Friday Nov.08, 2019

The LaCroix Killer. Coca-Cola just created one.

"_You drink bubbles often?_"

Hey Snackers,

More pixie dust. Disney shares jumped 5% after yesterday's earnings report, but that was just a trailer for the Disney+ streaming launch happening next week.

Stocks were busy hitting record highs on a hakuna-matata moment between the US and China over the trade war.

Sip

Coca-Cola re-enters the fight against LaCroix with a flavored, caffeinated seltzer

When your mouth just wants to relax... but you have 10,000 things to do. There's a sparkling water for that. Coca-Cola just announced AHA (actual name), a flavored sparkling water with almost as much caffeine as a soda. It hits shelves in March bursting with flavor combos like citrus+green tea or black cherry+coffee. But Coke's tried (and failed) with seltzer before:

Take I (2014): Coca-Cola launches "Dasani Sparkling Water." It goes nowhere because the brand isn't fresh and it's too similar to every other seltzer option.
Take II (2017): Coca-Cola acquires Topo Chico to get in on the pseudo-hipster craft mineral water trend (is it just us or does Topo Chico not make that easy to discover on its website or bottles).
Take III (2019): Coca-Cola shuts down Dasani's version and starts from scratch with AHA — the brand is new and the differentiator is caffeine.

Coca-Cola drowned in the sparkling water industry... 5 years later, it's only earned 2.5% of the US flavored sparkling water market. Here's who really owns it:

Polar = 7.7%
Pepsi (Bubly) = 8.5%
Nestlé (San Pellegrino, Poland Spring) = 11.3%
LaCroix = 18%. It's the leader, but owner National Beverage Corp's stock is down 60% in the last year facing all that above competition (it fell another 11% Thursday on this AHA moment).

Sparkling Water became so big, it’s got niches now... While soda sales fell, sparkling water sales surged epically from 100M gallons in 2013 to almost 400M last year. That's created a demand for different types of sparkling water for niche needs: Bud Light Seltzer and Corona Hard Seltzer want to replace your evening cocktail, while Coke's AHA goes after your morning espresso.

Assimilate

Toyota stands out from its Japanese pals — SUVs and trucks are the key

Memorize the Bill of Rights... define what "unnecessary roughness" means, and reveal the size of your truck. That's the modern citizenship test for foreign carmakers in the US — and Toyota is the only one passing. Mazda, Nissan, Honda, and Mitsubishi all struggle to sell cars to Americans, while Toyota's total sales jumped 4.5% last quarter to 7.6T yen ($70B) globally. Here's why:

Smaller cars: They represent just 28% of all vehicle sales in America last quarter. Picture little Civics, Accords, and Corollas (aka Uber driver go-to's).
Trucks & SUVs: 4x4s, pickups, and 7-seaters are all the rage, making up a shocking 66% of new vehicle sales in America last quarter. This is one of Toyota's money-makers.

It's all about destroying muda... We're not shocked that Toyota's winning in cars, trucks, and SUVs. Its passionate culture is committed to eliminating waste — "muda," as the Japanese call it. It would be wasteful to produce tiny coupes and sedans that Americans don't want, so Toyota invested years ago in assembly lines for its hefty Tundra, Tacoma, 4Runner, and Rav 4 truck/SUVs.

America created the assembly line. Toyota perfected it... Thanks to Toyota's anti-muda obsession, it runs an insanely efficient shop, wringing more profits out of each vehicle sale than other car brands. We crunched some numbers on profit per car sold for last quarter:

Tesla made $268 per car sold.
Ford brought in $1,400.
Toyota snagged a cool $2,300 in cold, hard, profit for each car it sold (and it expects to sell 9M of them this year).

What else we’re Snackin’

Trimmed: Weight Watchers stock lost 15% because its new "studios" physical footprint strategy for 2020 isn't impressing investors
Uber-ish: Uber's ex-CEO and co-founder Travis launched a ghost kitchen startup (we explain those in this podcast), which reportedly just raised $400M from Saudi Arabia
Fancy: Ralph Lauren shares jumped 15% because those higher prices it's charging on polos offset its hefty sales slowdown in Hong Kong
On: Dish shockingly added subscribers for the first time since 2017 — it was all thanks to Sling TV (not cord-cutting)
Worn: Gap's CEO joins the record-sized list of execs stepping down this year (Gap's sales are down 35% this year)

Friday

Earnings from Duke Energy and Madison Square Garden (fyi, an activist investor thinks the Rangers and Knicks teams are worth a total $7B)

Disclosure: Owners of this Snacks own shares of Tesla

ID: 1006719

Latest Stories

Matt Phillips

32m

World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

3.07¢

Pop Quiz!

What’s the world’s busiest airport?

Don't be a sucka

Rani Molla

Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

Frozen Dead Guys

The audacious and expensive world of cryogenics

Jamie Wilde

US-NORWAY-TRADITION-DEATH-FESTIVAL-OFFBEAT

Jack Raines

Adios, ERP

By one measure, stocks haven't looked this bad in decades

Earnings are important, but they aren't everything in the stock market.

Dow Jones Industrials Average Closes Day 477 Points Up

Rani Molla

Meta’s not telling where it got its AI training data

Today Meta unleashed its ChatGPT competitor, Meta AI, across its apps and as a standalone. The company boasts that it is running on its latest, greatest AI model, Llama 3, which was trained on “data of the highest quality”! A dataset seven times larger than Llama2! And includes 4 times more code!

What is that training data? There the company is less loquacious.

Meta said the 15 trillion tokens on which its trained came from “publicly available sources.” Which sources? Meta told The Verge’s Alex Heath that it didn’t include Meta user data, but didn’t give much more in the way of specifics.

