This guy needs a Driftwell
Hey Snackers,
"In the right environment, our burgers...could decompose." — McDonald's, trying to bust the myth that its burgers don't decompose. Very reassuring.
Stocks jumped yesterday, clawing back losses from the S&P 500′s worst week since June and the Nasdaq’s worst week since March.
A TikToker and a database walk into a bar... The wait to see who TikTok’s US parent will be is over and it’s… anticlimactic. Yesterday, Oracle confirmed it struck a deal with TikTok-owner Bytedance to become a “trusted technology provider” (read: not owner). Oracle would reportedly be managing TikTok’s US data. The deal still needs approval from the US and China. Somehow, this endless saga only started last month.
Less of a parent... more of a guidance counselor. While Oracle will possibly get a stake in TikTok’s US assets, this isn't an acquisition. The "tech provider" role is vague, but it likely means TikTok will be moving its data to Oracle's cloud (and off Google's, where it is today). Oracle could also get TikTok to use its marketing software for ads. TikTok is a big sexy catch of a customer, so Oracle stock jumped 4% on the news.
Is this a good deal for the US?... It certainly is for TikTok — the Tok gets to keep its 100M American users without giving up ownership of its business. But Trump has insisted the only way TikTok can avoid getting banned is a sale to a US company (this isn't that). Will Trump back off that demand? A few reasons he might:
Introduce the problem... then solve the problem. After decades of pumping you full of caffeine and sugar, Pepsi wants to help you chillax. That's why it just intro'd Driftwell, the ASMR of the canned drinks world:
The problem/solution premium... The health shift we've seen in recent years means junkier foods/drinks have lost steam. Sugary sodas are being replaced with CBD-vegan-gluten free kombucha. Pepsi's "problem" drinks are waning, but now it can make double the $$$ by offering "solution" drinks, too. And these premium drinks command premium prices:
"Functional drinks" are 2020's big bev trend... These provide more than just sugar/alcohol/caffeine — they feature 1 ingredient with purported health benefits. Coke launched Coke Energy with B vitamins and guarana. ABInbev's Bud launched hard green tea and coconut water. DrPepper invested in "smart energy" drink Adrenaline Shoc (sounds healthy). Sales of functional bevs came in at nearly $32B in 2019, up 7% from 2018. We can expect to see growth accelerate during an anxiety-inducing health crisis.
The cash runway doesn't look good... Pun 100% intended. Delta, like other airlines, is strapped for cash. Domestic travel is down ~60% from last year and daily costs are still sky-high (Delta's losing $27M/day). The government's $25B in airline bailout funds runs out on October 1st, and mass layoffs are expected. As a cherry on top of the cash-crunched sundae, US airlines just permanently scrapped their $200 change fees for domestic flights. Sooo...
Please explane... Airlines earn money from frequent-flier programs by selling miles to banks and retailers that award them to customers. American Express is able to drop you those sweet travel rewards points since it bought them en masse from airlines. And each time you swipe your Delta co-branded card, Delta gets a little money from AmEx.
Delta is a credit card company now (more than ever)... Few things drive loyalty like the metallic traveler status. In 2019, $4B in sales from Amex made up 8% of Delta's revenue. Delta expects annual AmEx sales to hit $7B by 2023. Delta is also AmEx’s largest co-branded account, making up 20% of AmEx balances worldwide. Delta’s passenger sales fell 60% in the 1st half of 2020 — But sales to American Express dropped just less than 5%. With its passenger biz decimated, Delta's leaning into cards more than ever.
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