Woolworths teams up with Tesco and other grocery giants for $190m VC fund

In what is believed to be a world first, Woolworths will join four of its global peers in launching a mega VC fund to invest in tech start-ups and transform the grocery sector.

W23 chief executive Ingrid Maes said the new VC fund presented a “uniquely powerful proposition for both our investors and portfolio companies”.

Woolworths has joined four of the world’s biggest supermarket chains to launch a $US125m ($190m) venture capital fund to invest in tech start-ups to transform the way we shop, while bolstering the green credentials of grocery giants.

Ingrid Maes – chief executive of W23, Woolworth’s VC arm – has spent the past nine months convincing Tesco, Ahold Delhaize, Empire/Sobeys and South Africa’s Shoprite Group to join the fund, which is believed to be the first time big corporates have co-operated on such a project.

The VC partners will invest an equal share of the $US125m, which will be deployed over the next five years.

Supermarkets have become one the biggest adopters of tech – even if much of it’s not seen – from using Microsoft’s artificial intelligence co-pilot to provide on-demand training to staff to ironing out bottlenecks in supply chains.

At the same time Amazon has been expanding its technology into bricks and mortar retail, launching its “Just Walk Out” or checkout-less store platform at Marvel Stadium and Canberra Institute of Technology, heaping more pressure on retailers to meet changing consumer demands.

Ms Maes said the new fund presented a “uniquely powerful proposition for both our investors and portfolio companies”. She said the fund aimed to offer entrepreneurs faster pathways to global scale, without being exposed to a venture fund anchored by a single strategic investor.

“At a time when innovation is reshaping retail and value chains across the economy, we aim to offer our investors incomparable access to transformative innovation in grocery and sustainability across the globe,” Ms Maes said.

“W23 Global will also work with its investors to identify common unaddressed challenges and identify entrepreneurs best placed to innovate new solutions.

“With five of the world’s leading grocery chief executives sitting on our investment committee and access to our broader ecosystem, our founders can test and develop their ideas quickly based on an accelerated understanding of retailers’ needs.”

But Ms Maes said the fund’s portfolio companies were free to contract any potential customer – not just the VC partners.

The fund will target three key areas of investment: driving faster, more personalised and connected experiences across stores and online; creating more efficient grocery value chains; and sustainability, which is one of the grocery sector’s biggest challenges.

Ms Maes said the fund would focus on improving the green credentials of supermarkets “from farm to household”. This includes investing in companies that are focusing on emissions and waste reduction, packaging innovation, product traceability and transparency, healthy choices and biodiversity.

In early 2022, W23 acquired a 40 per cent stake in Sydney-based NP Fulfilment – an online shopping business that uses robots to pick, pack and send items that can typically squeeze inside a shoebox.

Woolworths Group chief executive Brad Banducci.

Outgoing Woolworths chief executive Brad Banducci told The Australian at the time that the supermarket chain began using NP Fulfilment when it launched its own online marketplace, HealthyLife, and “loved what they did”.

W23’s other investments include consumer brand builder Eucalyptus, online marketplace creator Marketplacer, alternative protein start-up Harvest B, and plastics recycling business Samsara.

“Innovation is helping Woolworths Group create better, faster and more personalised experiences for our customers, while ensuring we always have what they need in store and online. It’s also fundamental to the great progress we’re making in minimising our environmental footprint,” Mr Banducci said on Monday.

“That’s why we’re committed to bringing the world’s best retail innovation into Woolworths Group, and a key strategy is supporting entrepreneurs, many of them in our own backyard of Australia and New Zealand, to start and scale ideas that can solve our biggest challenges for the benefit of our customers, team, suppliers and the environment.”

W23 has invested in NP Fulfilment, which uses uses robots to pick, pack and send items that can typically squeeze inside a shoebox.

Ken Murphy and Michael Medline, the respective chief executives of Tesco and Empire, were also upbeat about the VC fund and its ability to help solve “key issues facing our industry”.

“We are excited to be collaborating with four other leading grocery retailers in this new investment fund,” Mr Murphy said.

“We are passionate about seeking out the best retail innovations and finding ways to make everything we do sustainable, and this partnership allows us to do that on a truly global scale.”

Shoprite chief executive Pieter Engelbrecht said South Africa has one of the world’s highest inequality rates, prompting the need for the company to deliver “more affordable solutions for our customers to sustain their livelihoods, every day”.

“This is the driving force behind our need to innovate faster than most retailers and is why we entered this venture with our esteemed global counterparts. In doing so, the group remains committed to being a responsible corporate citizen for our customers, employees, shareholders, and importantly, also the sustainability of our planet,” Mr Engelbrecht said.

Ahold Delhaize chief executive Frans Muller said: “Together with best-in-class start-ups and scale-ups, we strongly believe we can further drive retail innovation, foster sustainability, and deliver greater value to communities worldwide”.