🤔Groundhog Day for Slack & IBM

Tuesday, February 11, 2020 by Robinhood Snacks | Disclosures

IBM becomes Slack's biggest customer (again)

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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.

1. Slack soars on news that IBM is its biggest customer — falls on exact same news

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:

  • 2014: Some IBM teams start using Slack, testing the GIPHY and emoji-filled waters of the messaging platform (which launched in 2013).
  • 2016: Slack partners with IBM's AI tool Watson to improve that friendly Slackbot (and allow Slack developers to make other AI bots).
  • 2019: IBM has expanded its usage of Slack over time, and (according to Business Insider) decides to go "all in."
  • 2020: Slack's relationship with IBM goes public/official. Kind of old news, but the BI report lifts Slack shares. Moral of story: all of IBM's employees use Slack now.
  • Either way, IBM's usage of Slack validates the app's potential with massive corporations, instead of just start-up-y startups.

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:

  • July 2018: SoftBank's Vision Fund (which also financed Uber, WeWork, and Wag) invests $240M, valuing Brandless at around $500M.
  • January 2019: Brandless begins raising its prices beyond $3, introducing higher-priced products like baby and pet food.
  • October 2019: Tries to expand its products into brick-and-mortar retail stores.
  • February 2020: Goes out of business.

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.

  • Burger King opened the most new locations in 20 years, but sales were up barely 3%.
  • Tim Hortons' performance "did not reflect the incredible power of our brand," according to RBI — sales were down 4% (Sorry, mom).
  • Popeyes sales jumped 34% driven by its viral fried chicken sandwich, which was sold out in 2 weeks and caused a chicken shortage that took months to re-supply. The proud parent called Popeyes' poultry dish "iconic" and a "game changer in every way." Thanks, mom.

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.

What else we’re Snackin’
  • Not Extra: Chipotle offers free guacamole to reward members who reach 'Guac Mode'
  • Print: Xerox sweetens its offer to buy HP to $34B, hoping to persuade shareholders
  • Oh: Facebook might have to pay the IRS over $9B in taxes because of its Irish subsidiary
  • Vicky: L Brands is getting close to selling Victoria's Secret to a PE firm — the deal could be announced next week, according to PFWTM (people familiar with the matter)
  • Rough: Schick's owner, Edgewell Personal Care, gives up on buying Harry's after the FTC sued to block the $1.4B acquisition last week (Harry's is disappointed)

Sign up for Robinhood, our commission-free investing app, and get a free stock. Already on Robinhood? You'll still get a free stock for getting a friend to sign up (they'll get one too).

Snacks Daily Podcast

Coronavirus — 2 weeks ago we went over the stock losers, last week we did the stock winners.

In today's pod, we’re looking at a critical need for the Chinese companies barely hanging on during this outbreak — "lenders of last resort."


Disclosure: Authors of this Snacks own shares of Slack

ID: 1086552

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