The Best One Yet - Adidas closing US “Speedfactory,” Bumble & Walgreens’ private equity love, and Apple’s potentially iPhone-less AR future

Episode Date: November 12, 2019

Adidas tried to update its manufacturing with a fancy new “speedfactory,” but now it’s relocating them out of the US and into Vietnam and China. Both Bumble and Walgreens have something in common: They’re suddenly into private equity. And Apple is planning for an iPhone-less future with iGlasses and iHelmets (we made up those names) after its 5-year plan was leaked.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is snacks daily. It is Tuesday, November 12. And this is the best one yet. Jack, you're a little sharp over there. I think you're missing the E-Notes. I did karaoke this weekend. Voice is barely recovering, but my wife and I slayed. I got Jack some tea. I got him some green mint. I threw a little honey in there. Jack. Can you tell us the first story? First story is a private equity two pack. Walgreens and Bumble. Both might get acquired by private equity firms. So Jack and I bought two stories, cut costs, bundled them up, reshipped them, repackaged, and we're delivering them to you in more profitable shape. Our second story is Adidas. It's transitioning how it makes your shoes. First it was Asia. Okay. Then it was America. Now it's Asia again.

Outsourcing is actually way more complicated than just wages. We're going to jump into it. Third of final story. Apple is thinking about the post-smartphone era. Think about them. I didn't even know that was a thing. What does that look like, Jack? New augmented reality glasses.

That's what we're talking about. Apparently there was a leak. This is a lesson in thinking five years ahead. Now, Snackers, before we jump into all that, we got to share something with you that we discovered that hits kind of close to home. It's kind of meta, but snacks is growing. Snacks is growing literally, according to a new poll by the company Harris. Jack, what do we learn? 80% of consumers are looking for more snacks.

Turns out 60% of consumers want smaller meals. and fewer larger meals. Now, both of those data points are very upsetting news to the cheesecake factory, which wants you eating gigantic meals and not even be able to move to a snack if you wanted. You don't walk out of there with an extra 600 calories in your pocket on top of the ones you just consumed. Now, younger people are bringing back snacks. We're not talking candy. We're not talking deep-fried potato chips.

We're talking like the healthier stuff that's just three ingredients. Now, Jack and I jumped into the survey, snack style. Discovered it was, you know, involved 6,000 adults in 12 different countries. We also learned one specific catch. Well, the report was commissioned by Mondales, which is a global macro giant food company. Turns out they're the company behind snacks like Cadbury chocolate, Oreos, and Ritz Crackers. So take this report with a grain of Oreos. No matter how you're snacking snackers, remember to do so responsible.

You're tuned in the snacks daily. We spoke to the lawyers and snacks about the hair rain food. It's air candy. They don't reflect the views of the robberhood family. all informational just so you know we're not recommending any securities nope it's not a research report or investment advice not an offer or sale of a security right snacks is digestible business news for you robberhood financial LLC member fenra slash sipc for our first story jack stretch out your hammies over here adidas just canceled american and german factories and it's shipping them back to asians dead

The only American shoe factory I've ever heard of is Parrish Shoe Company, Legendary, New Hampshire, featured in the movie Jumangi. I remember it well. Jack, what year is it? Great Robin Williams Flake. Also a good reference, Adidas, which planned out a very nice and novel concept just about like five or six years ago for how it was going to manufacture shoes. The plan was don't produce shoes in low-cost Southeast Asia.

That was a novel concept. It's actually like a very straightforward. forward simple plan. Instead, they decided they wanted to produce shoes close to where their customers were. Atlanta, Georgia, and Ansbach, Germany. Beautiful cities, also great places. And this wasn't just going to be any factory. No, no, no. This was going to be a Willy Wonka-esque, nearly human-less, fully automated factory. Yes, these are called speed factories, but they built in Atlanta, Georgia, and Ansbach, Deutschland. Speed Factory, didn't quite catch on, like, the gigafactory that Elon Musk.

No, kind of a branding issue. I feel like the name just sounds like it was like literally translated verbatim from German. There wasn't much creativity applied to a Schnell factory. So this was a fast fashion-ish idea because they wanted to produce close to America because that's where lots of Adidas customers are. Well, it turns out we just learned that American and German speed factories by Adidas, they're going to be closed in April, and that's going to cost them. about 200 jobs. Right. They're relocating all of, they're keeping the speed factory concept,

but they're relocating all of them to Vietnam and China. So here's the thing about when you're relocating or outsourcing a factory. When you're picking a place to produce, it's not just about wages. Outsourcing to China, outsourcing to Mexico. That's all we are. That's what you hear these days. But it's not just because workers get paid less there. There's other things to consider. All right. Case in point. You got to take into consideration the speed to the customer. Right. It takes a long time to ship shoes from Asia to America, but that's what the Deez has decided to do. Very long boat rides. There's also the fact you got to deal with foreign exchange. If you are paying your workers in Mexican peso, but then selling your shoes

in U.S. dollar, you need to hire like a whole finance team to manage that risk. No kidding. A lot of calculators. A lot of calculators. And then third and final, and I got to say, Jack and I think this may be the word of the year. It's beautiful. It rolls off the tongue. It sounds like a super califragilistic Disney movie. Agglomeration. Agglomeration is basically where are all the suppliers concentrated? Right. Where is the infrastructure?

