CEOs will finally start thinking about the Lorax
Hey Snackers,
Our congrats go out to miniature horses that can now officially board airplanes.
Markets climbed again for their 3rd straight day, rebounding from 3-straight down weeks.
2019 looks good on you... Estée Lauder's CEO was busy complimenting himself that it's been an "outstanding year” for the cosmetics legend. Micro Essence Revitalizing Cream and Le Labo fragrances helped sales pop 9% over the last 12 months. We jumped into the earnings report Snacks style and noticed 1 surprising theme: "travel retail".
Airport shopping is the most beautiful kind... It's where Estée's “global prestige beauty” (that's how it describes itself) is thriving. The next time you walk through a commercially-saturated terminal covered in MAC counters, you'll notice it — Global travel retail (including duty-free) has tripled sales over the last 15 years to $69B in 2017. And air travelers worldwide are projected to double by 2035.
A "captive" audience is a lucrative audience... And when you pass TSA for two hours of waiting to board, the airport terminal becomes your impulse-buy/last-minute-gift resource. That's why up to 90% of airport retail is after security — when you're stuck in a terminal that looks more like a mall sponsored by "prestige beauty" and Burberry coats. Your captivity is Estée Lauder's win.
Your parents mortgaged their house... so you could wear braces. SmileDirectClub tried a new approach to teeth straightening. The $3.2B startup has fixed incisors on 700K mouths since 2014 and just filed Friday to IPO. Its techie approach to orthodontics focuses on 2 things: Time (6 months vs. up to 2 years in braces) and money ($1.8K instead of $5K on braces). Here's how:
It's all thanks to Tinder and Instagram... When we jumped into SmileDirectClub's IPO paperwork (aka its "S-1"), this description of a core trend hit us hard: “Higher awareness of aesthetic image among consumers.” Social media's pressure on a generation to "present an image of their best selves" is powering the Club — and the company fully embraces that.
The greatest threat to this grinning unicorn is public policy... The American Dental Association isn't a fan of SmileDirectClub's "no-doctor-visits" biz model, so orthodontists are suing in 36 states. Any regulation requiring physical appointments would likely hurt its momentum — just like Uber worries about policies that could make it treat drivers like employees, not independent contractors. Policy has impact.
To love, honor... and generate profits at all costs forever. Since economist Milton Friedman first articulated it in the 70s, the purpose of corporations has been to maximize shareholder value — "profits." But now the Business Roundtable (a club of 181 big CEOs) wants to change that. Led by JPMorgan's Jamie Dimon, the group met up, probably ate well, and then recommitted itself.
Customers, employees, diversity, ethics, the environment... The Business Roundtable wants them all in a corporation's purpose — Apple, Amazon, and Bank of America's CEOs agree. We're already seeing major brands act on it: Think Nike's sponsorship of Colin Kaepernick through his social justice campaign, or Patagonia donating tax cut savings to environmental causes.
Capitalism is evolving for wokeness... It's created immense wealth, value, and innovation — it probably drove the motivation for whatever device you're reading this on. But a shocking less than 50% of Millennials believe capitalism is good. As young consumers reject Big Beer, Big Food, and Big Fashion, corporations are realizing the value in acting with principles. Now the Business Roundtable is building a framework around that.
Disclosure: Authors of this Snacks own shares of Tesla and Amazon.
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