Morning Brew Daily - Instacart Checks Out the IPO Market & Why Everyone is Leaving Scooter Braun

Episode Date: August 28, 2023

Episode 134: Neal and Toby discuss why Instacart is filing for an IPO after raking in more than $240 million in the first half of 2023. Plus, UAW workers have authorized a strike at GM, Ford and Stellantis and why are music's biggest stars parting ways with manager Scooter Braun? Also, why has the dwindling demand for French wine cost millions. Finally, the guys share their winners of the weekend and what we are watching this week. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Listen to Founder's Journal Here: https://chartable.com/podcasts/the-founders-journal Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. On today's pod, we'll talk about why auto workers are hitting up Michaels for poster supplies, and the French wine industry needs you to drink more wine because apparently no one is anymore. Then we finally have a big venture-backed tech company going public after months of a shriveled-up IPO market. Plus, why is everyone in the music industry ditching scooter brawn and could Justin Bieber be next? It's Monday, August 28th. Let's ride.

Neil Bob Barker, the host of The Price is Right for over 35 years, passed away over the weekend at 99 years old. Unbelievable iconic guy who lived a heck of a life. What do you remember most about him? The thing I remember most is obviously he's the guy who keeps you company when you're home sick because I'd never usually watch TV at 11 a.m. But not in the off chance I did when I was sick from school. I think this is a universal feeling shared by many. we'd turn on the TV and watch

a little prices right at 11 a.m. on CBS. But diving into Bob Barker through all these obituaries, I learned so much more about him, and he was apparently a very famous animal rights activist, and he ended every show. I did not know this by saying, help control the pet population,

have your pet spayed or neutered, and the PETA office in Los Angeles is actually named the Bob Barker building. I truly did not know any of this, too, before reading up over him on the weekend. And it also makes me reconsider how we end our show. So we have more of a... If you care about that cause? Right. Absolutely. I mean, we say let's run it back. So maybe we start brainstorming a little bit.

Also, I do think that a lot of people from kind of the younger generation know Bob Barker more from Happy Gilmore than for his actual role as the host of Prices, right? That's certainly where I know of, just like that iconic fight scene between the two. And then also, of course, you had a lot of jokes on about he got his just as close to 100, just as close to a dollar without going over since he passed away at 99. So really just a great guy. And yeah, the world will miss him. Did you know that Bob Barker was a black belt? So he was a black belt. And guess who he trained with? Chuck Norris, who was his neighbor. So he probably could actually beat up Adam Sandler in real life. That is probably where the gender, where the scene came from. That makes sense now. Very cool.

All right, Neil, let's jump into our top story of the day. The IPO market has been stuck somewhere between Siberia and Merrill Streep's character in Devil Wears Prada. That's how icy it's been. But we're finally seeing some signs of thawing as Instacart, the grocery store delivery company filed paperwork for its public offering just before the weekend. This is a big deal for a few reasons. One, it'll give us an inside look into how Instacart is doing as a business after it's had

to lower its private valuation multiple times over the public. past few years. And two, Instacart's debut will be the first IPO for a major venture-backed company since 2021, assuming no one beats it to the punch. And beyond just venture-backed companies, the number of IPOs over the past 18 months was lower than for any 12-month period since 2016. So, Neil, I for one am excited to have a new company to talk about. All we've had so far this year in terms of fun IPOs was Kava, which was great. Yeah, it was very fun. No, in the early days of morning, brew, there were so many IPOs from the likes of Uber and I think Snapchat was in 2017 that we used to go tailgate these IPOs in front of the New York Stock

Exchange. It was so fun. The private markets were so frothy. Everyone was going public. So it's really exciting to have this Instacart IPO. The biggest question for Instacart is that it has its core grocery delivery service, which grew a ton over the pandemic from 2020 to 2021, or from 2019 to 20 to 20. 2020 revenues grew 590% because everyone was ordering grocery delivery. That revenue has kind of

stagnated for that core for that core business as people as a pandemic has kind of winded down and people have gone out more. So it grew, you know, I think orders grew 18% into 2022. But then over the first half of the year, they've been pretty flat. So the question for, you know, potential Instacart investors and for the company itself is can it squeeze any more money out of this core grocery delivery service? And if, not, what are the new avenues of growth that it's going to tap into, which it has been doing recently. Yeah, it was definitely one of those pandemic darlings that just massively accelerated its growth timeline. It was valued at $39 billion in its last private round in early 2021.