How can I make these shoes as quickly as possible and then ship them to customers as quickly as possible? Turns out agglomeration was the winner here. Adidas said it makes more sense to concentrate all of its factories in Asia and take advantage of agglomeration. That's where 90% of all Adidas products, not just shoes, they're all made in Southeast Asia. As a side note, this is a bad sign for U.S. manufacturing that Adidas tried out the U.S. for like three years and is already leaving.

So, Jack, what's the takeaway for our buddies over at Adidas? This was a really expensive mistake by Adidas. Adidas opened this plant in Germany four years ago. The one Atlanta opened just three years ago. Those plants probably cost a number of billions of dollars, neck, and they're closing them down after just four years? That's the worst investment I've ever heard of. Somewhere in the deep in the Adidas earnings supports, there's probably about a billion dollars worth of cost that didn't need to be there. For our second story, Walgreens and Bumble both have something in common.

Private equity wants them and they want them bad. So badly. We're going to kick it off with Walgreens. The drug story you love to hate. They don't have as long lines or I'm sorry, they don't have as long receipts as CVS, but they're getting up there. True. And they want private equity support because Walgreens has been suffering and they need some health. Help. Snackers, the Walgreens stock is down 10% this year, even though the rest of the market is up 20%.

That means it has like a negative 30% overall compared to the rest market. Pretty brutal. It's kind of painful. It's painful and a lot of reasons for this. One of them is, turns out a government report revealed that they sell more cigarettes to minors than any other drug store chain. Not a good look. And like everybody else, they're reacting to e-commerce. Some sales are moving online and out of Walgreens. So Snackers, the shares jumped 5% yesterday, only because it turns out private equity firms may want to acquire the company. And we've talked about this on Snacks before. When a company gets acquired, its stock price tends to rise. So now it's worth $56 billion, which is about four lifts. Now, the suitor here who is handing the rose to Walgreens wants to acquire it is KKR,

the original OG private equity firm, because they identify weaknesses in companies, and then they try to help them out. KKR is the company featured. It's the protagonist and antagonist of the book. Wonderful. Barbarians at the gate. Right. They took over Nabisco in the 80s. They helped regrow it. And basically that became the whole private equity concept. So if KKR acquires Walgreens, it would buy all the shares, make it a private company, fix things, and eventually sell it. But we'll get to that later. All right. In the meantime, we should talk about our friends over at Bumble, which is getting acquired by a private equity firm. Yeah, this one's official. And as a A quick reminder, Bumble is the dating app where women make the first move.

Right. And this one's like Facebook official. They're willing to talk about the relationship. It's the real thing. It's the real deal. Bring it home for Thanksgiving. So Bumble's parent company is called Magic Labs and it's getting acquired by Blackstone. And the deal values Bumble's parent company at $3 billion. Blackstone is a private equity firm and now they are the owner of the majority of the company that owns Bumble. It's kind of surprising that Bumble is getting acquired by a private equity firm because Because Bumble's not a traditional PE target company. No, private equity firms tend to go after your more traditional industries.

We're talking your Walgreens of the world. I remember back in the day, Mitt Romney's firm took over Staples, which is like a crumbling Dunder Mifflin plus. Not the same thing as Bumble, which is a charming dating app who's both profitable and growing revenues at 40% a year. So Jack, what's the takeaway for our buddies over at Walgreens, over at Bumble, and really for the entire private equity industry? equity pretty much thinks it's smarter than you. It's so true. In both Walgreens and Bumbles

cases, the new private equity owners are going to follow a clear, tried and true, three-step game plan that's straight out of a business school textbook. All right. Step one in private equity, you purchase an entire company, but you don't pay for it in cash. No, that'd be silly. You finance that thing with like 80% debt, just like you finance your Peloton and just pay like 40 bucks a month. It's a lot of IOUs. The second step to private equity is after you've acquired the company, then you run it better than the previous managers did. And that means making it profitable, cutting a lot of costs, and doing a lot of changeroos, full makeover.

And that's a crucial step, Nick. You need to be better than the previous manager. Jack and I can't emphasize enough, step number two in this case. All right, the third and final step, sell the company after five to ten years for a much higher price than you acquired it for in the first place and make a huge profit off the difference. It's kind of like flipping house. Actually, it's way more like an episode of Queer Eye for the Straight Guy.

but with a lot more money and jobs at stake. And just as many tiers as square eye. So true. For our third and final story, Jack, is that the real you? I'm trying to touch your face. This is Jack. I don't know if that, is this the real Jack? Dick B2 years next.

