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Hey Snackers,
We love connecting with you every day, and want to do more of that during these challenging times. So we're launching our first "Snacks Break": a video conference between you and us. We'll whip up our 3 Big Takeaways from the corona-conomy, then answer your questions live. Register here to join us on Friday, April 3rd at 3PM EST.
All 3 major indexes fell over 4% Wednesday after President Trump warned the nation to brace for 2 very painful weeks ahead.
Sink
Carnival Cruises isn't bailout-eligible, so it's making some desperate money moves
That classic awkward moment when... you realize you're not eligible for a much-needed gov bailout because you incorporated in Panama to pay lower wages/taxes. Few industries are struggling more than the cruise industry, and nearly no company has struggled as much as Carnival (with its multiple coronavirus-infected cruise ships). Good thing the $2T govt stimulus includes $500B for sinking corporations, right? Not for Carnival:
- For a company to qualify for the $$$ it has to be "created or organized in the US.” But Carnival is incorporated in Panama, which means it avoids paying almost any federal income tax.
- Many of the largest cruise operators are incorporated offshore: Royal Caribbean chose Liberia, and Norwegian opted for Bermuda. They can avoid paying the US minimum wage to most employees, many of whom aren't American citizens.
Carnival is in an (especially) bad situation... It has no customers for the foreseeable future, but also has huge debt payments to make. And — it likely won't be eligible for bailout money.
- So it's trying to borrow billions, and tapping almost all of its $3B credit line.
- It's also selling $3B in bonds. Carnival knows investors will think it's risky, so it's offering to pay a whopping 12.5% in interest to make the loan attractive.
- If Carnival can't pay them back when the bonds mature in 3 years, investors get to seize its massive ships as collateral. No one has the garage space for that.
Being offshore hurts during times like these... For years, Carnival has been reaping the extra profits from being incorporated outside the US. But now, with its business virtually non-existent, it could really use a little help from Uncle Sam. It likely won't be granted a slice of the $500B rescue pie. So it's forced to rack up a very risky amount of debt, hoping to survive until things return to normal.
Drink
Alcohol sales are popping as people stockpile booze (but non-essentials are losing out)
It’s a hard (drinks) life, for us... Alcoholic beverage sales are booming as people hoard to drink away their corona-induced worries. FYI: The World Health Org wants us to know that alcohol is an "unhelpful coping strategy" for this pandemic. Sounds like no one was listening:
- Alcohol sales in the US soared 55% during the 3rd week of March (compared to the same week a year ago). Pennsylvanians especially scrambled to stock up after the state closed its liquor stores (some even make the trek to Delaware).
- Sales of ready-made cocktails spiked 106% in the same week, taking the keg for most in-demand alcoholic beverages (think hard lemonade, canned Vodka Spritz).
Surprisingly, beer sales also jumped... The foamy classic has been losing shelf space in American fridges for years now. But sales of 24 and 30-packs of mainstream brews like Bud Light soared around 90% compared to last year.
- Analysts say craft beers won't be so lucky — roughly 70% of craft beer sales come from taprooms/bars (which were almost all forced to close).
- No one's stocking up on fancy $9-each bottles of Craft Red Gooseneck 8.7% ABV IPA. Consumers can't afford that right now, and retailers can more easily stock shelves with cheaper brands (like Bud) in large quantities.
Only the "essentials" are winning... Grocery stores are considered essential services in all states, and liquor stores are still considered essential in most. But restaurants and bars — as well as the industries (like craft beer) that largely supply them — are losing out on major income from their biggest profit puppy: alcohol.
Hire
WarnerMedia snags Hulu founder as CEO — right on time for HBOMax launch
He's a Kilar Queen... of the streaming screen. Jason Kilar, the founding CEO of Hulu, just got hired by WarnerMedia to be its new CEO — juuust in time for the May launch of its new streaming service, HBOMax:
- Warner is a big ol' confusing media giant: It owns Warner Bros, HBO, CNN, TNT and a bunch of other media-related subdivisions.
- And the plot thickens... Warner itself is owned by AT&T, which acquired Time Warner (now WarnerMedia) in 2018. Like competitors Verizon and T-Mobile, AT&T has been trying to gain more of a foothold in the streaming world.
It's on... Between the impressively fast growth of Disney+, the pending launches of Peacock and Quibi, and the fact that everyone is stuck at home streaming anything with words/video on Netflix: the streaming wars are heating up big time. So is competition for top streaming talent:
- Warner's decision to make Kilar CEO means that HBOMax — and streaming in general — is a top priority for the company's future. Since streaming is the future (present?) of TV, it makes sense to bring on a top streaming pioneer to lead the charge.
- Kilar's streaming-laden resume is Warner's dream: He spent 9 years at Amazon before founding Hulu in 2007, spent 6 years leading Hulu, then served on the boards of a bunch of media companies before founding his own video startup (which sold to Verizon).
Old School media needs New School talent... Warner's got the cable and movie OGs under its belt, but it hasn't conquered streaming yet. That's why it's bringing on a CEO with a strong rep in both the media and tech circles (media + techy = New School media). Now Warner hopes it'll be better positioned to succeed in the competitive streaming space — with its new profit-puppy hopeful, HBOMax.
What else we’re Snackin’
- Married: T-Mobile's $26B merger with Sprint is (finally) officially complete — and T-Mobile CEO John Legere steps down earlier than expected.
- Eats: Uber launches grocery delivery as its rides biz takes a big hit — one of the new partnerships is with French grocery chain Carrefour (will also deliver sanitizing products).
- Cloudy: Apple acquires popular weather app Dark Sky, and will shut down the Android version in July (no changes for iOS users — for now).
- Booted: Macy's — which temporarily shut down all its stores — is being removed from the S&P 500 Index (Macy's is now worth just 1/4 of what it was in December).