Since then, it's repeatedly dropped its internal valuation, which is a little different from what it raises money at. It's most recently internally valued itself at $13 billion. So pretty big discrepancy between those two. And then one thing that stood out to me about Instacart, though, is it's profitable. It generated $428 million in profit last year, which I just didn't expect. They did say that there's a little asterisk because they had a one-time tax benefit that helped its 22 numbers. But that was a surprising, I just assumed it just had that profile of like a venture back tech company, but it is profitable. It's got a lot of users to 7.7 million monthly active users. And then another interesting wrinkle to me is that economists are kind of excited for this

public debut because it gives them a treasure trove of data about the shopping habits of different cohorts of people. Because Instacart claims that it works with more than 80% of physical grocery stores. So now that it's public, economists gets to pick through that data, see what people's spending habits are. So I do think it's a very interesting company to go public right now. And this is another tip that stood out to me. Almost 30% of its revenue. news are advertising. Right. So at the end of the day, this has been a joke on Twitter for a long time that every, at the end of the day, every company, no matter what it is, always rolls out an advertising business line and it becomes a big part of their, big part of their business.

You know, Apple is doing it. Amazon is doing it. Instacart is doing it. Uber. Every time you over Uber now, you see it. And then to zoom out to the broader IPO market, there's a couple coming down the pipeline. Finally, Arm is the big one, which is the chip manufacturing. manufacturer, it's probably going to be in the $60 to $70 billion range. Kava went public. Clavio is this email sending platform that is also venture-backed, that is also filed within hours of Instagram to go public. It was last valued at $9.5 billion.

It is weird, though, because we have lived through such a drought since we started this podcast, basically. I mean, even 2021 was a huge year. We had Lucid, Rivian, Coinbase, and Robin Hood. Some of those direct listed, but a lot of companies were going public. I'm just happy we have someone to talk about. That feels are great. Maybe we'll head back there for another tail day in the morning. Live pod.

Okay, I want everyone to circle September 14th on your calendar because that is the date that about 146,000 members of the United Auto Workers Union could go on strike, freezing production at the big three Detroit automakers, Ford, Stalantis, and GM. Last week, the union voted to authorize a strike if labor leaders and the companies can't agree to a new four-year contract because the current one expires on the 14th. And if a strike happens, get ready for economic pain. In just the first 10 days of the strike, economic losses could total $10 billion, according to a new analysis. UEW President Sean Fain is really seizing the momentum from other labor wins that we've seen this summer

at UPS and airlines to wrestle as many concessions from the big three as possible. Among other things, this is pretty wild. He wants a 46% wage increase that would boost labor costs to more than $150 an hour from the current $64. He's also pushing for a 32-hour work week. As he likes to say, record profits mean record contracts. Those demands were hefty, but I do think that this is one of the more powerful unions left in America, just because the sheer amount of economic kind of destruction that happens

if they go on strike is staggering. And then I also think that it's a bit of an interesting spot that the union finds itself in because the union could organize kind of more targeted work stoppages at certain plants, or they could call for a mass strike from all three of the big three automakers. But that would be the most impactful, but also the most expensive to the union. So they have this big old strike fund with $825 million in it. But assuming all 150,000 or so UAW members go on strike, it would cost the union about $75 million per week to pay out of that strike fund.

so it could last right around 11 or 12 weeks. So it is, if you go big, it's very expensive to the union itself, but it's also the most impactful. So it's going to be interesting to see which way they kind of tackle. I see a union boss in your future. And just to take a look at the bigger picture here, like there is a thread between a lot of the labor action this year, especially Hollywood workers or Hollywood writers and actors,

because just like them, the United Auto Workers is framing this as kind of an existential crisis for their jobs. For Hollywood, the threat is AI, and for auto workers, the threat is electric vehicles. Automakers have pivoted hard to producing electric vehicles, and that requires a whole different type of assembly than internal combustion engines, and it means they need just fewer workers. So the union sees the writing on the wall, and they want to secure good-paying jobs in those electric vehicle and battery plants that may just require fewer workers going forward. So they're just like, all right, we need to get out ahead of this, very similar to what the Hollywood workers are doing with advances in technology and the way the industry is going. Yeah. It does feel like a lot of this kind of union summer we've been talking about has stemmed from the pandemic too, because a lot of what the UAW union is saying is that we were essential to you guys during the COVID-19 pandemic.

