We recently interviewed David Kestenbaum of ZX Ventures at Shoptalk. ZX Ventures is the global growth and innovation group with AB InBev, the world's leading brewer. They have noticed how ecommerce businesses are changing the game for traditional retailers and they are adapting to how consumers are now buying beer and other beverages.
Read further to see how David and ZX Ventures are innovating the beer industry.
Tell us about yourself and ZX Ventures.
I'm David Kestenbaum. I look after strategy, for eCommerce within ZX Ventures. ZX Ventures is global growth and innovation for AB InBev. My role, eCommerce is one of the business units under ZX Ventures. My role is to look at the strategy overall. We have eCommerce operations in 20 countries today. Part of the operation is what we call eRetail, which is basically building partnerships with the Amazons and Walmarts of the world, their online divisions and startups that you are seeing in the marketplace.
We advise them from an account management standpoint. How to grow the category faster and more things like that. It's all about category development. It's about making sure we have our fair share on those platforms and doing cool stuff for the consumers as they move their shopping trips from the physical store to the online world.
The other side of the business is, mostly outside of the US, but we also have direct to consumer platforms as well in 17 different markets. There is some very specific consumer needs that we've identified that are interesting that technology allows us to deliver good solutions for them. An example of that would be a long-tail craft beer. We have a variety of these, but Beer Hawk is a good example that we acquired in the UK.
Imagine going to a store where you find 1500 different brands, curated, discover what styles you like, what brands you like entertainment. There is something around discovery and curation. We also have eCommerce businesses focused on on-demand, so you run out of beer at a party, you want to keep it going, get the beer there cold within 30 minutes.
Then we also have subscription services. In Mexico and Brazil, we've piloted subscription services. My role is to support this portfolio of eCommerce businesses that we have across these different markets. I'm focused on both the retail and direct to consumer businesses.
I also lead innovation within eCommerce. Entrepreneurs in different markets are always coming to us with new ideas, and we kind of manage an internal funding process to innovate new business models and things like that. Lastly, I also look after our acquisitions and investments.
We also might want to acquire companies, make minority investments, and things like that. That's another tool that we have. But at the end of the day, we're taking the eCommerce space and it's buy, it's build, it's incubate, it's invest. We have a lot of tools through ZX that we can use.
What’s your goal at Shoptalk?
I'm wearing my investor hat, so I'm looking for interesting companies to invest in. I'm talking to venture capital funds, understanding how we can work together. Sharing our investment thesis. What's the role we play, kind of from a corporate venture standpoint, and the value we bring to companies that we would invest in. Basically, kind of building that network, and looking to build the pipeline.
What are you looking for when investing in companies?
Our investment thesis is broad. It's less important what they do, and there's criteria and characteristics that I think are more important. From an investment standpoint, we're not a financial investor; we're a strategic investor. We have a threshold of what we want to earn, but we're not just looking to make money. We're looking to do things strategically.
First filter is that we have some sort of investment thesis around what they do. That's interesting to us, so we don't just take anything. Then great teams. If you're not a great founder, if you don't have a great founding team, it doesn't make sense, because I've talked to a lot of different venture capital funds.
There is this famous quote. Which is people who get in the business, the original 95 percent of it, I believe 95 percent of whether a company is successful, is the people. After being here for a while, we have a belief that 99 percent is about people.
We're looking for great founders. We're looking for people that are solving big problems, so we don't want to look at opportunities that aren't going to be tens of millions, and even more.
We need to be able to add value to this company. We talk about, I can tell you how I think we can potentially add value, but if I can't help that company grow, and it get to that next level, that next milestone, it doesn't make sense.
We really need to have a value, and at the same time, we have to make sure that if this company is successful, we're successful. We kind of have to be in it together. Some of the ways, we can add value from a ZX standpoint and from an AB InBev standpoint is, in terms of our products and our portfolio.
A good example of that is one of our acquisitions: Beer Hawk. One of their top selling SKUs is a product we had called PerfectDraft. It's this unit where, at your home you can have draft beer whenever you want, and consumers loved it for a long time. But stores weren't a good platform to distribute it.
They'd have to bring the keg back. It's a whole refill system, so it found this nice home in an eCommerce business that could handle the reverse logistics. In that case, now we're a key part of their value proposition, and that's a fast-selling item for them. We are adding value from the portfolio standpoint.