Apple is planning an augmented reality headset for 2022. And this augmented reality will replace your smartphone. Now, before we jump into this, we got to talk about some basics because they're way too many letters getting thrown around these days. We're talking like B-to-B, B-2-C enterprise with the CBD-I-R-A-L-A-SAP. Let me spark notes this thing for you. A-R is augmented reality. That means it's reality.

It's actually the real world, but it's augmented with some digital stuff. All right, Jack, can you break down VR for us? Virtual reality. Not the real world. Not reality at all. This is fully immersive virtual reality. So the information, which is a media company, got a hold of an October presentation from Apple's headquarters.

The presentation was live at the Steve Jobs Theater, which is where you put on your mock turtleneck and unveil the next iPhone. A thousand employees were in there looking at this presentation. Turns out you can have 1,000 employees enjoying the presentation, but it only takes one employee to leak that information to the information. They leaked the presentation, and it turned out to be a pretty important one. It was the product roadmap that includes Apple's next two big devices. We're talking.

This is like the treasure map in Goonies. that leads to where the gold is. Yes. Yes. The first product is an augmented reality headset that hits Apple stores by 2022. This is like a full-on vision-blocking headset that you're going to see in public and be like, I can't believe they've got that on their heads.

Right. The second product is a little more chic, augmented reality glasses, but they won't come until one year later, 2023. This is like picture Warby Parker and Robocop had a baby, and that baby had two lenses. Yes, they're going to look like pretty much normal glasses, but with digital info, like superimposed,

on the lens so that you are a robocop. Now, it takes a village to raise a child. It also takes a village of app developers to make a lot of apps to make these things worthwhile. Yeah, so Apple, according to the roadmap, is going to reach out to app developers in 2021 so that when these headsets hit Apple stores, they're actually useful with, like, you know, the apps you need. Now, Snackers, we know what you're thinking here. Why is Apple so obsessed with these AR or VR letters?

It's because nobody wants to miss augmented reality. Because other companies have missed things. For example, Microsoft missed mobile phones completely. And to this day, Bill Gates is in a closet every night rocking back and forth. Punishing himself. Punishing himself for missing mobile phones. Why didn't we do those? That's why Google, Sony, Facebook, Microsoft, Snapchat, and Apple are all charging into augmented reality,

even though customers haven't even said that they want them. And right now, if you're Apple, the iPhone is your profit puppy. But an iPhone requires you to have two hands. iPhone without the need for two hands would be even better. And that's exactly what these AR glasses could become. So, Jack, what's the takeaway for our buddies over at Apple? Where do you see yourself in five years? That's the question you need to ask. Good entrepreneurs and businesses, they solve a problem that exists today. Great entrepreneurs and businesses. Anticipate tomorrow's problems and start solving them today. Apple's thinking that in five years, people will want to use smartphones,

but without needing their hands. And that is what Apple is trying to say. And that is what Apple is trying to solve. Jack, can you whip up the takeaways force over there? Adidas thought about producing its shoes near customers, but decided on Vietnam and China instead. A glomeration when the supply chain is clustered in one area. Beautiful word. A private equity firm is buying Bumble and might be buying Walgreens.

The crucial step in private equity is to be smarter slash better than all the previous managers of whatever you just acquired. Third and final story, Apple, this is a wild one. I can't believe we're getting eyeglasses. You're just going to have to wait like three to four years, but that could make the iPhone obsolete. Now, Snackers, time for our snack fact of the day.

This one sent in by hardcore longtime OG snacker, Mia LeBlappin, from Gohaston, Massachusetts, now and bro. Classic Middlebury Panther, Mia. I love this one. Mia works in the self-driving car industry, and she's always thinking about what is the standard of excellence that we need to do better than in order to succeed. So let's look at the landscape right now. there are about 35,000 deaths from car accidents in the United States per year at the moment.

But Americans drive a ton. In fact, we drive 3.5 trillion miles per year. That's more than your Subaru can handle. So Jack whipped up the old whiteboard on this one, threw the markers at it, carried the one, and what did we end up with, Jack? That is one vehicle death per 100 million miles of driving. That's actually pretty safe. And that translate to 3.4 million hours of driving or 390 years of continuous driving for 24 hours a day, seven days a week, in between crashes. That is a very high bar, and autonomous vehicles have to get somehow better than that for it to be a positive impact on society, except for the sleeping we can do in the backseat. Mia, thank you for the self-driving snack fact today. Snackers, send us your own self-driving or just any kind of snack facts at Robin Hood Snacks. You can do that on Twitter or Instagram and have a great T-Boy,

Tuesday. That is the best one yet Tuesday. A merry T-Boy Tuesday to all. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, or any of its subsidiaries or affiliates. The podcast is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, and is not an offer or Thank you.