E619 | Georg Reifferscheid, REWE Group: Building Climate-Tech Ventures Inside a €94B Retail Giant

0:00Everybody, welcome back to the EUCLC podcast. Today with us we have Georg from Rehme Group. One of the things that I always start with is, you know, why is Georg on the podcast? The reason being, Gräber is one of the largest retailers in Europe. And then Georg has a very interesting background that we're going to hear about.

0:27Tear down this wall. It's more than just an alliance. This is a union of values. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Welcome to the show. Looking forward to this. Could you start by just explaining, you know, they have a group, they have an adventure. What is this all about? Yeah, I can do that. And thanks for the invitation. Also very happy to be here and looking forward to our conversation. Yeah, let's start with Rewe Group, I guess in Germany. So everyone who's listening and watching from Germany might know about Rewe Group.

1:13As you already mentioned, one of the largest European retailer, mainly operating out of Germany and Austria. So retail is one of the biggest parts. We operate supermarkets under the brand of Rewe. We also have a discount brand Penny. And in Austria, we operate Billa and Biba. So quite active in this space. But besides retail, what most people don't know is that we also operate in tourism. So we have obviously travel agencies. We operate on hotels and a lot more. And besides these two business units, we also operate in convenience with the brand of Lekaland and also DIY markets in the brand of Turm markets.

1:59I mean, I'm usually not the number dropping guy, but to give some perspective, right? So I guess the, I have to guess because it's changing, we have more than 600, 700 companies in our portfolio. We have 350 ,000 employees and 94 billion revenue last year. So quite a large number, mainly operating again in these strategic business units. Wow. Close to the 100 billion mark. A nice milestone to go for. And Georgi, if we then go into more about, you know, what you do, right? because you are a climate tech guy. But could you just tell us a little bit more, what is your mandate and what does the venture group do within Rewe Group?

2:43Let's go back a little bit, but also give you some context. The Rewe Group itself, in two years, we celebrate 100 years of existence and Rewe Group per se is a cooperative, right? And all of this, what we consider being a cooperative, all these values is very, very large part of our DNA. And this also is important to understand how we operate in our venture unit. So Rewe Venture has been implemented a couple of years ago, actually, by decision. We did quite a few stuff with startups beforehand. We also had actually some own venture building activities. But then it has been structured in 2022, 2023.

3:29That's also when I joined Rive, so two years ago. And within Rive Venture, our main goal is to get relevant innovation in our group, right? So meaning 100 % strategic orientation. And out of this setting, we are not an external unit, which is also, as you know, right? and a lot of other companies, you have an external innovation unit and stuff. So we, our four teams, our four focus areas operate from each department or business unit, right? Let's start because we always start kind of from our left to right logic and I'm on the last part, climate tech venture. So we have four focus areas. The first one is retail tech, meaning everything that is relevant for stores.

4:19here we have a lot of digital AI and other automation topics. So this team is located at Weave Digital, which is one of our companies. And let's say Weave Digital is, if you like, a startup itself. I mean, it's very large, but let's say the culture and this whole idea of innovation and R &I is rooted in their DNA. So this is done by Weave Digital. And then we operate in the area of e-grocery. So meaning everything related to delivery. So we operate delivery services, last mile, mobility and stuff. And then the most active one actually in the venture part is Foodtech, the Foodtech team. So Foodtech means self-explaining deals with products that we were going to sell.

5:10So meaning those startups and those products from the startups, they will end up in our shelves and we're going to sell them. So they look, for example, at alternative proteins, precision fermentation. They did quite some very interesting deals also in the last couple of years, or let's say last two years. And when I joined, the mandate was, let's look at sustainability. As you can imagine, pretty broad. So first step was to kind of narrow it down. We mainly did it by a commitment to SBTI. So since 2023, we started being committed to SPTI goals. So meaning this was my main mandate. So how can we decarbonize?

5:51How can we reduce our emissions? And so most of the topics that I look at should help us in our SPTI goals. You can imagine as a retailer, as a main business in retail, 95 % of our emissions, sorry, 98.5 % of our emissions are in scope three. So meaning supply chain products. The more we sell, the more emissions we create. Even though this is the biggest part and the most relevant part, there is still a very long way to go getting suppliers on board, getting the concrete measures on board. First of all, we need to have the data in order to decarbonize. So long story short, this is why we set the focus firsthand on scope one and two, so our own emissions.