Another place we tend to add values to our supply chain and distribution. Whether it's producing a product that maybe they don't have the expertise to produce, to brew. We can, once someone has developed a brand in Whole Foods for example, it's more on the consumer and less on eCommerce, but we can take them national overnight, the relationships we have, and stuff like that.
Then also we have some knowledge and intellectual property. We have connections to other CPGs, suppliers, our customers that can be valuable. If people, if your business relies on tapping into some of that that we have, then that's a good fit for us.
We've been fascinated by the rise of CPG going direct to consumer (DTC). What do you think about direct to consumer for your business? What's the thinking behind the direct to consumer portion?
I think a lot of it is about learning. About getting closer to the consumer and really understanding their behavior. Because a lot of times, we're distributing through wholesalers and retailers. We're not necessarily interacting with that consumer all the way through to their purchase. Anytime you can work with them directly, learn more about their buying behavior, the user journey, that's valuable insight.
Some of it's opportunistic that you just find a need that's not met by the current route to market. On demand is a great one. There are some players popping up in the space, but having beer delivered in 30 minutes is important for certain situations. Next day delivery is just not going to do that. In some cases, there really is opportunity going direct to consumer to fulfill a new consumer need.
At the end of the day, our biggest channels I don't think will be direct to consumer. It's going to be through our grocery partners, our convenience store partners. A lot of the volume and efforts are focused there. I think on the direct to consumer side, we can build some nice relationships. We can get some valuable data, and then even be a better partner to kind of our high-volume channels where most of the traffic is.
I think RateBeer is an interesting one to talk about. RateBeer is the largest database of expert reviews on beers. I don't know how many, do you know how many brands they have?
Basically, that was really an interesting business that had all these experts there, a really engaged community. What we're trying there now is to build that into a marketplace where people find the ratings for beers.
In a crowded space of craft beer, it can be overwhelming sometimes to understand what's good and what's not good. If I like this, then I might like this. And then show them where they can find that. If they want to go to a physical store, or to take them to an eCommerce website where they can buy it and have that delivered. That's an example of an innovation project.
I think our innovation approach might be worth chatting about as well, because we've really evolved over the last few years. We've had ZX and how we think about innovation and moving away from stage gating to really more of a design thinking focus and thinking about what success looks like for an early stage, versus moving through to different stages.
This idea of turning great beer into a marketplace is going through this innovation process, where you're getting something into the market. You're prototyping. You're seeing if you have good product market fit. If you have a viable business, and you're iterating on that. So that's kind of been an interesting success story of taking something that we bought and putting it through our innovation process and evolving in the business model.
What is a trend or what you're looking at for the future of commerce? What's going to be a big thing?
I think what's happening in China is super interesting. The way Alibaba and JD have started with these massive platforms, huge consumer database, and now working backwards in the supply chain, right? JD has new pathways and Alibaba has linked Shongtong. They are starting to do B2B. They have these 600 million consumers that buying on their sites that, if you're a part of a franchise store model with me, I can direct that traffic to you. And I'll also give you mobile ordering, inventory management. They're really adding a lot of value to businesses, the mom and pops, and working kind of backwards in the supply chain.
You can think about a world where they have relationships with 600 million consumers. Out of the 6 million traditional trade accounts in China, being the main distributor for that, so imagine all the data that they sit on top of. You can imagine a world where they work even further back and start to use that data to create new products, their own brands, and things like that. I think that's a very interesting thing that if you are a CPG, if you are any brand, you need to be aware of, and think about what that means for your route to market, and how you can maintain relationships with consumers, with your retailers, et-cetera.
Do you have any advice for our readers?
I think a good exercise for any brand to dois really think about their infrastructure and the assets they have, and how that could be used in different ways. A great example is if you think about Walmart competing with Amazon. They have all these stores that can be turned into pick up points. While a lot of these retailers are under pressure and they are starting to think in more innovative ways how to use this, I think if you're a brand, I would encourage you to do that as well. We visit six million accounts on a regular basis. In Brazil or in Mexico, we go to places that maybe the post office doesn't get as regularly .
I would encourage, if you are a manufacturer, if you are a brand, think about these assets that you have, and how you could use these to improve the consumer experience. You might find some interesting business models that pop up that maybe you haven't thought about.
