💨Juul makes Altria lose billions (again)
Hey Snackers,
It's Brexit day: the UK officially exits the EU at 11pm Greenwich Mean Time. But don't say "cheerio" just yet — it's mostly ceremonial. Nothing big changes for another 11 months (aka, the transition period). Oh, but British passports get a Brexit makeover.
Markets inched up moving into the weekend even as the World Health Organization declared coronavirus an international health emergency.
Altria — the Big Tobacco company — just had its worst year ever get even worse
Smoked out... Altria, the tobacco-giant behind Marlboro cigarettes, just lost an extra $4.1B on its investment in e-cig phenom Juul. When Altria first invested in Juul, the startup was worth $38B — Now Juul's value has dropped 68% to around $12B. Boom. Up in smoke.
- Threat: As smokers traded tobacco-filled paper for a liquid-filled metal Juul, the leading vape brand became a big threat to Altria. So...
- Investment: Altria invested $12.8B in Juul in Dec 2018 for a 35% stake in the company. It thought it made a solid strategic investment in the future of smoking. Until...
- Problems: Altria's got 99 of them, all called "Juul." A torrent of regulations and litigation — mostly because young kids got hooked on Juul's creme-flavored vapes — have cost it big.
Major fail... Back in October, Altria wrote down its Juul stake by $4.5B. With this latest drop, Altria's lost $8.6B from its Juul investment in just over a year. For a company whose cigarette biz was already hurt, this one hurts more.
A "strategic" investment... becomes a major liability. That's the problem with investing in a new industry that's not very regulated — regulation will come. For Juul, this happened in a big way. While the company says it's meant as a safer alternative for smokers, people who never smoked before started. Regulators blamed Juul's charmingly colorful marketing and Jamba Juice-inspired flavors. Now Altria's paying the price, too.
Amazon briefly joins the Platinum Platypus club with a record holiday
In the Zon... How Amazon's feeling after shipping expectations-smashing earnings. Revenue rose 21% and profits came in sweeter than expected at $3.3B. Amazon shares jumped 12% to bring its valuation over $1T (capital T). Amazon's back in the $1 trillion Platinum Platypus club. For context:
- There are 1,000 Billions in 1 Trillion (whoa)
- A newly-minted Platinum Platypus (a trillion-dollar company) is worth 1,000 Unicorns (billion-dollar companies)... or 35 Lyfts
Unpack the deets... Will do. Amazon's profits got pinched last quarter as it spent a lot of $$$ in its race to 1-day shipping, aggressively challenging Walmart and Target to who-has-the-shortest-ship-time. Amazon won with its SSE (Short Ship Energy).
- The Cloud: Massive. Amazon's cloud Amazon Web Services (AWS) biz made up a huge 67% of its profit.
- Holiday sales: Extra strong. Holiday sales rose 4.1% overall in the US, but they rose a whopping 15% for Amazon.
- Prime Time: Growing. Amazon now has over 150M Prime members world-wide, up from 100M in 2018. And they're shelling out $119/year for free shipping and extra perks.
How huge can huge get?... If Amazon Prime members were a country, they'd be the 9th biggest nation on Earth (sandwiched between Bangladesh and Russia). Amazon's latest earnings suggest it's not slowing down. Other tech giants like Facebook and Google are showing signs of slowing growth. Amazon's already huge, but these recent results suggest it's still speeding up (for now).
The Bouqs snags $30M in fresh funding
Like "bouquet"... but (trying to be) cooler, because shortened. The Bouqs, a flower delivery/subscription startup, just got a fragrant $30M delivered to its door (#romantic) from a Japanese investor. It's raised a total $74M, beating its flowery peers by a long stem. Now, The Bouqs is taking its flower biz to Japan's $6B flower market. Here's how it blossomed:
- Direct-to-consumer: No middlemen and straight to your door, deliveries of one-off orders or subscriptions for people who want to treat themselves on the reg. Because if bacon can be subsciptified, anything can.
- Millennial-friendly: Some examples of Bouqs bouquets: "Raspberry Rosé" (roses come complete with a fancy Compartes chocolate bar), "Lavender Lover" (succulent bouquet comes with a lavender diffuser), and other fun ones like "Wild About U."
- Farm-Direct: What sets it apart from other VC-funded flower startups like Farm Girl and BloomThat. Getting flowers straight from the farm cuts supply chain costs (and boosts freshness).
International expansion... means international competition. The Bouqs competes with less-cool-named (but bigger) companies like 1-800-Flowers and FTD in the US. Now, it's gonna have to compete with popular Japanese flower delivery companies, too.
Impulse buys have to be local buys... And flowers are classic impulse buys. "Thinking of You" flowers and "Sorry I Forgot Your B'day" flowers need to be delivered stat. You're prob gonna choose a local florist for those, rather than a Bouqs-like startup that needs a day or two to deliver. That's why The Bouqs is leaning on its subscription biz, developing its brick-and-mortar stores — and jumping into the (very profitable) wedding biz.
What else we’re Snackin’
- Sip: Unilever, Earth's largest tea-maker and the owner of black-tea legend Lipton, is considering selling its slowing tea biz because you go for cold brew
- Meat Lovers: Tim Horton's pulls Beyond Meat breakfast sandwiches off its coffee/donut chain menu after less than a year ("ultimately, our guests chose to stay with the meat option...")
- Subbed: The free Disney+ subscriptions that Verizon doled out to its customers may have come at cost to profits (though it did gain an impressive 790K new subscribers)
- Yikes: Southwest flew over 17M passengers on planes with "unconfirmed maintenance records," according to a government report
- Gas: Shell's yearly profit sunk by $5B, a 23% drop from 2018 — blame those low oil prices
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Friday
- Brexit day (the UK withdraws from EU)
- Earnings from Exxon, Chevron, Honeywell, Caterpillar, and Colgate
Disclosure: Authors of this Snacks own shares of Amazon and Beyond Meat
ID: 1076193