🥐 Impossible's Starbucks play

Thursday, June 25, 2020 by Robinhood Snacks | Disclosures

"I thought we had something special" - Beyond Meat to Starbucks Canada

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Hey Snackers,

Important job alert: snack-maker Whisps is searching for its first Cheese Executive Officer. The delicious CEO will get paid to eat cheese and do cheese-related things. No formal training required: "We’ll teach you how to cheese the day." So bad, it's Gouda.

Stocks took a plunge yesterday on news of record new confirmed COVID infections in the USA. The Dow dropped 700 points and the Nasdaq snapped its 8-day win streak. Still, the S&P 500 is down only 6% for the year (compared to 31% in late March). But investors are worried about a 2nd economic shutdown. More on that below.

1. Impossible Foods wins Starbucks' US love as it chases mainstream goals

What a plant-based player... When it comes to alt-meat, Starbucks is not monogamous. After linking up with Beyond Meat in Canada and China, Starbucks has moved on to Impossible Foods sausage in the US. The Impossible Breakfast Sandwich will be available at 15K Starbucks stores - and it's all about the mass exposure:

  • Impossible's biggest partnership: By hooking up with Starbs, Impossible just 3X'd the number of eateries that carry its new breakfast sausage.
  • Bigger than BK: Last week, Burger King rolled out the Impossible Croissan'wich at 7.5K US stores (BK also carries Impossible Whopper). This Starbucks partnership is 2X bigger.
  • But it's not exclusive: Starbucks sells rival Beyond's products in Canada and China. Beyond stock dipped on the Impossible two-timing yesterday.

Impossible wants to be "basic"... It doesn't want to be viewed as a niche alternative. But it's running into the (vegan) chicken and egg problem: to get more meat eaters, Impossible has to lower prices to compete with cheaper regular meat — but to lower prices, it needs a large mass of regular meat eaters. So big new partnerships are key.

  • 90% of Impossible buyers are traditional meat eaters who dabbled in alt meat for reasons like the pandemic meat shortage, according to Impossible's CFO.
  • “We don’t think of it as an alternative (meat) industry. We think we’re making better meat consumed by the meat eater."
  • 18X: How much Impossible grew its grocery presence since March. It also launched direct-to-consumer online sales.

The road to mass appeal could be rocky... First, Impossible has a bigger rival: Beyond Meat has a publicly traded $9.4B market value, compared to Impossible's ~$2B private valuation. Second, big consumer brands like Kellogg, Kraft, and Nestle have money to churn out cheaper alt-meat competitors (which they're already doing). Impossible thinks its quality is way better, but it needs growth ASAP to compete. It's already a viable acquisition target for these bigger brands, and may even be open to it.


COVID-19 data is the new econ data... In mid-March, markets plunged 30% on the alarming surge in coronavirus cases. Months of economic lockdown followed, and US COVID-19 cases slowed thanks to distancing measures. Investors took heart: markets swiftly rose in April and May, approaching record highs. This continued through June, as economies began to reopen. Yesterday, stocks took a health data plunge.

  • "Disturbing surge": What Dr. Anthony Fauci said some parts of the US are seeing. Wednesday was the worst day for COVID infections yet, with over 38K new cases.
  • The hotspots: Florida confirmed a record 5.5K new cases on Tuesday, and California added a record 7K. Texas added over 5K, and Houston ICUs were at 97% capacity on Wednesday.
  • The quarantines: New York, New Jersey, and Connecticut ordered visitors from 8 states including Florida, Texas, and North Carolina to self-quarantine for two weeks.

Not entirely surprising... It's not shocking that cases are rising as restaurants, bars, and gyms reopen across the US. However, cases in European countries appear to have fallen and are not surging again as countries reopen. "Public health guidance" in Europe can be perceived as "infringement of freedom" in America. Now the EU might even block US travelers from entering.


The longer the pandemic lasts, the longer tech stocks are likely to rally... The tech-heavy Nasdaq’s gain over the other major indexes is the biggest since 1983. This outperformance shows how fortunes have shifted dramatically in tech's favor during the corona-conomy.

  • Even after yesterday's drop, the techy index is up 9% for the year. Meanwhile, the broader S&P 500 is down over 6%, while the Dow is down 12%.
  • Why? Big tech companies like Amazon, Facebook, and Alphabet account for 40% of the Nasdaq's value, compared to 20% of the S&P 500's (and even less of the Dow's). And tech is winning more business as you spend more time/money on computers/phones.
What else we’re Snackin’
  • Mickey: Disney officially delays the reopening of its parks past July as COVID cases rise.
  • Awh: It's the end of the way for Segway — China-based Ninebot is ending production of the original two-wheeler (thanks for the memories).
  • Sell: Struggling PC-maker Dell is considering a sale or spin off of its $50B stake in software company VMware, according to PFWTM.
  • Foodie: Payments company Square teams up with Postmates to kick off its new food delivery option.
  • Suit: German pharma giant Bayer will pay $10.9B to settle lawsuits over alleged cancer-causing properties of its Roundup weedkiller.
  • Oh: Tesla ranked at the bottom of JD Power's quality ranking, with 250 problems per 100 cars (but a baby name ain't one).

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Disclosure: Authors of this Snacks own shares of Starbucks, Shopify, Beyond Meat, and Square, as well as put options of Disney.

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