Wednesday Oct.13, 2021

☕️ Starbucks’ big 50th

Go oat, brew cold [Adam Hester/The Image Bank via Getty Images]

Hey Snackers,

Happy International Day for Failure. The holiday, created in Finland, can be celebrated by learning from failures and engaging in new fails. Because winners #fail until they don’t.

Stocks ticked up today, even though the Fed signaled it’s moving toward scaling back its economy-boosting bond buying program, which has infused trillions into the US. The central bank is prepping to start cutting back next month.

Brew

Starbucks turns 50: the past, present, and future of the world's largest coffee chain

A tall vanilla latte walks into a Porsche… Midlife crisis, Starbucks edition. The chain is celebrating its 50th birthday. Today, it's a corporate giant worth $131B that accounts for 40% of US coffeehouses. In honor of the big 50, we're taking a look back:

1971: The first Starbucks opened in Seattle’s Pike Place Market. But it only sold beans and equipment for DIY brews.
1982: Howard Schultz, a sales rep for a Starbs supplier, became Starbucks' marketing chief. He believed it could become “synonymous with great coffee.”
1987: Schultz ended up buying Starbucks, with a vision of turning it into a nationwide café chain inspired by Milan coffee bars.
1991: A year after turning its first profit, Starbs started a national rollout. LA stores were instant hits, with celebs like Paula Abdul rolling up for nonfat lattes.

Cold brew, hot growth... Today Starbucks has over 33K stores around the globe, up from 1K in 1996 and double what it had in 2010. Most Americans had never experienced "café culture" pre-Starbs. Now the US has 37K+ coffeehouses — Starbs accounts for a whopping ~15K. Since going public in 1992, Starbucks stock is up more than 300X, and has doubled over the past five years. It's the world's second most valuable restaurant brand, trailing only McDonald's. Two recent areas of focus:

Digital: Starbs has doubled down on store pickup, delivery, and drive-thru. Last quarter, more than 25% of transactions came from app mobile orders, and rewards members accounted for more than half of US sales.
Product line up: Since Starbs acquired the Frappuccino in 1994, it's expanded from hot coffee to fancy foods and premium cold bevs, including egg-white bites and Mango Dragonfruit Refreshers.

"Premiumization" could be a frothy growth opp... Starbs has upped the dividend it pays to investors since 2010, when it first intro'd dividends. But to keep growing profit in the face of hot competition, Starbs might need more premiumization — fancy-fied products it can charge extra for. That's why it’s pushing premium treats like Beyond Meat breakfast sammies and Oatly iced coffees. We'll see if the premium push is still working when Starbucks reports earnings this month.

Puck

The NHL’s pricey new puck drops in Seattle as it takes a page out of other leagues' playbooks

Sounds like a lake monster… the Seattle Kraken. The NHL’s newest hockey team hit the ice last night. This season, the NHL signed a $635M/year broadcast deal with ESPN and Turner — nearly twice the size of last year’s deal with Disney and NBC, but far from the NFL’s recent $10B/year deal. The NHL has high hopes for Seattle’s first team in 97 years. Here’s why:

No expense spared: The Kraken raised $2B from billionaires like Amazon CEO Andy Jassy, who along with his ownership group paid $650M — more than 20 of 31 teams are valued — to join the NHL.
The Climate Pledge Arena, sponsored by Amazon, cost $1B+ to upgrade and is 100% renewable-energy-powered. Think: more LED video screens than any other arena.
Digital approach: The Kraken built a mobile app that gives fans personalized experiences, like finding their favorite wines waiting at their seats.
Monster demand: An average Kraken ticket sells for $188 on SeatGeek, double the NHL average.

Streamable hat trick... The Kraken’s debut is part of a bigger e-vamp for the NHL, whose ratings hit a 10-year low last season. The NHL-ESPN partnership is the first major US sports broadcasting deal that’s streaming-focused: It gives the NHL access to 15M ESPN+ subscribers and 43M Hulu subscribers — and an opportunity to boost its fan base.

The future of pro sports is omnichannel… and the NHL doesn’t want to miss out. The NBA and NFL have built ways for fans to consume live sports across multiple platforms. The NBA teamed up with Microsoft to provide AI-customized content across streaming and social platforms, and the NFL partnered with Verizon to deliver 5G-powered stats in the stadium. The Kraken could spearhead the NHL’s plans to engage viewers in stadiums and on streamers.

What else we’re Snackin’

TBD: The FDA didn’t approve or reject Moderna’s Covid booster vaccines, because of an apparent lack of data — bad news for Biden’s vax vision.
Out: A record 4.3M workers quit their jobs in August, with bar, restaurant, and retail employees leaving in droves.
NVM: GM won’t have to cough up the $1.9B it expected to pay for the recall of its Chevy Bolt EVs, after battery supplier LG committed to footing the bill.
Tunes: Blackstone invested $1B in music copyrights through UK-based Hipgnosis Songs Fund, which owns music from stars like Neil Young and Rihanna.
e-Taco: Charging network ChargeNet will bring quick EV charging to Bay Area Taco Bell restaurants, after a cash infusion from Tritium Partners.
Burger: Wendy’s is partnering with Google Cloud to spruce up its drive-thru experience with AI, joining McDonald’s in serving burgers with a side of smart data.

Wednesday

September Consumer Price Index drops
Earnings expected from JPMorgan Chase, Bank of America, Wells Fargo, BlackRock, Infosys, Progressive, and Delta

Authors of this Snacks own shares of: Starbucks, Chase, Moderna, GM, Microsoft, Disney, and Delta

Correction: In the Snacks newsletter published on Monday, Oct. 11, we misstated that Netflix had not yet set targets to reduce its carbon footprint. The company has set targets, which you can read about here and here. We’ve updated the online version of the newsletter, and regret the error.

ID: 1873773

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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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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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