It did mention that it includes AI-generated data, or synthetic data: “we used Llama 2 to generate the training data for the text-quality classifiers that are powering Llama 3.” There are plenty of known issues with synthetic or AI-created data, foremost of which is that it can exacerbate existing issues with AI, because it’s liable to spit out a more concentrated version of any garbage it is ingesting.

AI companies are turning to such data because there’s not enough good, public data on the entire internet to train their increasingly greedy AI models. (Meta had reportedly floated buying a publisher like Simon & Schuster to satisfy its insatiable data needs.)

Meta, of course, isn’t the only company that’s tight-lipped about where its AI data is coming from. In a now infamous interview with WSJ’s Johanna Stern, OpenAI’s chief technology officer Mira Murati was unable to answer questions about what Sora, OpenAI’s video generating app, was trained on. YouTube? Facebook? Instagram — she said she wasn’t sure.

Meta’s battle with ChatGPT begins now

What is that training data? There the company is less loquacious.

Matt Phillips

Today’s earnings: Who’s making money edition

Here are some some notable numbers out this morning, as earnings season gathers steam. Thursday’s main event will be Netflix after the close of trading. (Keep an eye on its advertising business.) But until then...

Parts distributor Genuine Parts beat, offsetting weak sales with cost control.
Credit card company Discover jumps, as delinquencies stabilize.
Builder D.R. Horton benefitted from the fact that there’s still no houses to buy.
Credit score giant Equifax was hurt by the fact that nobody wants mortgages.
KeyCorp, Comerica latest banks bummed by depositors demanding higher rates .
Insurance Marsh & McLennan did well by investing cash at high short-term rates.
Private equity giant Blackstone’s results were meh, due, in part, to lack of exits.

7.13%

The 30-year fixed rate mortgage is back above 7%, according to weekly numbers from the Mortgage Bankers Association, the highest level in four months. High borrowing costs are creating havoc for would-be buyers, as affordability lingers at the low levels not seen consistently since the late 1980s.

Rani Molla

11h

Amazon’s spy ops on rivals: shell companies, printed docs, and a fake Japanese streetwear brand

Some companies check out rivals’ websites, stores and public filings to stay abreast of the competition. Amazon made its own fake shell company and brands, transacted hundreds of thousands of dollars per year undercover on competitors’ platforms, and kept its intel operation a secret for nearly a decade even from others at Amazon, according to a fascinating investigation by the Wall Street Journal.

Working as a seller called Big River, a secret group of Amazon employees gained access to rival platforms, including Walmart, FedEx, and Alibaba. They used Big River email addresses and went to seller conferences as Big River employees. They even stayed hidden within Amazon itself. These employees would take screenshots of competitors’ systems that they would then show others at Amazon in person to avoid an email paper trail.

Perhaps most strange of all, the company created a fake Japanese streetwear brand called “Not So Ape” (clearly a play on A Bathing Ape) and continues to sell products from the brand on a Shopify store, presumably as an attempt to learn the inner workings of the shopping platform. Of course, copying is old hat for Amazon.

In meetings where they’d use this clandestine information to inform Amazon’s own business practices, the group resorted to literal paper. “[T]he team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies."

Exclusive | Inside Amazon’s Secret Operation to Gather Intel on Rivals

April 18th

13h

What’s happening

15h

Tesla pushes for a massive Musk pay package as the EV maker rides the struggle sedan

Jamie Wilde

Read

15h

Big Banks Earnings Wrap: Investment banking rebounds, but interest rates are a double-edged sword

Nia Warfield

Read

Time’s ticking

4/17/24

Big tech vs. big government

Jack Raines

More taxes, eh?

4/17/24

Capital gains taxes won’t fix Canada’s terrible housing market

Canada's proposed solution to its housing crisis may exacerbate the problem instead.

SWITZERLAND-DIPLOMACY-ECONOMY-SUMMIT-DAVOS

Jack Morse

4/17/24

Worldcoin pivots to the blockchain… with a 'humans only' discount

Worldcoin, the “proof of personhood” crypto project launched by OpenAI’s Sam Altman, said it plans to launch its own ethereum layer-2 (L2) blockchain dubbed World Chain. The pitch: a blockchain where it’s both easier and cheaper for people to transact than bots.

Worldcoin has made waves for its iris-scanning metallic orb that promises a future where people can mathematically prove they’re real humans and not AI bots.

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Which is what may make World Chain attractive. Crypto exchange Coinbase launched its own L2, Base, last year. Base has since seen rapid user growth — activity that’s generated the exchange millions of dollars in weekly fees.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Worldcoin, Sam Altman's Crypto Project, Is Building a Layer-2 Chain

But it’s run into trouble: the orbs have been banned across Europe and Africa, and the associated WLD crypto token has plunged 50% over the past month.

For project insiders, who reportedly received a token allocation of 25% of supply, that could equal significant losses.

Worldcoin could benefit from similar revenue if its L2 is adopted around the world.

Rani Molla

Ad-ing up

4/17/24

Turns out Netflix makes more money if it just acts like regular TV

Streaming companies will let you watch ad-free, but it will cost you.

Earnings

4/17/24

Companies report things

Nia Warfield

4/17/24

Smooth sailing? Not for superyachts

Sales of the luxury boats sank 17% last year. Meanwhile, Super-SUPER yachts (over 650 feet long) took the biggest sales dip, falling around 40%. Part of the problem: a pandemic-era backlog has led to a three- to four-year waitlist for new yacht orders. Meanwhile Russian oligarchs — former MVP customers — are largely out of the boat-buying business due to sanctions.