2020 Resolution: Become a water company

Tuesday, January 14, 2020 by Robinhood Snacks | Disclosures

New water company corporate mascot

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Hey Snackers,

This playboy tortoise with an unstoppable libido may have single-handedly saved his species from extinction. Now Diego is heading home.

Markets edged up to start the the week before Wednesday's signing of the US/China "Phase 1" trade deal. Here's what's believed to be in it (picture soybeans and grains).

Hydrate
1. Cott acquires Primo Water to become Big H2O

Water is the essence of wetness... for Cott Corp. Canada's drinks/filtration company treated itself to acquire Primo Water for $775M. Cott's so enamored with water that it sold off its soft-drink biz and quit coffee/tea. Now it's even adopting Primo's entire brand — Cott is marrying Primo, taking its name, and paying it $775M.

Primo follows the ol' razor/razor blade biz model... You're lured in with cheap razors, but then have to refill with pricier blades (#hygiene). With water, Primo can barely make any money (but hook you) with its water dispensers, then make bank when you come back to exchange/refill your huge water jugs:

  • Low Margin: The claaaassic boulder-sized hot/cool water dispensers dominating your office kitchen — they're barely profitable for Primo (8% profit margin).
  • Higher Margin: Pre-filled plastic water jugs delivered to offices and homes nationwide — pretty profitable (30% margin).
  • Highest Margin: FYOB (fill your own bottles) using Primo's filling machines at over 23K locations like Safeway, Walmart, and Costco — the most profitable (31% margin).
THE TAKEAWAY

Do less, more... Companies like Coca-Cola try to do more, more. Coca-Cola is a soda company, but it owns hundreds of non-soda brands from Dasani to Vitaminwater. Cott's doing the opposite: selling off its non-agua brands to focus solely on water (btw — it owns green glass bottle legend Mountain Valley).

  • Upside: Cott can do more with one product — Hydrating health is trendy along with sustainable bottles. Plus, everyone literally needs it to survive.
  • Downside: But Cott could get cott if the trends disappear — Water surpassed soda as America's favorite bottled beverage in 2017, but it could just be a fad.
Cure

Selling search data is so 2019... That's why 23andMe is capitalizing on your DNA instead. The genetic testing unicorn first helped you find your long-lost cousin from Angola. Now it's sold the rights to a psoriasis drug it developed using its very own genetic database.

  • Old News: 23andMe sold access to its users' DNA to GlaxoSmithKlein in 2018 — GSK uses it to research and develop their own medicines.
  • New News: For the first time, 23andMe developed and licensed a drug itself, thanks to research made possible by its giant set of saliva samples — the buyer is Spanish pharma company, Almirall.
  • Key News: 10M customers have sent 23andMe their saliva in a tube to get their DNA analyzed — and 80% of them opted-in to participate in research (without gaining any financial benefit).

You are the product... literally. 23andMe makes money selling DNA kits ($99-$199), selling its DNA data to a pharma company, and now also by developing (and selling) its own drugs. All these money moves involve your DNA, which you're paying them to give them.

THE TAKEAWAY

23andFree?... What if 23andMe made its core product (DNA ancestry kits) free instead? That would probably add millions of new customers, leading to more genetic info... which could lead to more drugs developed from all that extra research. That would make 23andMe look more like Facebook — it's free, but Facebook (and Insta) use your data to deliver you targeted ads. That's how FB makes $$$.

What else we’re Snackin’
  • Returned: Away co-founder Steph Korey (not to be confused with Steph Curry) is back as co-CEO after stepping down in response to viral articles about the startup's work culture
  • Double Dogg: Dunkin' releases a Snoop Dogg-inspo'd plant-based breakfast sandwich, the "Beyond D-O-Double G" (it's a Beyond Meat patty, egg, and cheese inside... a glazed donut)
  • Precious: Rhodium (the precious metal used to cut down on emissions in car exhaust systems) is trading at its highest price since 2008
  • Spend: Visa drops $5.3B on fintech unicorn Plaid — the behind-the-scenes software that helps your Venmo account speak to your bank account
  • Refresh: TGI Fridays is refreshing its bar architecture (bar-chitecture?) before it goes public (again) this year
Snacks Daily Podcast

Casper wants sleep to be the 3rd pillar in the health/wellness triangle, along with food and fitness — and sleep actually may be the most important one.

So Casper's splurging $1 on marketing for every $3 of revenue — more in today's 15-minute Snacks Daily podcast.

Tuesday

Disclosure: Authors of this Snacks own shares of Beyond Meat

ID: 1057261

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