6:35This is where we have the biggest leverage. Can I ask here, what is the overall Rehbe Group target for greenhouse gas emissions? We want and we will hopefully achieve net zero by 2050. We have a reduction goal until 2030 and then the rest until 2050. So last 10 years we also need to neutralize obviously, depends on the wording or the definition taxonomy. And again, the biggest part has to be done in our supply chain, but it can't be done without our suppliers. I mean, we have quite a few suppliers in a sense of our own brands where we have faster or let's say immediate access. But that's still not the biggest part.

7:23scope one and two and within scope one and two i started focusing on topics like the overall bigger climate tech picture of a built environment so everything related to construction um hvac cooling so cooling is by far the most relevant and also most active topic that i currently look at and what is really important especially when when we have maybe out of this podcast interview some snippets, right, as you mentioned, is really to say, it's not like this official decision done by the other group that this is the most relevant in the overall picture, but it's like from my niche perspective, working with internal departments and setting priorities straight, we started dealing with HVAC and alternative materials topics like green concrete, green steel and so on.

8:20So kind of the barrier between the department and your colleagues that does e-grocery and you do the climate tech is like mobility is eat groceries and build is with you, right? Yeah, I mean, it depends. If we look at mobility again from a sustainability aspect, I also deal with mobility topics. what maybe also helps to understand is like we differentiate between proactive and reactive topics. I gave the scope about a leader group. So there are plenty of topics that are relevant for us, right? There are plenty of potential use cases. We really needed to look at not what is the most interesting or trendy or whatever topic out there, but what is the most relevant for us.

9:11And most relevant means also like this kind of climate or CO2 leverage. Mobility, yeah, there's a lot we can do. In the overall picture of emissions, it's still a little bit less than, for example, cooling. And this is why we can kind of start it in cooling. Yeah. Just from my understanding, so does Rewe Group operate its own cooled warehouses? Yeah, we operate warehouses. We operate obviously almost 6 ,000 stores when it comes to Rewe and Penny. We also, when it comes to construction, I mean, you know, construction business is very complex. We have general constructor and all this stuff. So we don't build them on our own.

9:56We also don't own actually most of the stores. Nevertheless, we deal with all of the supplier and all of these projects of building large, what we call large projects like warehouses, like logistics. And we also built still quite a few stores and also quite a few green building stores. We are very active in green building also. And for all the startups listening in, right, we're just going to carve it out so you get the right deal flow, right? So what is, you know, investment stage? What is geography for all of these people? Yeah, so investment stage or sweet spot But it's definitely like a little bit later, depending on definition.

10:39But we start in series A with five million tickets. Also, we are usually not the lead investor. So you can get kind of an impression of the rounds we are talking about. This is when we talk about direct investments. Let's say the perfect kind of theoretical perfect pathway would be you are maybe a little bit earlier stage startup trying to kind of validate your product. In my case, currently, it's mostly hardware, right? It's mostly hardware. I also prefer actually dealing with hardware, not because my background is by far not in hardware, but it's, and I mean, it's like it's said, like it's more tangible than all these software AI topics because most of the startups, they promise like, I mean, we have to target this, 40 % with AI and all of this stuff.

11:29And I learned that, yeah, let's focus on hardware currently. You need to be at least somewhere at tier of three to five to, let's say, start working with us. What we do next is always when I receive or see any interesting startup or startup solution, I go back to the problem definition of my departments, of my colleagues that I asked beforehand, where's your biggest pain? And then we see if there's a fit. And if there's a fit and we start talking with the startup, we firsthand is 100 % focused on technique, right? On the product. This is why my people, my colleagues get on board and our work together is going very, very well, actually, because we both know, like both parts know where to focus on, right?

12:23If we have meetings with startups, I'm always like the guiding, moderating interface. but as soon as it gets to tactics my colleagues are the experts. Is it R &D that assist you with the DD and also post-investment? Now if we would continue let's say what I try to describe is pretty much the maybe part of the technical due diligence if you like, right? Operational due diligence. The colleagues tell me, okay, is this a product that is a fit for us? because also important to know is we only look at startups where we could be the customer of the product, right? Meaning at the same time, if we would just be the customer, we talk about venture clienting.

13:08There's not much needed, right? TRL 9, finished product, okay, we can buy it. We can be your customer. So my job is kind of done. But as soon as we start about strategic corporations, it needs to be moderated. And coming back to your question, like if, let's say, the journey continues and I say or we both say okay there's a product fit and I also find the startup the business potential all of this very interesting we hop on the internal IC to say okay this is a startup we want to look at and then we get approval for DD and DD is actually then done by our colleagues from M &A so within our venture teams and we have the people that are the kind of subject experience.

