🐔 The big chicken price scandal

Thursday, October 15, 2020 by Robinhood Snacks | Disclosures

Can I fix you some chicken?

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Hey Snackers,

A list of things that only make sense in 2020: July is the new January, Thursday is the new Friday, and canned corn is the new TP. How many did you get?

Stocks fell yesterday after comments from Treasury Secretary Mnuchin deflated hopes of a stimulus deal coming together before the election.

Cluck
1. This big chicken price-fixing scandal means a $110M fine for Pilgrim's Pride

In the criminal chicken world... everyone has a bone to pick. Pilgrim's Pride, the US' 2nd largest chicken processor, has reached a plea deal with the DoJ on poultry price-fixing charges. It'll have to pay a $110M fine, and is expected to plead guilty. Price fixing: an (illegal) agreement among competitors that raises or lowers prices to their benefit.

  • Example: If one toilet paper company charges $5/roll, we'll buy from a cheaper company (and the pricier one loses). If every TP maker decides to charge $5/roll, we have no choice (and the TP kings make bank).
  • Eggs-ample: That's basically what Pilgrim and other companies allegedly did with chicken, pushing up prices for chains like Popeyes, Walmart, and other buyers (including us).

That's clucked up... Right. And it's bigger than just Pilgrim's. From 2012 to 2019, multiple US chicken companies (including nugget legend Tyson) allegedly coordinated to suppress competition. The DoJ says that chicken salespeople were calling each other across companies to talk price. Hypothetical eg: "Hey Bob, with KFC we're going no less than 5 cents/wing, right?"

THE TAKEAWAY

This relates to Big Techies... Big Tech companies have been getting major heat from regulators over anti-competitive practices. The difference with tech staples like Amazon and Facebook is that they don't need to be in cahoots, because the competition basically doesn't exist.

Truckload

Don't ask for the AUX cord in this one... Uber Freight connects drivers (of massive semi-trucks) with high-volume riders (kegs of Heineken or your new furniture). In Silicon Valley speak, it's "the Uber of Logistics" — literally. Last year, Uber said Freight was its fastest-growing business. It looks like that momentum is still rolling...

  • $3.3B: How much Uber Freight is worth after raising $500M this month. PE firm Greenbriar Equity brought the cash, but Uber keeps majority ownership.
  • 65K: How many carriers Freight has in its network since launching in 2017. They work with big shippers like Bud-maker AB InBev and Nestle.
  • +11.1%: How much job postings in Indeed's driving category (including trucking) are up since the start of February.

Not a truckload of options... Trucking is generally inflexible and expensive — companies need contracts and lead-time to make their shipments. With delivery booming during the pandemic, retailers have been struggling to expand their trucking operations quickly enough. Uber Freight makes that easier and faster (#techify): gig drivers can literally book a load and get paid right in the app.

THE TAKEAWAY

Freight is Uber's dark horse... to offset losses and grow outside the complicated world of ride-hail. Uber's Ride bookings plunged 73% last quarter on germ-avoidance and "everything is closed, anyway" syndrome. Now if Prop 22 doesn't pass in California, rides will suffer even more. Logistics is a pandemic-friendly bet.

Diversify

Check your 401(k) or brokerage account... Odds are high that you've got some $$$ in a BlackRock fund, since it's the world's largest money manager with $7.8T in assets under management (AUM) — that's worth almost 4 stimulus packages. Much of that is dominated by index-tracking ETFs, aka "baskets" of stocks that can track an index like the S&P 500. But some funds are more startup-y:

  • Electric vehicle startup Arrival just raised $118M from BlackRock funds, reportedly giving the British EV maker a $3.5B valuation. Hyundai and UPS also invested.
  • Green and lean: Arrival claims its electric-run city buses and vans can travel 300 miles without recharging and lower ownership costs by 50%.

Not so green... BlackRock is also reportedly looking to invest in a $10B+ Saudi Aramco oil pipeline deal. On the sustainability spectrum, BlackRock had a quinoa salad for lunch with Arrival and fried dough for dinner with Aramco fossil fuels.

THE TAKEAWAY

BlackRock wants to diversify (and hedge)... instead of depending only on one food group. Diversification is meant to reduce risk by spreading investments across sectors/companies that aren't correlated. With the oil investment, BlackRock would also be hedging against potential downturns in EVs. If the oil biz loses, the EV biz is probably doing well (and vice versa).

What else we’re Snackin’
  • Zen: Meditation app Calm is reportedly looking to raise money at a $2.2B valuation — great time to be in the relaxation biz.
  • Doc: UnitedHealth's profits beat expectations. You avoided doctors' offices, so it spent less while pocketing your insurance premiums.
  • Grande: Starbucks ties executives pay to diversity targets — it wants 30% of its US corporate employees to be people of color by 2025.
  • Rave: Zoom will start letting people host paid-entry online events with a new service called OnZoom (should've been ZoomChella).
  • Jet: Airlines like United and American are increasingly using pre-flight COVID testing to get people in the air again.
  • Check: Facebook and Twitter limit the distribution of an unverified New York Post story about Hunter Biden's alleged tie-up with Ukraine.

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

Snacks Daily Podcast

Trex is a $9B company that decks out your patio with recycled wood (don't get too excited). TREX stock hit an all-time high yesterday since WFP is the new Work-From-Bed.

Tune into our snackable 15-minute-pod to hear why boring is fun in the corona-conomy (and why an actual T. rex just sold for $32M).

Thursday

Disclosure: Authors of this Snacks own shares of Uber, Amazon, and Walmart

ID: 1369060

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