We were still on the front lines risking our health. You called us essential then. Are you going to down pay us now? So it has been interesting. You can kind of trace this big kind of labor movement back to the pandemic. I wonder if we'll get similar memes to what we got with UPS. Because UPS drivers secured a huge gain in every labor union leader is looking to that model to say like, okay, if UPS workers could do it and they really like, you know, they kind of did a really good job of

getting a lot of concessions from the company, then, you know, we can do it too. So that's kind of driven the momentum here. Okay, Neil, let's move on to our next story. What if I told you that retailers leaving San Francisco isn't the only exodus that people are talking about recently? Scooter Braun, the man famous for discovering Justin Bieber and holding Taylor Swift's master's hostage, is facing an exodus of his own recently.

Demi Levato, Carly Ray Jepson, Asher Roth, Adina Menzel, and Jay Balvin have all cut ties with Braun's management company at some point in the long. last year, and rumor has it that Ariana Grande, and yes, even Justin Bieber could be on their way out. But despite the salacious nature of those big-name moves, the actual team may be less piping hot than we wish. Brons sold his management company to the conglomerate behind K-pop band BTS last year, where he also became CEO of their US arm. So these moves might have more to do with him moving into an executive role and away from his management role than any internal

drama. Neil, I for one, were shocked to find out that Scooter managed all these people. I truly thought he was still just kind of riding Justin Viver's coattails, but he's got a huge management company. Well, I think all anybody knew about him, or most people outside of the music industry, was this fiasco with Taylor Swift, where he had, he sold her masters to this private equity firm, and Taylor Swift did not like that and claimed that he was bullying her, and he thought back and then, you know, Taylor Swift, her fans all got on Scooter Braun's case, and everyone, I think, in the broader population, thinks of this guy, if they know him, of him at all, as, you know, maybe the guy who bullied Taylor Swift into recording all six of her albums

again, which she doesn't have the masters, too. But turns out, this guy is like a huge power broker in the music world. When he sold his company to the Korean company, it was a billion dollar deal. Billion dollars. Like, very, very big. That, that, that, that, that, that, that, That new entity that he's now the CEO of America, Hybe, is one of the biggest music companies in the world. So this guy is really, he's been pulling the strings on a lot of music deals on some of the biggest artists that we know. So this is not really, I mean, it is like a music industry story, but he's kind of one of the biggest players in the space that everyone knows. Absolutely. It does.

People started digging into all these names leaving. And like Edina Menzel left nine months ago. Carly Ray and Jay Balvin also said that they haven't been managed in months by him. So people are trying to connect the dots between all these departures. Although the Ariana Grande rumors are a little more surprising because she's been with Scooter since 2013. She's right in the middle of promoting a re-release of one of her albums. And literally minutes before news of her departure leaked online, Scooter's management company was promoting the album on social media. So people are like, none of this is making sense.

So it is interesting. And of course, if Justin Bieber leaves, then that's the big news because they, He found Bieber when Bieber was 13 on YouTube. Right. And convinced he and his mom to move from Ontario, Canada, where they were, to the United States to pursue a, to me, Usher in Atlanta. So, I mean, discovering Justin Bieber is a pretty cool thing to have on your resume.

Changed the course of history. All right, Neil, before we jump into the next story, we're going to take a quick break. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill, or get $50 off a select Weber Spirit grill and bring big flavor to your backyard.

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Hilton for the stay. Okay, pour one out for France's wine industry, which is going through some rough time. will actually pour out 80 million gallons, which is how much surplus wine France is about to destroy. That's enough liquid to fill more than 100 Olympic-sized swimming pools. So why is France bidding adieu to all this wine? Because it just hasn't become profitable to sell it anymore. Combine increased costs from inflation and climate change with plunging demand for Vino

and wine makers can't price it high enough to make a profit. So the French government is paying farmers $216 million to destroy. it. Okay, they're actually not destroying it. Wine makers are going to use the money to turn the wine into pure alcohol that can be made into other products like cleaning supplies and perfume. Still, this is a major wake-up call moment for a proud industry that may need to make structural changes to keep up with the times. Climate change is causing harvesting chaos with all the extreme weather it fuels. And an analysis by a French publication found that never has there been so little wine drunk in France. The average French citizen now drinks about 40 liters of wine per year

compared to 136 liters in 1926. And I looked this up just because I was curious, the average American drinks only 11 liters per year. The crazy stat from that is that they used to drink that many liters of wine. Like that is truly an insane amount. But yeah, this is not a new trend by any means. Wine consumption is just falling. It's fallen 32% in France over the last 10 years. Of course, things that are taking its place are rosé, beer, and even non-alcoholic options. So it's a story that we've been seeing in America, but it's even more stark in France as well. It's also just crazy to me that you can salvage pure alcohol from wine. That was an interesting part to me, and it's used in stuff like hand sanitizer, perfume,

