Good Beer Hunting

Pardon the Disruption — External Changes Force Internal Adjustments for ZX Ventures


A subtle change appeared recently when London beer retailer Phill Elliott went to look up the rating of a beer.

“Just noticed that ZX Ventures invested Ratebeer now links to ZX Ventures owned Beer Hawk,” he posted to Twitter, referencing a UK online alcohol retailer. “Also how does Augustiner have such a low rating?”

Low scores aside, the sudden appearance of a purchase link may actually be part of a larger shift for ZX, Anheuser-Busch InBev’s “global incubator, operator, and venture capital team.” Elliott, who runs London’s Caps and Taps bottle shop, was unexpectedly clued into what former ZX employees perceive as a purposeful and ongoing shift for the company.

[Disclosure: Good Beer Hunting's studio side is the Executive Producer of a Condé Nast project, October, in which ZX Ventures is an investor.]

Following a July announcement of a ZX restructuring, there’s an assumption that the company’s data capabilities and digital footprint of investments from all over the world will finally become more integrated. According to former employees interviewed for this article, there was a commonly-shared idea that goals for ZX have been shifting toward near-term profits and AB InBev’s alcohol brands, two things that were not explicitly meant to be the company’s main purpose when it was launched just three years ago.

“It makes sense that [AB InBev] doesn’t have a stomach for things that will lose millions of bucks year over year hoping one gets big and hits,” says one former employee who asked to remain anonymous since they continue to work in beer. The disconnect, they say, came from a misunderstanding in purpose. As a venture capital firm, ZX’s mission should be attuned to many options and long-term potential. Instead, new goals suggest to the former employee that “companies owned by ZX should serve ABI.”

The RateBeer situation is a perfect example.

In a June 2017 story breaking the news of ZX’s stake in RateBeer, ZX spokesperson Samantha Roth told GBH that the reason for investment was consumer trends. “It’s a better understanding of the beer consumer, and the beer markets globally,” she said at the time. “That’s really going to help us kind of keep our finger on the pulse.” Founder Joe Tucker, as it happens in so many acquisitions, said nothing would change, however such framework had already been set in place in Brazil, where ZX had worked to connect an Untappd-like social network to a beer delivery service, both of which had been acquired by ZX.

Following the recently-announced restructuring, the head of ZX told in early August that emerging retail channels would be necessary to grow AB InBev's brands. "Today, as e-retailers grow ahead of total market, we are positioned to use them as a source of strength, and actually gain market share as e-commerce grows,” Pedro Earp told the outlet.

This circular path brings ZX to a moment of inevitable change raised by GBH in June 2017. Despite its original place as what was essentially a “disruptive” PE firm, the data made available through ZX investments and the potential connections between businesses may now be at the core of its strategy.

"Having a direct relationship with consumers will allow us to improve our marketing efficiency by directly targeting consumers with the right product at the right time and price, generating a better consumer experience," Earp told just-drinks.

This thinking is at the heart of ZX’s new structure, which has combined its innovation and marketing teams under Earp, who now serves as global chief marketing officer for AB InBev and head of ZX. Miguel Patricio, who previously served as global CMO, is now InBev’s chief of special global projects. A ZX Ventures company spokesperson tells GBH that combining the groups under Earp will allow AB InBev to “harness the strengths of each organization to make strides in the industry.”

Former employees speculated that such a merger was bound to happen as a way to bring ZX closer into the AB InBev fold. Spurred by interest in short-term profits, the long-game strategy of a PE firm could never stick for a parent company focused on quarter-to-quarter improvements, they say. Some former employees described a culture created early on in 2015 that was exciting and lived up to the “disruptive” atmosphere promised, but eventually turned into a situation where individual decisions were made to invest, support, or promote projects or brands to hit quarterly goals and receive related bonuses.

In response to GBH, a ZX Ventures company spokesperson says that “everything we do is with a view to the long term” and that “shifts taking place in the core business will provide us an opportunity to introduce and reinforce the ZX model, ways of working, and structure to new core colleagues.”

For one person, it became a struggle between what they wanted to do for the stated mission of ZX (long-term investment) versus what they felt Earp and AB InBev leadership were seeking (quarterly growth). The latter won out for this person simply because it was necessary to receive an expected salary.

For example, being part of a $17.2 million investment in Starship Technologies, a robot courier service, would be seen as a less-than-desirable choice over a company like homebrew supply store Northern Brewer. The former was clearly something to monitor among changes in e-commerce and the latter presented a chance to do something AB InBev is notoriously good at: building something up with a globally-recognized team of marketers and salespeople rather than creating it from scratch. The last internally-created win, one former employee half-joked, was Lime-A-Rita.

“The people in charge of ZX don’t have the leeway to carry for years hoping and thinking something will be an inevitability that makes them a lot of money 10 years from now,” a former employee tells GBH. “Everybody is working for their employee review and promotions, not five years out. That affects how people fall in line about the objective of ZX.”

The hope, industry pros explain to GBH, was that by this point in ZX’s existence, the company would have already found its billion dollar idea among all its investments. That was particularly relevant, according to ZX investor Maisie Devine, who described challenges from outside AB InBev as a need to create the investment arm in the first place.

“ZX Ventures came about because Carlos Brito, our CEO, realized that we were at risk of being disrupted by external companies, and the best way to defend against that was to actually set up a unit from within the company to disrupt it from inside,” she said in a Q&A.

The irony should not be lost in this scenario: an international conglomerate with billions of dollars in its pockets—the largest brewer in the world and third-largest packaged goods company—saying it was being beat up by others. But in the March 2018 interview, Devine foreshadowed today’s situation, noting that an ultimate goal was to create a “turnkey solution” that allows for ZX to present plug-and-play businesses to support AB InBev opportunities.