13:53In my case, I'm the part, I'm officially part of the sustainability team. And I have also colleagues from strategy and from M &A joining, and they help me then if we would go to DD case to deep dive. Also, reality check. I mean, as we are not the lead investor, usually, you know how it is, right? We can also relate to DDs from partner investors. That is super interesting, right? So you're also describing what you really want from the startup is that they, you know, they can, you know, become, well, you become the customers of theirs, right? That's kind of the get go, right? And one of the things that we often talk about when we talk about hardware, right, is that it's expensive to develop hardware.

14:39And how do you go about that when you then do your investments? Do you do a letter of intent or offtake agreements or anything like that with these startups? Yeah. And maybe also to add to your question. So, yes, we started with the idea, can we become the customer of your solution as a relevance check for, yes, this is relevant. At the same time, if I look at the venture part, the operational check is just the beginning and the approval for relevance. But then actually it's way more interesting if there's business potential, maybe even outside our business units. Right. So this is important. and coming back to because we actually had i just returned from a call with one of our startups that we're currently working with they actually have a hardware solution we are currently testing it together with them and yeah it's pretty much their investors would be interested in getting offtake agreements and yeah i mean this could be a possibility definitely and at the same time Maybe if this startup is so interesting, also for us in the overall picture that we are looking for an investment, maybe this is the easier way to work.

15:59Maybe not the easier way, but the more practical way to go, right? Instead of saying, here's your offtake agreement so that you get more money from your investors, let's get us on board on the cap table. And besides the money, it's not just the money that we give and then say, okay, goodbye, but we really want to work together, co-develop, maybe if it's helpful, right, co-develop solutions. So this is why we are a strategic investor. And this is also the task that I have in our team is to, or we have as a team, to kind of highlight the strategic value of an investment, right? What's the difference between just being the customer and giving you$5 million as a startup?

16:44And this is what we call a strategic value add, obviously. And what needs to be figured out? One thing to notice. In my past life, when I was investing for a large corporate, we would often do the investment, but also do an LOI or an off-take agreement on certain deliverables. So if the company could deliver this product with these capabilities, then we would say then we are interested in buying. It had a good kind of effect on existing investors and also future investors. So I think that is also why I ask, because it's a super interesting value add to deliver. And then I think you're kind of saying we are a strategic investor.

17:31right so so when normally when i dig into this right i would imagine that you are a strategic financial investor because i don't believe that you want to lose money no obviously i mean i mean no no one wants to lose money right um but it's put it like this the strategic relevance in the sense of that they help us with their product to achieve our goals in my case in my case decarbonize bringing innovation in, that's far more relevant. Meaning if you have a startup that would have whatever kind of amazing financial KPIs, but not delivering any strategic value. It depends on who you ask. If you would ask our CFO, probably he will say, yeah, I also take the money.

18:14I mean, this is also definitely a part of, there are a lot of people involved, right? And this is what I learned. I mean, it's right everywhere. I mean, the more people involved, the more you need to kind of align and show you. It depends on who you ask. Yeah. And I personally, from my background, from how I operate, I really, really focus on the on the strategic and innovation. And even internally, we sometimes call it like in especially maybe to my topics, the investments cherry on the top. But I think we are all realistic enough. If it's just about money, do something else and start up investments.

18:52Right. But I think actually when you say strategic, Georg, right, for me, right, that's kind of your investment strategy, right? You have basically carved it out. This is our strategy. This is the elements we want to, you know, invest within. And then you invest in there, and that's a financial investment. So for me, it's kind of checkmark already, right, with what you have said. So I think that's interesting. But maybe for some of the corporates that are listening in, that want to build a CVC, who is then sitting on your IC? Who takes the decision? What positions do they have within Reve? Yeah.

19:31And this is, for example, maybe then highlighting, let's say, this perspective, right? I mean, first of all, again, obviously, when we do like in DED, when I go into the IC and then say, hey, this is an interesting case, we need to talk about financials. That's a no-brainer. But nevertheless, again, the focus is on what we get out of the startup. That's the same. I forgot to mention that we also did. So we're not looking for new LP tickets, but we're closely with quite a few VCs. and we also did our LP tickets mostly because regarding access and learning and so on. So yeah, who's sitting in our IC?

20:14We have people from the board, from the C-level obviously and they are responsible for innovation, digitalization and also the CFO. and we have people from strategy and M &A who's like responsible for the entity, the venture on board. So meaning that it's quite balanced view. Jumping into my next question, right? And we have touched on this, right? So what I would like to learn a little bit more is the principles around building your corporate venture entity, right? And we have the first dot, you are a strategic investor, right? We have cleared that. But what else do you have in there? How is this working?