and other industries. So it's kind of like a reverse Jesus moment where they're turning wine into pure alcohol. So it went from water to wine to pure alcohol. So that's the way the world is right now. Yeah, I mean, this is a big deal for France, though, because it's not, the wine industry is not just like any other industry in France. It's their seventh biggest export. They export, you know, tens of billions of dollars of wine a year, more so than even perfume

in cosmetics. So this is a big deal. But this also at telling farmers to destroy wine is nothing new. The government has been doing this since the 19th century because agriculture is kind of a weird production mechanism where you want to produce enough to keep prices high, but not too much to the point where you have a surplus where prices crater, which is happening now. But you can't just tell farmers to not grow vineyards because that's just their livelihood. So they're paying them not just to destroy wine, but there's a separate government initiative to convert their vineyards to make

grapes to other stuff like, you know, trees and other uses that may actually make them more money. Yeah, it was literally they're paying them to convert the land into wood. or to just leave it fallow, around 1,000 farmers in one region have already applied for the aid, which represents around 8% of the total growing area in the region. So it's not a small amount where wine farmers are probably just thinking, might as well get something for the land

rather than have to just destroy the surplus. But yeah, definitely a crazy, it was crazy to see that this much wine is destroyed. It's 400 million bottles. I know you use the Olympic swimming pool analogy, but I'm going to take it back to the bottle. That's a lot of bottles of wine. Yeah.

Okay, Neil, let's move on. It's Monday, which means it's time for our winners of the weekend segment, where you and I both pick someone or something that had an especially lovely weekend. I won the pre-show Battle of Wits, so I'll go first. And my winner of the weekend is Cameo. Now, Cameo for the Uninitiated is an app where you can pay famous people like athletes, actors, etc. to record a message of your choosing. It became a huge hit, especially with Hall of,

Hollywood stars during the pandemic as they all sat at home with nothing to do after the industry shut down. Well, Cameo just had its biggest influx of sign-ups since the pandemic after the SAG after strike once again has shut down the entire industry. So since the strike began, more than 2,400 performers have joined or reactivated their Cameo accounts, an increase of 137 percent. And it's the biggest batch of signups since the pandemic began. And get this, Neil, Even Fran Drescher, the president of Sag Afsha, re-activated her account this past week, and she's charging $1,500 for video.

So my winner is Cameo, Neal, and now I'm wondering if we should get on there. They've been gutted, right? I don't have the exact numbers on me, but Cameo had to lay off a bunch of staff and was definitely one of those pandemic darlings that kind of cratered after the fact that, you know, everyone started going out and could get actual gifts

rather than a cameo. But have you ever gotten a cameo? I have not. almost got Mia Hamm to wish my girlfriend a happy birthday because I was just shocked to see some of the, how big some of the names are on there in that, yeah, Mia Ham, like, you could get her next week talking to us if we wanted. I think I got a Brian Dawkins one, which is pretty cool. Oh, you received one?

Yeah, I received a Brian Dawkins one. That's a good one. But my favorite cameo story, I have to bring this up, is the pricing strategy of the actors who play the Salamanca Twins on Breaking Bad. They're identical twins, but one of them has a price of $500. and the other has a price of just $99. So people have been trying to figure out why, and they think it's that you'll be manipulated into thinking the $99 one is a good deal,

given the cost of the other twins cameo, buy that one, then they split performing the cameos in half because you can't tell the difference, and then they split the earnings. So it's a very Saul Goodman-type ploy. I think it's like price anchoring is the psychology behind that. That's super interesting, actually. I've never seen Breaking Bad, But that, I'll trust you.

Just picture any twins. Yes, yeah, exactly. All right, let's go to my winner of the weekend, which is central New Jersey. So for decades, central New Jersey residents have languished in this liminal space between the used guys of South Jersey and the strip mall bagel joints of North Jersey. And a debate raged over whether it was a region at all. But now the state is finally telling its neglected middle child, we see you, you exist. Last week, New Jersey Governor Phil Murphy literally put Central Jersey on the map by ordering the

States Tourism Department to redraw its map to include the region and promote it in all marketing campaigns. And as someone who's worked and spent a lot of time in Central Jersey, I'm glad that it's finally getting the recognition it deserves. It's quite beautiful. There are quaint towns like Princeton, cool canal system that a lot of people don't know about, huge company headquarters, like tons of pharma and a bunch of revolutionary war sites. Because did you know that more revolutionary battles were fought in New Jersey than any other state? Maybe more people will find that out. They go. I knew that this story could not be more squarely in your real house.

