The Bible says: "Let them [men] have dominion over the fishof the sea and over the birds of the heavens and over the livestock and over all the earth and over every creeping thing that creeps on the earth."
After being given dominion, the question Man has then faced has been what to do with this power. The answer has sometimes been found in consumption of those it controls.
But with the World Bank estimating there to be nearly 6.8 billion people in 2009 and a further billion on their way by 2030, the way in which resources are consumed is growing in importance.
Fred van Ommen, senior vice-president of innovation at Philips, in a keynote speech at the International Business Forum’s (IBF) Corporate Venturing and Innovation Partnering conference in February, said climate change was one of four strategic issues at which the Netherlands-based electronics conglomerate was looking. The others were an ageing population, emerging markets and more empowered consumers.
Companies within the consumer sector, such as those producing and selling fast-moving goods in food and related areas, are using corporate venturing as a way to find technologies or business models to reduce their ecological impact.
Sweden-based furniture retailer Ikea set up its €50m ($70m) GreenTech fund in 2008, and in October invested €2m in Alelion Batteries for energy storage. France-based dairy producer Danone has blurred the line into venture philanthropy with its €100m Danone Ecosystem Fund, set up in 2009 and which also collects 1% of the company’s net profit each year in order to boost jobs and the economic impact of the company in local markets by examining better ways to source, distribute and recycle.
Anglo-Dutch consumer goods maker Unilever also uses direct and indirect corporate venturing holdings, for example through Unilever Ventures, Physic Ventures and Langholm Capital, to back companies in similar areas, such as HaloSource for water purification and Recyclebank to deal with post-consumption issues (see profile of Unilever).
Consumption patterns are affected by age. Outside China, most emerging markets are facing a population increase due to the number of people under the age of 25, while in developed economies the baby-boomers born after 1945 are starting to retire.
US-based AARP (formerly the American Association of Retired Persons) estimates 10,000 American baby boomers are retiring daily. Their needs are changing – greater assistance for home living and a focus on wellness.
This is leading to a convergence of interests among food, pharmaceutical and other companies to sell enhanced products.
Peter Bryant, a partner at consultancy firm Clareo, said: "Corporate venturing is emerging with a bigger role, especially in food and nutrition. There is a convergence of food companies, pharmaceutical groups and non-regulated supplements and technology businesses over the nutritional value of food and wellness."
He said pharmaceutical groups were pushing for more regulation, such as by the US Food and Drug Administration and under the European Union’s Food Supplements Directives affecting unlicensed medici-nal herbs from this month.
Part of the innovation is by add-ing existing plant-derived nutrients to other things, or just genetic engineering tools used in biotechnology to affect the product. Crop company Monsanto was one of the earliest corporate venturing companies, having built an $80m portfolio in the 1980s, including biotech company Biogen, while others have been looking at the investment tool more recently.
In December, crop company Syngenta, through its Syngenta Ventures unit, licensed to Agrivida access to its crop technology and intellectual property in return for Agrivida equity. In 2006, Syngenta had also been a cornerstone investor in a $100m biotech fund being run by venture capital firm Life Sciences Partners looking at agriculture.
Bryant said: "More regulation is coming and food and pharma groups have big pockets."
Switzerland-based chocolate company Nestlé last year used the insights from its commitments to the independent venture capital firmInventages Capital to set up a division on disease-preventing nutrients. Nestlé’s health science division has then tapped Inventages’ portfolio for deals, such as CM&D Pharma in February.
A much larger cohort of young people are hitting maturity in emerging markets – the so-called baby emergents – and this group is attracting attention from consumer groups.
Steve Meller, chief innovation catalyst at Procter & Gamble, said at last year’s IBF Corporate Venturing and Innovation Partnering conference that whereas consumers in India and China spent on average less than $5 per person on its goods, in the US the figure was more than $100 (see profile of P&G).
The growth potential for selling more goods in emerging markets is clear for these companies. The most important factor behind rising consumption is a person’s income. Beyond $1,000 per month (see table for comparison of emerging markets), people have more money to increase their consumption of meat and branded goods.
A secondary factor behind consumption patterns is the cost of basic items, such as food and accommodation, and the proportion of income saved. One of the important drivers behind US consumption patterns of the past century has been the relatively low, and falling, proportion of income spent on food.
According to bank Credit Suisse, US food consumption per person more than halved relative to gross domestic product (GDP) from 20% in 1920 to less than 10% in 2010. China, however, is at a GDP level similar to the US in 1929 but people there spend about 40% of income on food and save a further 30%.
Last month, China’s government asked companies, such as Unilever, to delay planned price increases in order to dampen inflation. However, rather than the flow of ideas being one way – from developed to emerging economies – the idea of reverse innovation is disrupting companies’ established markets (see related article on the idea).
And the Credit Suisse Emerging Consumer Survey 2011 published in January said consumers in emerging markets had little preference for foreign over local goods, provided the quality and customer service was good enough.
And in this regard, consumers round the world are becoming increasingly unhappy. Consultancy firm Accenture’s 2010 Global Consumer Survey found satisfaction with customer service had decreased since 2009 in each of 11 characteristics it measured.
Accenture said 64% of consumers had switched companies in the past year due to poor customer service (down from the 2009 survey’s 69%) and this was even more common in emerging markets.
The dissatisfaction is allied to an increased pace of change for many consumer sub-sectors through the use of technology. Sports clothing makers Nike and Adidas have responded by setting up corporate venturing units, Nike Ventures and Hydra respectively, while drinks company PepsiCo started a competition for entrepreneurs to win money from venture capital firm. Highland Capital Partners and branding and mentoring from PepsiCo.
One head of a corporate venturing unit being set up said: "Corporate venturing lends itself well to the consumer sector as it is a cheaper way to innovate then traditional acquisitions, which we are terrible at, and because the cycles are so fast it lends itself to making lots of bets and seeing if one or two pay off really big."
He said even conservative groups driven by convention and "in-breeding of staff switching from one company to another within the industry" were starting to open themselves to more external sources of innovation.
He said the trend was for collaboration with designers and a concentration on branding and using the consumer research developed at established groups.
Pepsi’s peer Coca-Cola has been developing its Venture and Emerging Brands team for more than three years with an eye to improving its acquisitions record and nurturing nascent products, with an estimated 300 new drinks brands entering the market each year.
In 2008, Coca-Cola bought 40% of US-based Honest Tea, a maker of organic bottled teas, and took up its option to buy a majority stake earlier this year while retaining the company in a separate division and using it as a channel to distribute its other products.
The same approach is being used by electronics retail-ers to keep up with the rate of change for new gadgets. US-based Best Buy through its corporate venturing group, has backed sleep aid Zeo and the Tecca personal electronics shopping and information service.
Ross Levinsohn, chairman of Tecca and managing director of Fuse Capital, the venture capital firmbacked by Best Buy and which incubated the portfolio company, said: "The speed at which technology evolves affects everyone. We repeatedly hear that constant innovation is overwhelming for consumers, who struggle to keep pace."