IBM becomes Slack's biggest customer (again)
Hey Snackers,
Happy Tuesday — especially to this man who just came back to solid ground after 78 days in a wine barrel on a pole after breaking his own Guinness World Record for "living in a barrel at the top of a pole."
US stocks climbed to start the week — the S&P 500 and Nasdaq both closed at record highs.
When they congratulate you for something that happened years ago... Thanks, I guess? Slack stock jumped 18% Monday after Business Insider reported that it snagged IBM as its biggest client. Huge win, since IBM has 350k employees.
Then, trading of Slack stock was strangely halted... Then, this announcement from Slack cleared up the situation: "IBM has been Slack's largest customer for several years..." Slack shares fell 8% after hours. Here's how Slack's relationship with IBM has blossomed:
A mutually beneficial relationship... Being chosen by one of the world's largest corporations is a big win for Slack, and its partnership with IBM has prepared it over the years to tailor to larger customers. IBM, on the other hand, is a 108-year-old. When developers at Slack-using startups see IBM's chatbot integrations, they might be more inclined to champion the tech IBM's trying to sell them.
Building your brand... is not just a LinkedIn gimmick. SoftBank-backed Brandless, the ecommerce company that sold frill-less, sustainable grocery/homegoods products for $3 each, is shutting down. In 2017, Brandless launched with direct-to-consumer single versions of almost everything — minimalist basics from organic cashew butter to cruelty-free moisturizer, with no brand on the label. Then:
End "the brand tax"... That was Brandless' thesis: Make products cheaper for consumers by saving on marketing costs. Because if a product's not splurging millions on branding, you can give that $$$ back to customers. But Brandless didn't have enough word-of-mouth and customer loyalty to survive in the highly competitive direct-to-consumer market.
Companies are built on brand... Brand is so important that it often overpowers actual quality, price, and reason. Buying an $80 candle doesn't really make sense — but it somehow clicks if it's from Anthropologie or Goop. Especially for direct-to-consumer companies, where you're not seeing the product on a store shelf, branding is crucial (from Allbirds shoes to Warby Parker shades).
Praising the favorite child... Restaurant Brands International is a Canadian holding company, and also the parent of Burger King, Popeyes, and Tim Hortons. But RBI was especially proud of Popeyes, which outshined its siblings this year with a surge in sales.
RBI is latching onto trend foods... Popeyes Chicken Sandwich, like the Baby Yoda of food, was a huge win for RBI. Last quarter, the Impossible Whopper drove Burger King US sales up 5%. But trend foods aren't always successful — Tim Horton's Beyond Breakfast sandwich was killed off after less than a year.
Profit-wise, RBI could do more... It's underperforming compared to Yum Brands, the owner of KFC, Pizza Hut, and Taco Bell. Yum is the Lyft to RBI's Uber — both own 3 huge fast-food chains. And they both had about $5.5B in sales last year — but Yum made almost 2X the profit. RBI needs to boost sales and/or lower costs to super size its profits to Yum's levels.
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Disclosure: Authors of this Snacks own shares of Slack
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