Friday Oct.11, 2019

Waze is a "buried treasure"

_Still trying to make "wazing" a thing_

Hey Snackers,

We're trying to figure out if Rotisserie Chicken-Flavored Pringles will work out.

The US and China are still hashing things out too — Stocks popped Thursday on hopes that at least a "mini deal" will materialize between trade negotiators before the weekend.

Sweet

Tootsie Roll is 100% all-in on candy — but its profits and stock price may surprise you

The bottom of the Trick-or-Treat hierarchy... Somewhere between apple slices and candy corn, you get Tootsie Roll. Its sales fell to $515M last year and have barely budged in 2019 — that's because it's fighting nearly every trend we talk about at Snacks.

It's pro-sugar: Tootsie is doubling-down on dessert. Indulge in this portfolio of brands: Blow Pop, Charleston Chew, Junior Mints, and many more movie theater faves.
It's anti-diversifying its biz lines: Hershey's just bought a popcorn company. Mars acquired a pet food one and invested in Kind Bar. Tootsie is still just Wonka-esque candy.
But it's found an audience: The latest OECD report on developed countries found 60% of citizens are overweight and 25% are obese.

When you've been around this long... you do things your own way. We noticed the 123-year-old company handles a few things differently.

The Gordon Family has owned a majority of Tootsie Roll for 60 years.
After its 95-year-old CEO passed away in 2015, his now 87-year-old wife Ellen charmingly took over (she’s 87 and running the show).
But they don't do earnings calls (they just release the reports) and no analysts cover the company (because it literally only does candy).

So why's the stock up 28% in the last year?... Dividends. Those are the payouts some profitable companies make to their shareholders when they're mature enough to have a steady stream of profits. And Tootsie Roll pays them, because its bare bones candy biz is profitable. It has actually raised its dividend every year for the last 50 years. Investors don't mind Tootsie's kale aversion, because it reliably pays them dividends.

Upside

Waze, the driver-powered carpool app, is one of Alphabet's secret weapons

Police in 0.4 miles... Ease off that accelerator. Waze gives its users the handy heads-up via emoji-ish car icons. Google dropped $966M in 2013 to acquire the Israeli app, and now it's Alphabet's other navigation app. Last month, a bank analyst knighted Waze a "buried treasure" for Google-parent Alphabet. Here's why.

Network effects: The more people wazing, the more data Waze has on traffic and your ETA. More users ➡️ better product ➡️ more users ➡️ better product. Repeat (infinitely).
Daily habit: 75% of smartphone users regularly use a navigation app.
Near-monopoly status: Google Maps and Waze combined capture over 80% of the navigation app market — It's a shocker (and mistake in our opinion) that Google was allowed to acquire its main competitor.

"You can let me out right here"... Now that it's pretty much as good as Google Maps, Waze is differentiating itself with a carpool feature. If you're heading to work, you can use Waze to pick up fellow commuters. A 5-minute detour could earn you $5 driving Katie to that 9am all-hands meeting. Waze hopes that steals business from the ride hailers.

High engagement = High profit potential... Google Maps and Waze are some of Alphabet's least-monetized assets — so the analyst thinks Waze will start packing in ads to become a profit puppy for the parent company. Picture this:

Take exit 13 to pick up your Waze carpool.
Continue East on Hudson Parkway for 2 miles.
There's a Starbucks just 0.1 miles away offering a refresher for this 98-degree sweltering summer day.

What else we’re Snackin’

Fed: Uber Eats is partnering with Rachael Ray to bring her chicken chili expertise to a virtual restaurant that only delivers to your door
Out: Victoria's Secret (owned by L Brands) just lost its head of stores because they were too much push-up, not enough bralette
Unplugged: Dyson, the really intense vacuum company, is ending its plans to build an electric car
Upgraded: Delta is hiring a hefty 12K new employees over the next year as it expands
Fancy: Porsche and Boeing team up to build some luxury flying cars
Censored: Apple shuts down the Quartz app after complaints from the Chinese government about how it was reporting on the Hong Kong protests

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ID: 978901

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Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

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Nuke stocks up on AI excitement

For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

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China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

Exclusive | China Orders Apple to Remove Popular Messaging Apps

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Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck | TechCrunch

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

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Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

Why the World of Chocolate Is in Crisis

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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

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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.

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