Thursday Jul.02, 2020

🛒 Alibaba goes Beyond

_Proud toddler wine startup parent: "They sell off so fast"_

Hey Snackers,

Since 2020 couldn't get any weirder anyway, Coca-Cola seized the moment to launch Coke-flavored cappuccinos (through Costa Coffee, which it acquired). Because 14 years of Coke + coffee flops must mean this is finally the one.

The S&P 500 ticked up and the tech-heavy Nasdaq closed at a record high Wednesday thanks to positive COVID-19 vaccine data from Pfizer and BioNTech's trials.

BTW, this is our last newsletter of the week since markets are closed tomorrow for (early) July 4th — Enjoy this Independence Day weekend 🇺🇸

Booze

Constellation snaps up 1-year-old online wine delivery company for bcommerce gains

What do you call boozy ecommerce?... Let's go with bcommerce. If there's one thing you want showing up at your door mid-pandemic, it's wine. Bcommerce sales soared almost 400% in mid-April when lockdowns were on and bars were shut. Then we had a brief reopening stint, but now bars are getting re-shut in some of America's largest cities.

Booze giant Constellation Brands thinks it's the perfect time to invest in bcommerce. Constellation owns alcohol classics like Robert Mondavi wine, Svedka vodka, and Ballast Point beer. Now it wants some direct-to-consumer action...
Empathy Wines: The D2C wine company Constellation just acquired. The 1-year-old startup was launched by Gary Vaynerchuk, who founded Resy (later sold to Amex). Its 2K subscribers have bought 15K cases of "vineyard-to-table" CA wine. Sounds empathetic.

Constellation isn't just buying a startup... It's buying the whole bcommerce biz model.

Over 90% of Constellation's wine sales happen through wholesalers and bars/restaurants (not pandemic-friendly).
Yet 46 states allow alcohol to be delivered right to your door, which could cut out the restaurant and liquor store middle men for Constellation.
Empathy does exactly this. And tricks Constellation learns through Empathy could be applied to its other alcohol brands.

In a fragmented industry, brand matters extra... Many young drinkers can’t name/pronounce a wine label besides whatever sits next to Two-Buck Chuck at Trader Joe's. But brands like White Girl Rosé by Josh Ostrovsky (@TheFatJewish) stand out because of the personality they're built on (so AB InBev acquired it). Constellation is hoping Empathy Wines' brand can bring some of that personal touch to its liquor portfolio.

Plant

Alibaba brings Beyond Meat to its futuristic, Amazon-beating grocery stores

Beyond borders... Alibaba is "the Amazon of China," with one key difference: Alibaba.com is a marketplace that connects over 1B buyers and sellers — it doesn't actually own any of the merch (no "Baba Basics"). While Alibaba trails Amazon in many respects, it has it beat on grocery stores. Before we get into the meat of that, let's talk alt-meat:

Beyond Meat will start selling its meatless patties in Alibaba's Freshippo grocery stores.
Back to Freshippo. Think of them as those human-free, cashier-less Amazon Go stores, but kicked up a dozen notches.

More like "the Amazon of the Future"... Alibaba launched Freshippo in 2016 to pioneer the "New Retail" concept. Think: mobile-order products, unmanned checkouts, and hot food lockers. Now it has over 200 Freshippos, all aimed at creating a world where: "the boundary between online and offline disappears" (would watch that movie).

Freshippo locations serve as both store and warehouse — 30-minute delivery is available for online orders (if you're within a 2 mile radius). Conveyor belts on the ceiling carry your bagged goods out for delivery.
Online orders make up over 60% of Freshippo's total sales — you can order a sandwich from your phone in a subway car, and pick it up in a hot locker at the next stop.
The offline experience is wild too: Robots deliver food in some of Freshippo's restaurant spots. Customers can pick live lobster out of fish tanks. There's also the option to pay with your face (maybe stick with the app).

It's all about the daily touch points... The more touch points you have with a company's products each day, the more intimate that customer-company relationship is. Companies like Apple and Amazon have high daily touch points. But operations like Freshippo bring that daily interaction to another level. That intense interconnectedness is what Amazon is trying to achieve with its Go stores (and everything else it does), but Alibaba is far ahead.

What else we’re Snackin’

Pinning: Pinterest stock jumps after Facebook says it's shutting down its unpopular Pinterest rival app Hobbi (#unZucked).
Closed: Google postpones its US office reopenings to at least September as COVID cases spike.
Cheerio: General Mills' sales soared 16% for the quarter as corona-consumers turn to hoardable big brands like Cheerios and Betty Crocker.
Deliver: FedEx jumped after the package giant posted expectation-topping earnings (Amazon wasn't the only one delivering).
Shutdown: Apple will close 30 more US stores as COVID-19 cases spike, for a total of 77 re-closed stores.
Odd: Coca-Cola is ending its struggling Odwalla Juice business because "we couldn't make it work."

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

Thursday

Weekly jobless claims, the monthly jobs & unemployment report for the month of June.

Disclosure: Authors of this Snacks own shares of Alphabet, Amazon, Alibaba, Apple (lotta A's), and Beyond Meat

ID: 1232984

Latest Stories

Matt Phillips

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

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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

12h

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

14h

What’s happening

16h

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

Jamie Wilde

Read

16h

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.