Friday Oct.02, 2020

🥤 Pepsi could be going hard

_Bed Bath is back, baby_
_Bed Bath is back, baby_

Hey Snackers,

An Irish court just ruled that Subway's loaves are too sugary to be called bread. Not bread = not "staple food" = no tax break. Also: meatball sub = dessert.

In much more important news: Late last night, President Trump and first lady Melania Trump tested positive for COVID-19. We'll see how investors react to that today.

Chug

Pepsi's drink sales bounce back — now it's exploring the wild world of alcohol

But I ordered a Coke... Tell that to Pepsi. The beverage giant bounced back to growth last quarter. People are driving more, meaning more Pepsi pit stops at 7-Elevens and gas stations. Pepsi's drink sales grew 6%, up from a 7% plunge the previous quarter. Meanwhile: snack sales continued to thrive as we have Pepsi's Quaker Oats for breakfast, its Rice-A-Roni for lunch, and its Cheetos for Netflix.

No one is carding Pepsi... After 127 years of being soft, Pepsi is considering going hard, according to its CEO. Coca-Cola just teamed up with Molson-Coors to launch its 1st alcoholic drink in a while: Topo Chico Hard Seltzer. But alcohol makes things complicated...

  • "The three-tier system" of alcohol sales in the US means that boozy drinks must be made, distributed, and sold by separate companies.
  • That's why there's no Smirnoff store. You're picking up vodka at Walmart or Big Joey's Liquor (the sellers). Smirnoff-maker Diageo has to partner with other companies (the distributors) to get it to Walmart and Joey's.

If Pepsi gets in on a trend, it’s a post-trend... The bigger and older a corporation is, the less quickly it's usually able to move. White Claw launched four years ago and controls over half the US hard seltzer market, followed by Boston Beer's Truly. Now Coke and Corona-maker Constellation Brands are hard seltzer-ing too. If Pepsi does go hard, it'll have to do something special to stand out from the crowded sparkling playing field.

Wake

Bed Bath & Beyond stock surges 25% after it snags its 1st sales win since 2016

Getting a 2nd life... If this retailer were a video game, it would be called Bed Bath & Respawned. Bed Bath & Beyond, the company famous for dorm decorations, massive coupons, and being featured in an early 2000s Adam Sandler movie, is back. The stock surged 25% yesterday on a brand-reviving earnings report:

  • BBB had its 1st same-store sales gain since 2016 and swung to a $218M profit (vs. a $139M loss for the same quarter last year).
  • BBB added 2M new customers, many of them young and spending more per transaction on decorative pillows, patio furniture, and even dorm decor.

This isn't just about "House Hype"... BBB was actually late to benefit from the lockdown "House Hype," following the success of Lowe's and Home Depot. BBB thrived thanks to digital innovation:

  • Online sales soared 89% for the quarter. Now BBB is planning to close 200 of its 1.5K stores as it continues to e-nnovate.
  • Last week, BBB rolled out same-day shipping in the US in partnership with Instacart and Shipt.
  • Earlier this year, BBB launched a "buy online, pick up in-store" option along with contactless curbside pickup.

This is a narrative-changing earnings report... Investors thought Bed Bath & Beyond was stagnant and dying. Until this report, the stock was worth over 80% less than it was in 2015. While it's still worth 67% less than the 2015 price, these earnings convinced many investors that BBB can succeed in a modern, remote world. So the stock majorly soared.

Raise

Millennial health startup Hims is going public at a $1.6B valuation

Packaged like a Glossier moisturizer... actually a hair loss ointment. Hims is an online health company that ships erectile dysfunction meds and hair loss supplements. Except they're packaged so minimalistically and with so much Millennial pink that they look more like Sephora products. It also has a "Hers" brand — think BC and biotin gummies. Now:

  • Hims is going public via SPAC. That's a company that goes public for the sole purpose of one day acquiring an actual company (mission accomplished).
  • The deal values Hims at $1.6B, and the merger will yield it a fresh $280M in cash to continue shipping its Millennial medicine.

Just what the doctor prescribed... One SPAC-quisition, ASAP. Hims is going public just three years after launching (for reference: it took Teladoc 13 years). But with IPOs on track to have their best year ever and telehealth thriving, Hims is speeding up plans to go public. The CEO says it compressed a 2-3 year roadmap into just a few months with multiple product launches.

Hims has reached recurring revenue bliss... Hims has 260K medication subscribers, and 91% are recurring. That's 234K customers shelling out money each month to treat chronic conditions or regular needs. Not only does Hims have high sales frequency — it also has high sales stickiness. Those chronic conditions are unfortunately... chronic.

What else we’re Snackin’

  • Frisky: Playboy is going public (again) after being acquired by a SPAC at a $415M valuation.
  • Cut: American and United went ahead with plans to cut 32K employees, since their federal payroll protection expired yesterday.
  • Trending: H&M reports rebounding sales and expectation-beating earnings. It turned a trendy profit by being disciplined with inventory.
  • Sinker: Carnival cancels most of its cruises through the end of the year in North America.
  • Sick: Amazon says 19,816 of its essential workers have tested postive for COVID so far.
  • Scooped: Google pledges $1B in licensing payments to news publishers for a new product called Google News Showcase.

🍪 Thanks for Snacking with us! Want to share the Snacks? Invite your friends to sign up here.

Friday

  • The September Jobs report: We'll get an unemployment rate update.

Disclosure: Authors of this Snacks own shares of Amazon

ID: 1351410

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