Friday Jan.21, 2022

🚴 Peloton stops spinning

Fluffy only meets subscribers [Westend61 via Getty Images]

Hey Snackers,

Happy Friday: Put up your feet, light a lavender-scented candle, and slap on a hydrating mask that looks like a slice of deli meat. Oscar Mayer’s terrifying bologna face masks — described as “the cold-cut of self-care” — are already sold out.

Stocks dropped again yesterday as concerns over interest-rate hikes and slowing economic growth continued. British Prime Minister Boris Johnson dropped Covid safety measures in the UK, where the virus appears to have peaked.

Sweat

Peloton pauses production of its fitness equipment as unsold bikes and treadmills pile up

Worse than a fake death on “Sex and the City”... Mr. Big news: Peloton is temporarily halting production of its spin bikes and treadmills, CNBC reports. In a confidential presentation, Peloton reportedly said that demand for its connected fitness equipment has faced a “significant reduction” since mid-pandemic. Picture: thousands of unsold bikes and treads sitting in storage depots.

Peloton stock tanked 24% yesterday to below its IPO price, and was temporarily halted for trading. Shares have lost 70% of their value since November.
Peloton plans to pause bike production for two months and treadmill production for six weeks. The pricier "+" versions of each will be paused even longer.
Last year, Peloton majorly fumbled its response to demands to recall its Tread+ after thousands of injuries and one death. It belatedly issued a recall in August.

Pre-Zoom Beyoncé ride... Early in the pandemic, people rushed to snap up Peloton’s $2K bikes and $4K treadmills. Sales nearly tripled, subscriptions more than doubled, and it even turned a profit. But since all that demand was "pulled forward" and IRL workouts have returned, Peloton's growth has dramatically slowed. It lost $376M last quarter, and the new year is off to an even rougher start…

1st: CNBC reported that Peloton hired McKinsey to consult on its cost structure, which could translate to layoffs and store closures. It has reportedly started cutting jobs already.
2nd: SEC filings showed that Peloton insiders sold ~$500M worth of shares before the stock plunged earlier this week.

Too much optimism can be dangerous… Peloton’s growth forecasts for this year were way off. It seriously underestimated the possibility of a drop in demand. As the poster child of pandemic thrivers, Peloton had months-long shipping delays because orders were so strong. Now it has the opposite problem: so much unsold inventory that it could start a warehouse Equinox.

Superfan

Insta and TikTok roll out creator subscriptions — because influencers are their competitive advantage

Like, share, subscribe… The influencer's Triple Crown. This week Instagram and TikTok began testing tools that allow creators to offer paid subscriptions. Both are hoping to drive more traffic to their apps. TikTok didn’t share details about its subscription, but here’s what we know about Insta’s:

Only 10 creators were invited to test the feature, including Olympic gymnast @jordanchiles (431K followers) and spiritual coach @bunnymichael (216K followers).
Creators can charge anywhere from $1 to $100 for access to subscriber-only content and special badges that help fans stand out in crowded comment sections.
Insta is not taking a cut of creator earnings — yet. But it plans to expand the program to all creators in coming months, and may start “sharing” revenue in 2023.

Liked Jason Derulo’s TikTok… and his Reel, and his Snap story. Social giants are competing with new features to court top creators, whose millions of followers drive massive engagement. By attracting influencers with paid subscriptions, social platforms hope to win over their followers.

Instagram, TikTok, and Snapchat have between 38M and 45M users each, and that gap is expected to narrow to about 1M users by 2025.
Social platforms have spent billions on “creator funds” to attract top talent, and the growing creator economy is worth $100B+.
Meanwhile, creator-focused platforms like Clubhouse, Patreon, Cameo, and OnlyFans boomed during the pandemic by connecting creators directly to fans.

Influencers are influencing tech companies… Creators have more leverage than ever before. Social companies initially focused on user growth, not creators. But now that the market is saturated and they’re competing for the same users, keeping top talent is key to engagement. And engagement is key to social’s profit puppy: ads.

What else we’re Snackin’

Shot: Starbucks reversed plans this week to require employee vaccination and testing after the Supreme Court blocked President Biden’s vax mandate for large employers. Other businesses could follow.
Damon: Crypto.com disclosed that 400 customer accounts were hacked this week, adding that the affected accounts were all reimbursed. The exchange has 10M users and recently made headlines thanks to a ridiculed ad feat. Matt Damon.
Squid: Netflix stock plunged 20% yesterday after it disappointed on subscriber numbers, despite hits like “Squid Game.” Last week it hiked US and Canadian prices as growth there stalls.
FashZon: Amazon is opening a clothing store that features algorithm-driven recommendations and touchscreen-order dressing rooms. As America’s #1 clothing seller, the ’Zon is trying to promote its private labels.
Digi: While China plugs its digital currency (#DigiYuan) for international use, the US Fed released its long-awaited exploration of a digital dollar. But the 40-page doc doesn’t actually take a stance on creating one or not.

Friday

Earnings expected from: Schlumberger and Ally Financial

Authors of this Snacks own: Bitcoin, and shares of Snap, Amazon, Google, Starbucks, Netflix, and Apple

ID: 2000505

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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.

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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

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.

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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.

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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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