Retailers are better at coming up with new ideas than putting them into practice, according to a report by recruitment agency Korn/Ferry Whitehead Mann published by news provider Financial Times (FT) earlier this year.
But given that the consumer segment, at more than $10.5 trillion in sales, is the largest segment of the roughly $14.3 trillion US gross domestic product then they seem pretty good at selling their wares too.
And with at least 11 corporate venturing units started over the past two years by consumer groups (see table), executives are using minority investments and open innovation to help keep up with changes in the retail sector, even if it is often to provide incremental rather than disruptive new ideas to incorporate in their products.
Funds
US-based companies, including sports goods makers Nike and Adidas and events ticketing group Live Nation, have started most new corporate venturing units, according to Global Corporate Venturing.
However, while Nike has expanded its team and hosted US trade body the National Venture Capital Association’s corporate venturing group summit last autumn, Adidas has seen the departure of Tom Montgomery from its its venturing unit, Hydra, with Martin Ott taking over alongside his role leading mergers and acquisitions.
However, rather than organically grow its investments unit, Bunge, a New York-listed agriculture and food business, in February bought clean-tech fund manager Climate Change Capital.
Daniel Rudolph, managing director of Bunge Financial Services Group, said: "The group has been active in carbon markets since its inception, both as a buyer of carbon credits and an adviser to other market participants. We also see strategic and operational synergies resulting from the combined business, including an enhanced ability to expand service offerings."
In emerging markets, India-based agriculture company Godrej Group’s Omnivore Capital and China-based Alibaba’s AliVenture and Taobao fund have been formed to take advantage of the rapidly-growing consumer markets in both countries and an expansion in the number of entrepreneurs looking to service them.
However, the two firms have taken different approaches, with Alibaba reportedly commiting more than 20 people to its investments team while Omnivore has four, including last year’s hire of Subhadeep Sanyal as investment manager from industrial group Mahindra & Mahindra.
And established corporate venturing units from western companies have been expanding into emerging markets, including Anglo-Dutch consumer goods conglomerate Unilever, which set up in India and has similar plans for China, while also commiting to the $150m Capvent Asia Consumption Co-investment Fund.
Unilever’s Corporate Ventures programme, which also covers cornerstone commitments to Physic Ventures among others, covers the spectrum from incubation and spin-outs (see Rahu case study in related copy) to minority equity to buyouts, and was rated the most influential corporate venturing group with a consumer sector parent, according to Global Corporate Venturing.
One of the biggest fundraising programmes of the past year has been France-based luxury goods company LVMH, which has two venturing units, L Capital and L Capital Asia, raising large funds of more than €400m ($530m).
And last month, venture capital firm Redpoint Ventures teamed up with Germany-based retailer Otto Group’s eVentures unit to start a joint firm in Brazil.
This partnership, Redpoint eVentures, is led by Yann de Vries, who joined from computer group Cisco, and founding partner Anderson Thees. News provider TechCrunch said Redpoint eVentures had struck four deals – Viajanet, Grupo Xango, Shoes 4 You and 55Social, and a fifth in stealth jewellery website Sophie & Juliete.
Procter & Gamble, which looks primarily for partnerships rather than taking minority equity through its Connect+Develop scheme, and Switzerland-based chocolate company Nestlé, which has funded Inventages as a way of understanding the healthcare sector and set up a new division, were ranked second and third, respectively.
This type of partnership to develop in new areas led crops company Monsanto to agree to work with venture capital firm Atlas Venture to look jointly for investments in early-stage life sciences companies.
Monsanto’s peers, Syngenta and Cargill, have both remained active in corporate venturing, although John Cripps departed from Syngenta Ventures last year, leaving Carol Marino as effective head and vice-president.
People
The Korn/Ferry report interviewed 30 chief executives at retailers and fast-moving consumer goods companies and found many were prioritising existing goods and services, the FT said.
And chief executives said they were better at generating ideas than bringing them to fruition. Korn/Ferry said 50% of retailers were recruiting and developing innovation skills in their business given that 80% had no head person in this position, although all consumer goods companies did.
Goods vendor Redbox, for example, has expanded its New Ventures team. Omowale Casselle and Sanay Patel have joined as managers of New Ventures last year from their start-ups, MySenSay and Position Tech, respectively, while Stacie Caine Bogdan stepped up at about this time to be senior manager of the group.
Redbox has already incubated Star Studio as an interactive photo booth for teens and tweens found in malls and other high-traffc retail locations.
Other consumer goods companies to have expanded their innovation teams include drinks maker Coca-Cola, which moved Denise Lewis to be general manager of its ven-turing and emerging business unit, while Maurice Cooper became a director in January after two years as senior brand manager of Coca-Cola Zero.
Deals
As befittingthe world’s two largest economies, China and the US had the biggest deal-flow by volume and value in the consumer sector, according to Global Corporate Venturing.
The US had nearly half the more than 100 deals last year, with China just more than a fifth by volume. By value, however, and excluding the $950m round for daily coupon provider Groupon ahead of its flotation,the two countries were more closely connected at just less than $1bn for the Asian country and more than $1bn for the US.
In China, retailers Lashou, Qianlongzui Liquor and 55tuan all received more than $100m in venture rounds, while the US had AirBnB, LivingSocial and Gilt Groupe.
There were also a number of large rounds in the consumer sector in India, including for Devyani and Goldsquare. In Europe, however, the rounds tended to be smaller for more specialised entrepreneurs, such as Vorwerk Direct Selling Ventures, the corporate venturing fund of Germany-based Vorwerk Group, joining a consortium investing €4m in DaWanda, a local online marketplace for unique and hand-made items.