The Best One Yet - Beyond Meat surges after 1st earnings, Cronos cannabis’ 10% surge, and Barnes & Noble is about to be bought

Episode Date: June 7, 2019

In its first earnings report since its IPO, Beyond Meat surged as it defends its first-mover advantage. Canadian cannabis icon Cronos is pivoting its CBD efforts to the US. And Barnes & Noble jumped on word it’s about to be acquired.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 the last day of the week, Friday, June 7th. And Jack, what do we decide to prepare today? T-boy, T-B-O-I, the best one yet. Spell it out. Now, markets overall feeling really sharp.

They rose on word. The U.S. made delay tariffs on Mexico. Okay, fire put out. All right, three wonderful stories. We got, Jack, this mix today, I'm really feeling this mix. Kick it things off with Beyond Me. It had its first earnings report since its IPO last month. We've got to talk about its other.

first, its first mover advantage. Second story, Barnes & Noble surged 30% on word it's about to be acquired. We're going to look at everything that went wrong with its turnaround strategy, which was more than one thing. Third and final story, Kronos Canadian cannabis surged by 10% on Wednesday. So we dive deeper into its strategy, which is heavy on brand. Jack, I got two words that are going to explain this whole thing. Spinach and co.

That is quite a teaser. Let that one sink. in. Now, Jack, by the way, all right, so we used to live together. Now, in that time since we haven't lived together, Jack and I have not discussed our smoothie go-toes. Are you a mango guy? No, no, not a huge mango guy. I like to knock out all of my like seven vegetable servings with one smoothie. We're talking like kale, spinach, everything. It's always healthy when the thing you're trying to consume is 90% things you don't want to consume. Exactly. It's like ripping off the band-aid. Turns out Jamba Juice, one of our favorites.

is dropping juice from the name. This is like finding out fetch isn't happening. Apparently, juice has become a really bad word. Get this. We jumped in snacks die a little deeper. Apparently in 2012, Americans drank up a hefty 4 billion gallons of juice. And since then, our consumption is down by half a billion gallons. We're at like 3.5.

Juice is out. No, juice is out. Jamba juice has apparently our friends over there become scared of the word juice. So they're dropping the word juice from the name, and they're adding smoothies and bowls as a tagline, but we think they should be more specific and go almond butter, assayi with cocoa nibs, and coconut shaves. They're going to run out of nuts at some point.

Now, Jamba Juice, we're not going to leave you hanging at Snacks Dayla. We've gotten a little bit of advice for you. The real problem, your logo. Change that scary logo. The smoothie tornado thing with multiple colors, it's actually stressful to look at. Smoothies and tornadoes.

Not good synergies. Not a good mix. Everyone listen to these keywords, and then we'll hit our three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got the snacks about the hearing food. It's air candy. They don't reflect the views of the Robberhood family.

It's all informational just so. We're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robohood Financial, LLC, member FINRA slash SIPC. For our first story, Barnes & Noble stock just surged.

30% on credible reports that it's getting acquired. Now, full disclosure here, because we like a good disclosure. This is important. Nick and I, we're big fans of books. We like books. We read books. We frequent books. Some of our best friends are books.

It's true. And Barnes & Noble is the largest bookstore in the country. It's the source of, like, many a first date as well. Very few second dates, I will say. And it's very true. Now, let's talk about the buyer in this situation. It's called Elliott Management. It's a hedge fund. It's a big fan of financial term sheets, long walks on the beach, and it also has a big thing for books. So it's into books. It recently got really into books because it bought Waterstones. Yes, which is the Barnes & Noble of the United Kingdom. Now, in case you were wondering about what's up with Barnes & Noble, basically this bookstore chain put itself out on the market last fall and it's been looking for suitors. The 78-year-old Leonard Reggio, who is the chairman of Barnes & Noble and owns 19% of the shares.

He was thinking about taking back his baby and owning the thing straight up. Just bagging the thing up and bringing it home. Now, if you don't know Riggio, you may want to know this, that he famously told Jeff Bezos, the CEO and founder of Amazon, that Barnes & Noble would crush Amazon when it opened its online store. Yeah, perspective here, Barnes & Noble is only worth like $400 million total as a company today. That's pretty discount. Now, there's one kind of core thing that a lot of people know about Barnes & Noble, and that it's become fallen on hard times basically because of Amazon. Clearly, Amazon, starting in 1996, caused a lot of trouble, and Barnes & Noble is still feeling it. It's closed 90 locations in the last seven years.

Meanwhile, Amazon, totally disrespectful move is opening new bookstores, 20 of them. That's what people know. What you may not know, and this is what fascinated us at snacks daily, is that it's not just Amazon that's hit and hurt on Barnes & Noble. This is a bit of a feel-good story. Local bookstores are staging a major comeback in America. We're talking about the bookseller on Main Street in your downtown. We're talking down the street, the place with like a bunch of kids' books in the window, they're all really nice. And when you walk in, if you talk too loudly, people look at you in a weird way.