20:59And with your team, right? How does your team within Climate Tech operate? Yeah, I mean, again, the approach, the main approach is inside out. So meaning, and also this is how I started, my role is instead of going outside and looking for whatever I mentioned, trendy and topics, topics. I started building the internal network. Again, 350 ,000 employees, quite a complex structure. It takes some time also to get the trust, right? I have a background in business and psychology. And I always tell that I guess the second part is more relevant for my work, right? The background in psychology. So I need to get the trust from people in the operations that I'm not just a new next whatever startup guy, you know, like in a negative way and some prejudice that people have, but that I want to understand their standpoint, their problems in order to help them.

22:04What's in it for them? That's the main point I need to address. And this is, again, this is how we work. All of the teams, well, not all of them, but for example, also especially the R &I team, they focus a lot on venture clienting for our group, right? Really look for, do workshops with departments. They come more from this methodology approach, innovation, and so on. But then again, they're grown mostly in software and digital solutions. So this is how we work internally. Externally, we do, for example, climate tech challenges. My main go-to actually also when I look at conferences is mostly also because of resources is mostly I work with the VC and investor and partner network.

22:48So when I'm in this conference, I usually talk with investors instead of listening to, I don't know, how many different pitches from startups. Yeah, I think, I don't know if this answers your question, but this is how we operate. We also have regularly our exchange with our funds, right? Also in order to learn with other partners to look where the next topics are that are relevant for us. maybe one thing that I would love to go back to right and that was a little bit when you explained about your your own background your education right let's take the the psychology part because that's super interesting right because corporate venturing is about you know how do you collaborate between the startups and the corporate your job in Rebe in my opinion is also to understand your core colleagues right and their needs could you share a little bit about how you work with your core colleagues also in defining relevant investment areas within build and so forth you know how how does that go by on a on a daily basis yeah let's say um i tried to to find a good balance between like hey let's have a free defined clear structural workshop process of getting you on board and more like the pragmatic hey this is me as a human being and i'm trying to connect to you now and to under to give you the understanding what my role is what i want and that i'm your partner and not something someone that brings you additional workload so this is and this is i mean i don't know if i have like a concrete methodology for this i think this is pretty much my sensitivity to what's like when two people or more people come together, that it's all about communication.

24:42And then if I say A, the other person doesn't understand A or right. And if it understands A and so on, so on. So the whole complexity of communication and each project is dependent on this, right? For example, some weeks ago, the next pilot was a startup, very hands-on. I didn't take enough time to actually get the colleagues on board, the really operational colleagues, right? So, and when I talked to them, I kind of came up with saying, yeah, you know, innovation and it's really well run for us as a group and also the C-level and board, I really want it and they are on. And what I wanted to say is, hey, maybe this is also a good opportunity for your department to kind of get some attention, some exposure but what they understood is like oh but they want it okay then i have to do it right there's no other choice and i try to figure that out i mean you decide and they said like okay to be honest i don't really i don't think this is a good solution the startup is not really that good i don't want to do it but i have to do it and i said no that's not and then coming out of this you know it's again it's communication moderating expectation management that's the daily job that's the daily job that's super interesting right some anecdotes from my past I you know I I worked for McDonald's Denmark once luckily I had been in store already when I was at university just to to make a little bit of extra pocket money right so I knew how to be in a store right but everybody in HQ they had to go into store training for a week just to understand what it is that you do right and i think you know my first investment that i did as a cbc was in need kmbh in uh in berlin that that today's closed down but they were doing you know cool transportation and i went and visited a carrier in frankfurt and just you know talking to a normal person that is running you know he had 150 trucks right it's a huge company right and you know i i had to stand there and admire his work right because it's super hard work but it was also super clear to me right he spoke a total different language than i did right so i had to adapt to that to basically understand the pain point and then move on from that right so i I think that connection with the core employees is super relevant, right?

27:14Just popping this question to you, do you ever spend time in a river store or in one of your warehouses or stuff like that to understand these problems? So let's say river stores, I don't look that much into this. I mean, cooling is actually operated or let's say not responsible from the construction department. So this is why it wouldn't make that much sense to go into store. But I'd say in general, this is, yeah, I 100 % agree to you. Yeah, I have been to the warehouses and so on. And this is the 100 % basis. You need to understand who's in front of you. And I think this is what a lot of young people don't get, right?

