🏦 Chase's $30B racial equity pledge

Friday, October 9, 2020 by Robinhood Snacks | Disclosures

Casper the Friendly Ghost Kitchen

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Hey Snackers,

A Bug's Life is expensive – also: great Pixar movie. High-tech bug farm Ÿnsect (intense) just raised an extra $224M to do the worm.

Stocks ticked up despite ongoing stimulus uncertainty. President Trump made comments supporting individual aid measures, while House Speaker Pelosi pushed for a broader package.

Billions
1. JPMorgan Chase pledges a massive $30B to fight the racial wealth gap

Outdoing everyone (10 times over)... Yesterday, JPMorgan Chase announced that it'll spend $30B over the next five years to help close the racial wealth gap. That's the biggest monetary commitment any company has made to advance racial equity by far.

  • ~$1B: How much Citi and Bank of America each pledged to racial equity causes since George Floyd's death in May.
  • $3.3B: How much the 100 largest US combined had pledged, including Citi, BoA, and 46 others (that was the biggest amount in history committed to these causes).
  • $30B: Chase's pledge makes up ~90% of the $33.5B committed by Fortune 100 companies since May.

Pull up the stats... In 2016, the net worth of a typical white family was ~10X greater than that of a typical Black family ($171K vs. $17K). The legacy of slavery, discrimination and the fact that Black families are more likely to be denied mortgages all contribute to this massive gap in generational wealth-building. So:

  • $14B: What Chase has earmarked for new housing loans to Black and Latino borrowers.
  • $8B: Dedicated to increasing affordable housing and homeownership in underserved communities.
  • $8B: The rest goes to mortgage refinancing, small biz lending, and philanthropy.
THE TAKEAWAY

The purpose of the corporation has changed... For decades, public companies were all about returning value to shareholders through profits. Generally, more profit = more dividends and/or higher stock price. The $30B that Chase pledged to spend over the next 5 years represents ~83% of its total 2019 profit ($36B). But it might just be enough to change JPM’s image of "big bad corporation" into "big good corporation." That's strategic.

Drano

Googling "how to be special"... First, change your name. Dollar General is tired of selling you $2 necessities like Cool Whip and Drano. So the discount chain is launching "Popshelf" (so fun, so fresh) — a store aimed at higher-end shoppers who still love a good deal. Inside, it looks like a mashup of Ulta Beauty and Blick Art Supplies. Hence...

  • The crowd: Popshelf is geared toward suburban women with household incomes of $50K-$125K/year, compared to Dollar General's core customers from $40K households.
  • The goods: Popshelf will feature "nice-to-have" goodies (think: home decor and beauty products), rather than showcasing 24-packs of TP at the entrance ("need-to-have").

The thrill of the hunt... DG wants to cash in on the "affordable splurge" treasure hunt experience that TJ Maxx thrives on. Most Popshelf items will cost less than $5 and will be changed out on the reg to surprise customers (and encourage more visits). Instead of rushing out of one of DG's ~16K stores with Clorox, you're spending an hour in Popshelf browsing scented candles and charcuterie trays. The fun experience leads to more spending.

THE TAKEAWAY

Nail the target, then expand it... Dollar General is living its best life with its lower-income target customers. Wallets are corona-hurting, so DG's thrifty basics are winning. Sales jumped 19% last quarter and DG stock hit at an all-time high yesterday. This growth means it's a perfect time for DG to reach beyond its tapped-out customer base to wealthier shoppers.

Ghosted

The good kind of ghosted... Grocery hero Kroger is getting into the Halloween spirit with the debut of two "ghost kitchens" — aka, delivery-only restaurants. Kroger is pivoting from generic pasta and frozen pizza to e-nnovation with Casper-like kitchens.

Left on red (cabbage)... Kroger's collabing with ClusterTruck (lol), a ghost restaurant service that'll set up its kitchen in two Kroger stores. It's a smart, low-lift way for Kroger to test out the prepped meals delivery/pick-up concept. Meals have more profit-potential than groceries: Bread + avocado = $3. Avocado toast = $12. Womp.

  • What Cluster does: Basically, all the work. It makes the menu, orders ingredients, cooks the food, and delivers. Kroger shoppers get free delivery
  • What Kroger does: It gives Cluster 1K sq ft of space in its 160K sq ft stores to make the morsel magic happen. Niiice.
THE TAKEAWAY

The lines between grocery and restaurant are getting hazy... Kroger is a grocery chain trying to get into prepped meal delivery. Ironically, restaurant delivery services like Doordash are now getting into grocery delivery, too. We've seen this trend accelerate in the pandemic — restaurants closed for in-store dining, and started selling grocery items like olive oil and bread to survive. Now companies are seeing that the more food-related-anything you can drop at a doorstep, the better.

What else we’re Snackin’
  • Vax: Moderna vows not to enforce COVID-19 vaccine patents during the pandemic and is willing to license the tech behind its shot.
  • Cloudy: 109-year-old IBM is splitting into two public companies, spinning off its IT infrastructure biz to focus on cloud services growth.
  • Groce: Instacart raises $200M at a $17.7B valuation as grocery delivery thrive and partnerships like Walmart boost its reach.
  • McScott: McDonald's US sales jumped 5% last quarter vs a year ago thanks to faster drive-throughs and a Travis Scott meal (quarter pounder, fries with BBQ sauce, Sprite).
  • Ride: Lyft teams up with medical provider Epic to let hospitals book rides for patients.

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Snacks Daily Podcast

Grab a charcuterie board and tune into our snackable 15-minute pod to hear why Dollar General's "Popshelf" goes against every trend we can think of right now.

Every. Single. One.

Friday

Earnings expected from Infosys

Disclosure: Authors of this Snacks own shares of JPMorgan Chase and Moderna

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