milk alternative that is high in protein, vitamin D and calcium, and low in sugar.
“EverGrain is one of the best examples of creating new ventures from upcycled assets and capabilities,” says Rodriguez. She adds the company has made a few direct investments recently, which have not yet been announced. “I can’t disclose the most recent investments, but I can say that one is a blockchain technology platform that provides traceability into our supply chain,” she explains.
For Rodriguez, having that visibility in the supply chain all the way back to the farmer provides significant value to its network, which comprises direct relationships with more than 20,000 farmers around the world.
“We do look into agriculture, and that’s kind of a key interest area for sustainability investing,” says Rodriguez. “Through our investment in the blockchain platform, we’re providing value to the farmer itself because the platform provides them with a record of their economic activity. And that company helps us to meet our own goals on sustainable agriculture and farmer empowerment as well.”
To the point
What opportunities do you see in the market for new ventures?
There are two trends that are really great for us being able to create new ventures from our existing assets and capabilities — upcycling and plant-based protein through fermentation, which are complementary to tackling the food waste crisis.
As well as the ability to upcycle spent grain, spent yeast and other things like CO2 offtake. We’re looking into how we can leverage our capacity to produce value-added ingredients and other products.
We’re the world’s biggest brewer, so fermentation is core to our capabilities, and this technology has taken centre stage in the alternative protein space, where a key gap for a lot of the emerging businesses in the sector is production at scale. Ab InBev does that every single day and we are really excited to be getting more involved in this.
What sort of companies are you looking at?
For us, this is a great way to expand our vision and go beyond beverage and become a total food and beverage company. We are looking at players along the value chain within fermentation and in the bioengineered food space, trying to identify the key players who would make the most interesting investments.
It’s a ‘rising tide lifts all boats’ sort of approach at this point in the fermentation space because there needs to be a lot of investment across the value chain for this to be successful. We’re not only looking to participate and offer our own capabilities and helping to enable the scale-up but also looking at investment opportunities that are right for us both upstream and downstream.
What is the market potential of upcycled food?
I’ve been interested in the circular economy since I first read William McDonough’s Cradle to Crade about 15 years ago, and back then, there were very few organisations keyed into this space, such as the Ellen MacArthur Foundation and Closed Loop Partners — it was not mainstream.
But over the past two years, consumer awareness of the need for circularity, and what circular economy means, has just exploded. I think our collective attention has been focused on these sort of topics as we’re all been at home, but that’s really helped to amplify the awareness of health, wellness and the environment.
Consumers are showing an interest and willingness to try things that we might not have thought of before, like upcycling waste streams into human food products. It was always a little bit of a long shot, but there’s an incredible openness to it now.
Are functional drinks and low alcohol companies of interest to ZX Ventures?
From a sustainability and circularity standpoint it’s not a priority area, but it is for the beverage fund. AB InBev already has a number of low and non-alcoholic products in its portfolio, and this is a huge space to play in — it’s a big innovation opportunity.
What’s the approach to functional drinks powered by hemp and cannabis compounds?
Cannabis is not something we’re willing or able to take a chance on given the regulatory environment. It’s clear that there is a lot of potential for these ingredients and they could well be disruptors or complementary, but it’s not something we’re pursuing as a company.
What segment are you most excited about?
We’re really excited about opportunities in emerging alternative protein and this kind of upcycled ingredients. And one of the benefits of us being a corporate venture group tied to AB InBev, which is such a big company, is that we have the potential to be a strategic partner for a lot of emerging brands and companies. And that tends to be the best pipeline and deal sourcing mechanism for us.
Rodriguez recognises that ZX Ventures is a strategic investor, always on the hunt for potential partners for AB InBev. The company’s 100+ Accelerator, which is now in its third year, is yet another way in which the company engages with next-generation food companies.
The accelerator is designed to attract external companies with innovative solutions to AB InBev’s core sustainability challenges related to agriculture, climate, water, and packaging — and it’s currently accepting applications until 31 May. “Companies that are accepted into the accelerator run pilots with AB InBev and will be considered for follow on investment depending on opportunities for a continued strategic relationship,” she concludes.
Date published: 12 May 2021