Like, you are a big Jersey guy. I also was just shocked at the tourism numbers coming out of Jersey. In all nearly 115 million tourists visited New Jersey in 2022, spending more than $45 billion during their trips. That felt really high to me, or is that just like the Atlantic, what's it called? Jersey Shore. Jersey Shore. It could be that, but another thing that I was just thinking of is, do you get counted if you fly into Newark? Yeah, is that economic activity?

Also, think about where the stadiums are. MetLife is in East Ruther for New Jersey, where the Giants and Jets play. So that could also factor in. Okay, interesting. Not that there's other stuff to do in New Jersey, but I'm just thinking about the big guys. Newark, the Shore, and MetLife, I feel like are a big part of it. Okay, because, yeah, that $115 million number felt high to me. I don't have any context, first of all.

Like, I don't know whether that's a lot or a little in the context of other things. But, yes, the revolutionary, they love the revolutionary war in the middle of New Jersey. And, you know, it's a good place. I still think they need to do a little. It's, it's okay. It's not amazing. All right, let's go to our week ahead, where Toby and I preview what you can look out for this week. We got a tropical storm Idalia, which is growing, and it could hit Florida's Gulf Coast as a powerful hurricane.

as Wednesday, it looks like this one's going to be a big one because it could land as a category to hurricane, but we've been talking about how hot the ocean temps in the Gulf of Mexico are and it could fuel Idalia, I hope I'm pronouncing that right, to become a much more powerful hurricane. It's going to slam into the west coast of Florida, kind of where you grew up. Yeah, my whole family is actually out of town, right? Really? So they're, but they did not board up the house. So we are definitely keeping an eye on how powerful it's going to become. The Atlantic hurricane season has been actually very active this year.

It's not just Los Angeles getting hit by hurricanes, but there have been 10 storms about a month earlier than typical, according to the hurricane center. Let's go to our own backyard, New York City, where the U.S. Open begins today. By far, one of my favorite events of the year. This is tennis, by the way, not golf. Serena Williams and Roger Federer are now retired,

so the rivalry between Carlos Alcaraz and Novak Djokovic has become the most gripping storyline in this war. And then on the women's side, Coco Gough, the American is playing lights out. So this should be super fun. I need to get tickets ASAP. So I was at the wedding this weekend. I was talking to a bunch of people. I would say half of everyone said they were going to the U.S. Open this week.

It's become an incredibly popular event. Yeah, I went last year. It is so fun. I'm also going to put my predictions out there. So for anyone who wants to fade me, who wants to play the inverse Toby line, I'm picking Jokovic to get revenge on Alcaraz. And then on the women's side, I think Jesse Pagula, who is the U.S., she's number three in the world. I think this is going to be her breakthrough tournament.

So if you really want to fade me, definitely pick Alcaraz and probably pick Cocoa Gough because I'm always wrong on these things. All right, let's get to the U.S. Open this year. Pretty big week in terms of economic data. We'll get fresh inflation data on Thursday. And then the August jobs report on Friday, both of which Jerome Powell will use to guide his next interest rate move. And we're also in stoppage time of earning season, but a few companies like Salesforce, Lulu Lemon, and Dollar General will report this week. I'm really curious to see whether Lulu Lemon is managing to avoid the pain that other retailers have suffered recently.

Yeah, definitely on that different end of the retail spectrum, a little higher product. Right. So, yeah, I'm interested as well. All right, we have college football kicking off for real with a full slate of games on Saturday. Go Terps. And it's the final Sunday without NFL football. It's been a long summer. And then finally, speaking of that, August ends on Thursday. And I don't care what the official calendar says. Once August is over, summer's over. Summer's done. Summer's done. U.S. Open's here. August is over. It's been a good run. It's been a good run. We had a good summer. Highlight was definitely the Taylor Swift concert on Memorial Day and then it was all downhill from there. All right, that is our show for today. Let's kick some butt this Monday. As always, you can direct your

fan mail or your hate mail to Morningbrood daily at morningbrew.com. It's all fair game. Let's roll these credits. Emily Milliron is our editor and producer. Macy Gilliam and Raymond Loo are our associate producers. Yuchinawa Ogu is our technical director. Billy Minino is on audio. Hair and makeup left us, even though we discovered them on YouTube. So much for loyalty. Devin Emery is our chief content officer and our show is a production of Morning Brew.

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