“A good example of this is with a company ZX acquired called Hiball—they make energy drinks,” she explained, though reports indicated it was parent company AB InBev who led the purchase. “AB InBev ran into a situation where Monster Energy drinks were pulled from our retail distribution portfolio, and we needed to replace them somehow. But rather than have to scramble around to find a new partner, the business unit came to us and we were able to say, ‘Actually, this isn’t a problem because we just acquired an energy drink company that will close this gap for you.’”

Privately, at least one former employee saw the situation differently, explaining to GBH that getting outside companies excited about ZX investment was easy. There was the money, for sure, but connecting to AB InBev’s resources and supply chain was seen as a coup. The situation with Hiball was easy, they explained, because it was swapping out similar products. But asking wholesalers to immediately succeed with a kombucha brand, for example, was a different challenge when stocking that kind of drink for the first time.

A ZX Ventures company spokesperson says that as ZX looks toward future investment, the company is excited about “beer-adjacent and beer-related products,” which would include specialty beverages, spirits, canned wines, kombuchas, and other alternative beverages.

Future success is increasingly seen with opportunities in technology. In one conversation with GBH, vending machine technology was explained as a potential connection among these options, an area that has gotten attention recently when Anheuser-Busch announced that Bud Light vending machines would offer free beer in Cleveland when the city’s NFL team won its first game of the season. Future alignment between ZX investments and AB InBev products could come from a hypothetical situation where a vending machine at a music festival could accurately check ID and dispense a Budweiser as a way to use technology to improve user experience, one person suggested.

In describing a priority area of future disruption, a ZX Ventures spokesperson says the company has developed interest in technologies as a way to “get products to consumers more efficiently or give them new experiences” through brewpubs, e-commerce, and digital platforms that won’t just provide access to beer, but non-beer products as well.

Just this week, AB InBev announced another move that could create stronger alignment between the parent company and its investment arm that provides just that. Felipe Szpigel, who oversaw the company's High End craft division for four years, is shifting into a new role to start a new venture that falls into the “beyond beer” space. As reported by Brewbound, that new department will include brands like Hiball, Spiked Seltzer, and others, likely something like Kombrewcha, which was acquired by ZX in 2016. These brands and more are listed by AB InBev under aspirations of "expanding the category with near beer" in its 2017 annual report.

The multinational company has huge hopes for no- or low-alcohol products, which could explain why they'd want an experienced leader like Szpigel to help lead the charge. After working to grow AB InBev's craft brands, he's now part of an effort to have these no- or low-ABV brands represent at least 20% of AB InBev's global beer volume by the end of 2025. As for Szpigel’s involvement in that specific effort with AB InBev or ZX, a ZX spokesperson tells GBH that they’ll “share details on Felipe’s new role in the coming weeks.”

All of this hints that the original course for ZX and its accomplishments might not have been enough.

In 2016 and 2017, it became clear that, despite ZX’s goal of leading in innovation, it wasn’t working as planned, GBH was told. In its three-year existence, there was an expectation to have found its billion-dollar idea. That hasn’t formulated yet, which is what’s led to a new focus toward AB InBev.

“The original idea that ZX existed to help AB InBev at the beginning wasn’t true,” a former employee tells GBH. “But now, ZX is coming right out there saying we’re going to do more to help. It’s now a disruptive arm for the parent company. The idea of putting a lot of money into something you think won't really hit for three or four years and will be really huge is not something they have the appetite for.”

One former employee described the situation as a failure to take big gambles, rather than relying on smaller bets. They pointed toward failed opportunities to invest early on in some of the biggest alcohol delivery companies, like Drizly or Minibar, or get involved in some aspect of cannabis, which main competitors Heineken, Constellation, and MillerCoors have all done. A ZX spokesperson says that, as a policy, they don’t comment on merger and acquisition targets or future activity.

This mindset trickled into daily work activities, multiple former employees tell GBH, in which a risk-averse attitude and a top-down leadership structure kept employees from feeling like they could truly take initiative. The new structure of the organization, in which nine global sales “zones” have been reduced to six, could make things tougher due to a consolidation of inner circle leaders. It’s compounded by new responsibilities for Pedro Earp, who has less incentive to consider risky investments, two former employees mentioned to GBH. A ZX spokesperson says that the company welcomes the exchange of ideas, which is needed to “challenge the status quo.”

“We recognize, hire, and promote those people who have demonstrated results and who have ideas, vision, and energy,” they tell GBH.

Oddly enough, despite a potential shift toward more short-term goals, one particular long-term outcome was mentioned to GBH: the grooming of Earp for a larger role within AB InBev. One former ZX employee specifically said they believe Earp could be pegged as eventual successor to current CEO Carlos Brito, especially given Earp’s background with focus on innovation and marketing, two areas identified as integral for future success of the company. Because of this, former employees suggested to GBH that Earp may be more cautious with green-lighting potential ZX projects because of a new C-suite path laid before him.

In the meantime, former employees said the connection between AB InBev, its products, and how ZX can support growth is expected to grow stronger, especially around online retail and experiential efforts through events to maximize “activations” among consumers.

“We all want to make beer the preferred beverage at as many occasions and events as humanly possible,” a former employee tells GBH. “Anything that can improve that experience, even regardless of brand, will be for the better.”

Given challenges to the beer category such as declining consumption and increased attention for wine and spirits, championing beer as a beverage of choice has become a common rallying cry, whether from the Brewers Association or an investment arm of the largest brewing corporation on the planet. Eventually there’s bound to be a capitalistic schism, however, in which it appears AB InBev is hoping that an evolving ZX Ventures will help guide ideas and innovation to get those beer-related decisions toward their products—not just to any beer on a shelf.

—Bryan Roth