27:53If you're socialized in the startup bubble and then come to people who work, they have like their operational work, 40 hour plus. So, right? And don't come there and say, oh, this is the perfect, amazing, whatever, and expect them to be jumping on you. It's expectation management. Expectation management means the person in front of you has probably more than enough to do. Maybe he doesn't even know all his certain pain points even or hasn't had enough time to define them. What he doesn't want is like naive, young, and I'm exaggerating, right? naive young people who just came with some startup hype from the next corner.

28:34And also what I learned is we are very traditional, let's say corporate, I guess in some operations, and the assumptions that people have about startups is very often startup equals young people, no experience, and whatever. But I think that's also sometimes what is needed to do kind of the innovation part but I think maybe another question within your core team is everybody coming from outside of Grave Group or do you have somebody from inside of Grave Group? No, we also have inside people from the inside I'm actually the only one who came from kind of the outside and also the only one let's say everyone who's leading the teams let's say my colleague also in in food tech he um he also had his own company beforehand comes from the startup scene and same with me so besides i mean this was just the education background business psychology but let's say my main background i would say is um like doing business i i founded several companies myself always bootstrapped always very lean and pragmatic not the whatever exit the story i think this is more education i bring in than the university education.

29:58No, but I think that's a very, very good setup, right? Because also, there's nothing more interesting, in my opinion, than seeing somebody coming from a business school, getting into a CVC, and have no understanding of how a corporate works. So I came into Maersk in 2018, and I was a naive VC with 10 years of background, right? I did not know how politics works in a corporate, you know, and that's a big part of being able to do what you do today, Gary, in my opinion, right? Yeah, yeah, yeah. And I think this is very, I mean, a question that we can elaborate on. I mean, not true here, maybe in another, but I mean, it depends.

30:46Again, I wanted to say the success criteria, but then you have to ask what does the success actually mean, right? What is the success of a CVC? but let's say whenever we are in exchange with the the vcs and the funds that we are invested in and and that's also what i in every call what i want to highlight to our employees in this call not just employees but also the board members is is always to highlight the differentiation because even we see talks about i want to find this one point whatever zero percent unique founder exit potential all this stuff yeah that's the vc game the cvc game is different i mean because i want to work with the company right i want to work organic in a healthy development and and sometimes as you know right maybe the vc game is not the most healthy one when it comes to building healthy companies and maybe when we are talking about you know stakeholders and how you worked with them you know could you highlight some of your latest successful engagement with the group either direct or investments or you know things you have been running internally or so forth yeah so maybe the one thing again very lean pragmatic because i realized the more people you get on board the more complex it gets in a corporate is so we did like an um the the first Rewe Group Climate Tech Challenge, like a public announcement in the area of built environment slash cooling alternative materials.

32:21So we got quite a few applications, obviously, also from a lot of VC partners. And this whole approach for us, it's, yeah, doing a challenge is kind of normal, right? But I learned that it kind of got a lot of waves internally about the lean and successful approach because out of this, we had like 10 startups that I kind of organized in two 90-minute sessions each 15 minutes presenting very clear structure. And out of these 10 startups, we generated firsthand four follow-ups in the sense of, okay, there might be cases, venture clienting, three times pilots. And now we are kind of in the area of three pilots that we are planning.

33:12Because then obviously it takes quite some time. But let's say this approach and the operational department has been like, wow, okay, so efficient. We screened so efficiently these quite few innovations. And from this we're going and now we are repeating this climate tech challenge. And I started very, very lean. And now we're trying to get more people on board, also external partners, and to push it even more. And yeah, again, piloting is in my current scenario way more relevant or maybe realistic, let's say realistic, than doing direct investments currently. and also because of the kind of hardware stage and with the development.

34:04Funny anecdote. I was talking to a professor from the Danish Copenhagen Business School. There's something when you actually look at the cost of running such programs compared to direct investments. I know, you know, for direct investments, you of course have the CapEx pure investment, but from a manpower perspective, if we can still call it that, then you actually tend to use a little bit less on operating it. I know all your direct investments are exciting. I know all your fund-of-fund investments are exciting and thereby also what they put in their portfolio. But are there any of your portfolio companies that you would like to highlight?

34:50And I know our mood changes as investors. We are in different stages. We move through the waves. But right now, you know, what do you have of existing, you know, investments you would highlight? And maybe if you could share a little bit of, you know, what are you looking at right now? Yeah, so again, the team that is most active would be the colleagues from Foodtech. They did quite a few interesting investments. I always have to be a little bit careful because some of them are not disclosed. Yeah, and so Project Eden. But I think Project Eden is a company that has been very, very interesting. a very high demand around that we participated together with Planet A, which is one of our fund investments.