Hey Snackers,
Latest update on Captain Tom: the 99-year-old British WWII vet snagged a Guinness World Record for most money raised by charity walk — $35M for the UK's Health Service. Then, he broke another record by making it to top of the UK single charts with this hit: "You'll Never Walk Alone." Add that to the "Things to do by age 100" list.
US stocks rose as investors grew more optimistic about the economic re-opening timeline. Some states, including Texas, Georgia, and Tennessee, are beginning to allow dine-in restaurant service. Lots of Big Tech earnings coming up this week.
Nestlé's strongest quarter in 5 years — puppy food is the new profit puppy
Love the smell of Nesquik in the morning... Nestle, the world's largest food company, reported a sweet 4.3% quarterly sales growth — its best in nearly 5 years. The food/bev giant makes recognizable staples like Hot Pockets, San Pellegrino, and pretty much anything that begins with "Nes" (presso, tea, cafe, quik).
- Like its packaged foodie peers, Nestle got a boost from the panic-buying surge (DiGiorno pizza is them). Plus, it's lucky enough to own Toll House at a time when US frozen cookie dough sales are up 454%.
From Kit Kats to real cats... Nestle's corona-strength may lie in its fastest growing product category: pet food.
- In 2019, Nestle's Purina PetCare saw 7% organic growth and $14B in sales, beating all of Nestle's other (human) product categories.
- This quarter, Purina sales soared a whopping 14% in North America.
- On April 1, Nestle scooped up London-based pet food brand Lily's Kitchen — a more "premium" (read: more expensive) label than Purina, to cater to those posh cats and dogs.
Pet food is Big Food's (accelerating) trend... That's why consumer goods companies like General Mills and J.M. Smucker have spent billions to acquire pet food brands. While US pet ownership has consistently increased over the years, it's accelerating in the corona-conomy. Animal fostering is up 90% in some cities and Chewy.com stock is at an all-time high. Americans are taking in more pets (and pampering them more).
Instacart turns a profit for the first time — time to cut the middleman?
Do it for the Insta(cart)... Your foodie friends were ordering Whole Foods pasta sauce on Instacart years before it became the $8B grocery delivery unicorn it is today. Its biz model is simple (and corona-conomy approved): you order a cart full of food online, and a shopper goes to Costco, Eataly, or one of Instacart's 350 retail partners to pickup/deliver your groceries. Now the 8-year-old company is thriving on booming demand:
- 5.5X: Instacart's April sales boom. It reportedly sold 450% more groceries in the first two weeks of April than it did in December — that's $700M worth of groceries per week.
- 250K: The number of new workers (aka "Shoppers") that Instacart added to comb the aisles and deliver grocery bags. This doubles its total Shopper count from 250K to 500K.
- $10M: Instacart's estimated profit in April — that'd be its first profit ever.
Do less, better... The philosophy behind Instacart's fridge-worthy accomplishment. We've talked about "One & Only" companies that only do (and are known for doing) one thing well. Zoom, Netflix, and Instacart are One & Onlys, while "One & Many" companies like Amazon do more...more. Instacart's approach is working right now:
- Instacart controls 70% of the US online grocery delivery market, up from 50% only five weeks ago. Amazon contolled 20% five weeks ago, but has fallen to 11% market share.
- Amazon's stressed out with way too many business lines — customers may see "One & Only" Instacart as better focused on delivering their groceries (since it only has one job).
Ditch the middleman... This delivery boom might be the perfect moment for Instacart to optimize its biz model. It already has a valuable treasure trove of data on what products customers want and where. Instead of sending its Shoppers to Whole Foods (cough, owned by Amazon) and other random markets to scour the aisles for Dave's Killer Bread, Instacart could invest in warehouses to order and deliver its own popular items.
Volkswagen restarts the engine of its massive car factory (but who's buying?)
That new Jetta smell... German car-making giant Volkswagen is reopening the world's largest car plant. As COVID-19 infection rates fall, the German government has allowed small retail stores to (re)open up shop. Now VW and its auto-making peers are reopening too — as long as they do business in an extra-distanced, extra-hygenic way.
- 3.5K cars/day: What VW's 63.K Wolfsburg workers can produce at the 70M square foot plant — the car-churning factory is the size of about 667 Walmarts.
- 0 cars/day: The number of cars the plant actually produced over the past 39 days. VW essentially lost 136K cars over the five-week period it was closed.
No more Wienerschnitzel Wednesdays... Germany's national pride car industry is gradually restarting its production engine. But not without taking some important precautions:
- Volkswagen will start with 1 shift of 8K workers instead of the usual 20K. Our favorite changes: Doors will be opened with elbows instead of hands and lunch will be BYO (no more schnitzels at the canteen).
- BMW will make workers wear masks and keep safe distances. Employees need to show up to the plant already wearing their factory clothes (to reduce germy locker room time). Hallways are now "one-way" traffic only.
What comes first, supply or demand? ... Even when economies reopen, consumers might still hesitate to go out and splurge. But signaling that factories are open could generate some demand. It's a chicken/egg problem — and TBD whether companies can stimulate demand by returning to business as usual...or whether they'll just end up over-producing.
What else we’re Snackin’
- Backup: AutoNation, the largest US car dealer, will return the $77M in forgivable loans it received through the Paycheck Protection Program.
- Lose: Adidas' profits fell over 90% in the first quarter — the Stan Smith icon blamed the fact that 75% of its stores worldwide are closed.
- Suspend: General Motors suspends dividend payments to shareholders — GM's US production has been halted since mid-March.
- Test: CVS will ramp up COVID-19 testing to 1K locations by the end of May — it's planning on running 1.5M tests per month.