Good Beer Hunting

AB InBev-backed ZX Ventures Buys in to Northern Brewer Homebrewer Supply

ZX Ventures, a group backed by AB InBev and located about a mile and a half from ABI’s headquarters in New York City, has formed a partnership—terms not disclosed—with Northern Brewer and Midwest Supply, the largest homebrew supplier in the U.S. for which there are well over a million potential customers.

Innovation and venture groups formed at the periphery of large corporations in other industries—Coke Ventures or Google Ventures, for example—tend to have a similar role of seeking out new growth opportunities away from the core business, or forming relationships early on as a form of pre-M+A strategic positioning. If you’re working with start-ups from day one, the theory goes, not only will you be first in line to acquire the company, but will have played an integral role in making them an attractive target to begin with. And of course, you get a front-row seat as they work to disrupt the industry and glean critics research about the future of the category along the way.

For our part, GBH worked to help form a group that spun out of PEPSICO a couple of years ago before it went independent as a venture partner for tiny food and beverage entrepreneurs trying to help connect the logistical and resourcing power of one of the world’s largest food and beverage companies (co-packing, distribution, food science) with entrepreneurs who didn’t even know what to ask for as they encroached upon a step-change in their business. 

This latest move for ZXV shows a keen interest in finding new channels within beer, which is both close to home for their corporate backer, but as a business that supports homebrewers, is also pretty distant from the larger strategy of ABI. It’s also a clear indicator that ZXV has a healthy amount of independence in its targeting of business opportunities even as they speak with the ABI voice in much of their social media. These deals can become new revenue drivers for stalling companies, sold off at a later time if they fail to produce meaningful results, serve as incubators for testing new ideas, or be incorporated into an existing portfolio if they drift closer to the core business. 

But in the beginning, plays like this are usually tied to the marginal aspects of the corporate backer, looking for low-risk opportunities to leverage existing assets in new ways. For example, as one of the largest producers of hops and brewing grain in the world, there’s a significant resource available in just the surplus and waste of the AB agricultural system. Having alternative channels for these materials, while it may be nominal to the point of invisibility for the ABI system, is a big enough opportunity in the margins for a real business to start growing. 

And knowing that customer acquisition cost is often the biggest hurdle for start-ups, the most attractive element in the Norther Brewer deal is undoubtedly its dedicated audience. 

—Michael Kiser

The Rise Of Corporate Venture Capital: As It Booms In Tech, Consumer Giants Should Follow Suit [Forbes]

Brewing an Exciting Future [Norther Brewer]