Uber Freight's $200M, 2K-person, Chicago surprise

Tuesday, September 10, 2019 by Robinhood Snacks | Disclosures

"What do I have to do to get you in this Uber Freight?"

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Hey Snackers,

Hedge fund icon Ray Dalio is still making his way back from Burning Man (tie-dye fur coat included).

For the rest of us, all eyes are staring at Apple's keynote stage for its annual product unveil — here's how to watch on your soon-to-be-inferior phone.

Sip
1. Starbucks is whipping up its 1st pickup-only store — that's a big deal

No talky until coffee... Starbucks is making it possible — CEO Kevin Johnson sat down with Bloomberg to reveal a pick-up only store is in the works for NYC this fall. Picture NASCAR pit stop meets barista nightmare — Starbucks is targeting "people on the go" (aka all humans in Manhattan) because even pre-orders face lines lately. Other key deets:

  • The where: If NYC goes well, Starbucks will export the concept to LA, BOS, CHI, SEA, and SF.
  • The what: PSL, coconut milk lattes, frapp-a-anything — you name it, pickup-only Starbucks serves it.
  • The $$$: Pickup-only could become Starbucks' #ProfitPuppy — Coffee sales will bring in the same revenues, but at lower costs (less real estate & employees).

If the Starbucks mobile app had feelings... this would be its dream. The pick-up concept blends deliciously with the Starbucks app's growth — usage has surged to hit 2 shocking numbers:

  • 17.2M = that's how many Americans use the app
  • 40% = that's how much of Starbucks' sales came from app orders (QR-code for the win)
THE TAKEAWAY

American companies are now inspired by Chinese ones... This wouldn't be Starbucks' 1st pickup location — it launched the same concept in China last summer as "Starbucks Now." It made that move because local Chinese rival Luckin Coffee pioneered the concept across the Great Wall, jumping to 3K locations in under 2 years (Starbucks is barely higher at 4K China stores). It's an early example of American retail copying Chinese competition.

Ship

Freight just brought sexy back... Uber wants to make trucking its next profit puppy. Just like ride-hailing, Uber Freight connects drivers (of 18-wheelers) with riders (Budweiser's beer kegs or Land O'Lakes' stacks of butter). Uber just announced that Freight is its fastest-growing business line, so it's investing more in a big way:

  • Cash: Uber's Freight line will get a $200M investment each year.
  • Personnel: Uber's hiring 2K people at its future 2nd-biggest location (and the only other one besides SF that gets engineers) — Chicago = Freight HQ.
  • Perks: To sign up new truck drivers to the gig-for-cargo platform, it's offering discounts on gas, free tires (but seriously — tractor-trailers need 18 of 'em), and cash bonuses.

Uber's spending money to stop losing money... It lost a gargantuan $5B last quarter (the last 3 months), and loses $3.36 each time someone delivers an Uber Eats meal. It's funneling money away from marketing (it laid off 400 this summer in that dep't) and toward this growing bet.

THE TAKEAWAY

Freight has to be different than the rest of Uber... Uber's 3 non-Freight divisions — rides, bikes/scooters, and Eats — all face copycat competition. Without barriers to entry to creating an app platform, Lyft, DoorDash, and others keep prices low and competition fierce. Uber must find a way to prevent an Amazon Freight or Lyft Trailer from becoming a thing.

Haters

Haters gonna hate... Only some release a 23-page open letter about it. Hedge fund Elliott Management just sent one to AT&T after splurging $3.2B for a 1.2% stake in the telecom giant. The letter's core theme: Change (almost) everything. Here's how to interpret the Real Housewives-style takedown:

  • It's not personal, AT&T: Elliott has "tremendous respect for the Company’s legacy."
  • But there's a problem: Over the last 10 years, the broader market (the S&P 500) has risen 193% — but AT&T only rose 42%.
  • So it's time for a makeover: Specifically, cut the CEO and the board – Elliot thinks that “this is the moment to determine the right team for the next decade.”
  • Take the free advice and everyone wins: The fund thinks its proposals could push up AT&T stock by 65% in 2 years.
  • FYI, the fund doesn't own enough stock to force AT&T management to listen — but shares jumped because investors hope it does.

Here's the problem... There are a lot of problems facing AT&T. The hedge fund spent pages 2-23 covering them.

  • The botched iPhone: AT&T enjoyed exclusive rights to sell iPhones when they launched — but its poor service quality ended that.
  • The identity crisis: Verizon snagged the high-end wireless market while T-Mobile/Sprint grabbed the low-end — AT&T was awkwardly left in the middle.
  • The brutal acquisitions: AT&T has dropped a hefty $200B on them the last few years — it bought DirecTV at its peak, and satellite TV has only lost subscribers since.
THE TAKEAWAY

AT&T is a tech company led by landline guys... That's the biggest issue. The current CEO has run things for 12 years, and the newly-promoted COO's telecom roots go back to 1998. But now AT&T is a tech media company that owns streaming tech and HBO — that means it competes directly with Netflix. Elliott wants leadership to be more iPhone, less landline.

What else we’re Snackin’
  • Hangry: Wendy's ups its breakfast game to nationwide next year, but it lowers its profit projections
  • Grounded: British Airways is cancelling almost every single flight at the start of this week because of a pilot strike (but seriously, don't bother going to the airport)
  • Partnered: Spotify users can now share their music and podcasts to Snapchat
  • Groovy: Volkswagen goes back to its older, simpler logo (look sharp, drive sharp)
  • Resumés: Amazon wants 'em — it's hiring 30K when "Amazon Career Day" hits on 9/17. Like Prime Day, but for job offers
  • App'd: Apple is handicapping its own apps within the App Store because they were coming up too high in search results (we covered it in this podcast)
Snacks Daily Podcast

Chewing more on Uber's freight moves, Starbucks' "express" plan, and AT&T's hedge fund intervention

Tuesday

Disclosure: Authors of this Snacks own shares of Luckin Coffee, Volkswagen, and Amazon

20190910-948480-2858692

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