🤫 Apple’s big alleged China secret
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Hey Snackers,
Google’s top trending searches for 2021 are a time capsule for a weird year: “Squid Game,” “Cottagecore,” “how to pronounce Dogecoin,” and “Bernie Sanders’ mittens.”
Stocks rose for the third day in a row after Pfizer said its vaccine booster neutralized the Omicron variant in lab tests. In DC, Instagram chief Adam Mosseri testified before Congress over concerns that social media exacerbates mental-health issues in teens.
Apple’s alleged $275B deal with China has helped it thrive where other US tech giants couldn’t
Cupertino to Beijing... A route that Apple CEO Tim Cook knows well. Apple is known for its secrecy, but one alleged big secret: The Information reported that Cook signed an estimated $275B deal with Chinese officials in 2016, in which Apple promised to invest in China’s economy and tech industry. Cook is said to have sealed the deal during China visits he made after regulators there cracked down on its China biz, including shutting down iTunes books/movies. As iPhone sales plunged, Cook jumped into action:
- The reported five-year agreement included Apple’s promise to invest in Chinese companies (see: Apple’s $1B investment in Didi), supply deals, infrastructure, and worker training.
- The supposed goal: Establish strong ties with China to protect and grow Apple’s business in the key market, where nearly all its products are assembled.
iPhone diplomacy... As China tightens censorship and data-privacy laws, more US tech companies like LinkedIn and Yahoo have pulled out. Facebook and Twitter have been blocked since 2009, and Google left in 2010 after refusing to censor its search results. US-China tensions are escalating: The US just announced a diplomatic boycott of the Beijing Winter Olympics over China’s human-rights abuses. Meanwhile:
- Apple is #thriving in China: Thanks to Cook’s reported diplomacy efforts, it’s one of the few US tech companies succeeding in the world’s most populous country.
- No. 1: Apple recently became the largest smartphone brand in China, which now makes up 19% of Apple’s total sales — up from 15% a year ago.
China diplomacy is a double-edged sword… likely why Apple would try to keep such a deal under wraps. Apple’s China strategy has helped it become the world’s most valuable company. It has been exempt from many limitations imposed on foreign companies (for example: It gets to control encryption keys for Chinese iCloud users). But Apple has also complied with China’s requests to delist thousands of apps that run counter to the state’s policies, including religious apps. As US-China tensions grow, Apple could get more flak for its biz-boosting concessions.
Wonder’s chef-centric food-delivery trucks could solve the “soggy fries” problem
Your filet mignon is en route… courtesy of Bobby Flay. Wonder Group designs exclusive meals with celeb chefs and then cooks them outside customers’ homes in mobile kitchens (think: fancy food trucks). On Tuesday, this food-tech biz — which has raised $500M to date — unveiled its new CEO: Marc Lore, the billionaire founder of Diapers.com and Jet.com.
- Fresh model: Wonder pays partner restaurants a one-time fee for the rights to prepare their dishes but keeps all delivery sales — unlike DoorDash and Uber Eats, which earn fees from restaurants for each delivery.
- 60 mobile kitchens are already cooking food and mixing cocktails in New Jersey. Lore plans to have 1.3K trucks in the NYC area by next year. Wonder also runs a separate service, Envoy, which lets customers order from local restaurants.
The “soggy fries” problem… Delivery behemoths DoorDash and Uber Eats are still losing money after raising billions, partly because delivery margins are thin and customers abandon apps easily if someone offers a better promo code (or their fries arrive cold). To solve the soggy-fries problem, Lore plans to copy ecommerce giants and streamline fulfillment — by using mobile kitchens to ensure food is piping hot. But the loyalty problem requires a different fix.
Exclusive content is king… even when it’s a sizzling steak. Netflix won over millions of customers by spending billions on exclusive “gated” content. Wonder plans to do the same — not with movies, but with exclusive mojitos. To build customer loyalty, Lore plans to copy streaming companies and “lock up all the best proprietary content” by forming exclusive partnerships with top restaurants. Think: Spotify-exclusive podcasts, but for pasta.
What else we’re Snackin’
- Coinage: Crypto CEOs testified before Congress to argue that their tech can help solve economic challenges, as lawmakers weigh how to regulate the booming market.
- CO2: President Biden committed the US gov’t to reach net-zero emissions by 2050, and directed federal agencies to buy only zero-emission vehicles by 2035.
- Inbox: In Twitter’s first big move since Dorsey flew the coop, the social biz bought business messaging service Quill to use its tech to improve Twitter DMs.
- Build: Lego, the world’s biggest toymaker by revenue, plans to build a $1B factory in Vietnam to satisfy growing demand for toy bricks in Asia.
- Tense: Theranos founder Elizabeth Holmes’ lawyers wrapped up their defense yesterday. The jury will now determine whether she faces up to 20 years in prison.
Thursday
- Weekly jobless claims
- Earnings expected from: Oracle, Costco, Broadcom, Lululemon, Chewy, Dave & Buster's, and National Beverage Corp.
Authors of this Snacks own shares of: Apple, Twitter, Pfizer, Amazon, Google, Netflix, Spotify, and Uber
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