In 2017, that's the data we got. We've got to work with it. Sales at independent bookstores were up 2.6% from the year before. And that trend has been going on for a while, while Barnes & Noble has clearly been falling. Local bookstores have been enjoying consistent growth. And they got a few things going from. First of all, you got like the local taste,

the people like know your taste when you walk in, right? You also got like somebody behind the counter. You recognize you know, and you like, you know, the cashier's picks, the books that the cashier recommends you read on the beach this summer. And then the other factor is fewer Americans are going to malls. And if you're not at a mall, you're less likely to run into that Barnes & Noble and you're less likely to do a second date there.

So, Jack, what's the takeaway for our buddies over at Barnes & Noble? There is no millennial formula to a turnaround. Exactly. Barnes & Noble tried pandering to our demographic with a millennial formula and it pretty much failed at it. It was an epic pander. We're talking about their infamous concept stores. Oh my God. They had like Instagram bowl food that was really expensive, really fancy coffee.

Very expensive coffee. And then wine and crapped beer. We're talking the like Williamsburg stuff, like the stuff that, you know, very high end. Seriously highbrow. And it also tried prior to that to be. a tech company creating its own tablet called the Nook. Nick, I haven't seen a Nook since the Prisoner of Asgaband. Few have. Now, there's no formula for a retail turnaround, and Barnes & Noble has become a living proof of that. For our second story, Kronos' stock just surged on US CBD hype.

And one rave review from a critic at an investment bank, a positive, bullish critic. Now, this is a Canadian company that's like into the weed game. Yeah, their game plan to enter the United States is to hit CBD first and weed slash marijuana slash all the other nickname second. I'd love to see the giant whiteboard they definitely have at the headquarters that just has CBD and big letters on the left and weed in big letters on the right. Let's talk about CBD though. CBD is in everything these days. It's pretty much the new kale. It's in oils. It's in creams. It's in beer. I just saw it in pet food. I'm pretty sure they serve it at Jamba Juice. It's everywhere. So context for Kronos, the Canadian company, it's sales

so far are 99.6% pure Canadian. Very polite. Very polite. It only had $7 million, Canadian dollars, of sales last quarter. So it's a very small company. Very key distinction, because the key here is that the United States is a much bigger market for this Canadian company. Except CBD legality in the United States is even more confusing than like whether recreational marijuana is legal. Like, can you bring it on a plane? Can you take it from California to Oregon? No one knows this. Can your pet take it? We can't help you, by the way.

No one has any idea. Now, that's why it was really interesting to hear the CEO of Krono say he wants to expand, quote, unquote, aggressively into the United States exactly focused on CBD. The guy said that on Wednesday, and he said it with so much conviction that a Bank of America analyst gave a double upgrade to the stock of Krono. So he thinks in one year, the price target should be $27, not $17, what it was before. And the reason why is there's a big distinction there between weed and CBD, because CBD's potential is pretty wide here. It's an alternative to opioids for like one thing. Right. And the U.S. needs an alternative to opioids. It could also be good for veterans suffering from mental health issues. And even if you're coming down with a good old case of, you know,

work burnout, it makes for a great shoulder rub. Work burnout. A W.H.O. recognized ailment. All of these things, CBD can help you with that soothing goodness. So Jack and I noticed this story, and we decided to jump in snack style. And when we did some more research on Kronos, we found some fascinating information in their investor presentations. Oh, man. Go to the investor website of Kronos and download their presentation. Better yet, invite a few friends over, dim the lights, put on some candles, and toss this investor presentation up on the Chromecast screen. Cast this thing up with a projection screen, if possible. It is entertaining. So slide 8. Actually, I remember this was page 8. Look at spinach, which is Kronos's record.

recreational marijuana brand. This is the actual name of the brand, spinach. So, Jack, what is spinach offering up to consumers? It's offering farm to bowl for consumers that don't take life too seriously. It is just the perfect kind of culmination of so many things right there. Jack, the second brand, I thought this one was most fascinating, Cove. Cove is the premium marijuana brand. This is like the Evian to your aunt's Brita filter kind of a situation.

Yeah, you got to have a snobby tone of voice when you're smoking Cove. but it's offering premium weed customers focused on every detail of the process. My favorite detail about this particular coiff thing is that it's hand trimmed. That is a quote, it's hand trimmed. In fact, most of everything we just said was a quote from the slide deck. So, Jack, what's the takeaway for our buddies up north over Kronos? Kronos knows the future of weed is in the brand. Weed could easily become a commoditized thing.

Easily. Like a barrel of oil. You don't care what barrel of oil you're buying. it's all the same stuff or like oats. Stick it in the car. Other things that you don't care about brand. That would be really bad for profits if this thing became commoditized. So Kronos is differentiating its cannabis by applying its brands to all of its products.

Kronos already owns like 50% of MedMen, which is a retail store chain that's trying to become the Apple store of cannabis. So it's looking for like weed brands. And the slide deck shows you it's already created weed brands to segment different customers, spinach and cove. Those could become logos, commercial slogans. Spinach and Cove could become their own lifestyles. They got to invest in those brands because good brands can justify higher prices.

And you know that's what Cronos wants. That's why Cronos knows the future of weed is the brand. For our third and final story, this one's wild. Beyond Meat stock just jumped 17% on its first earnings report. Nick, the stock is now four times higher than its IPO price, which was last month. We're talking about the plant-based meat company here. Beyond Meat, it is, its product is kind of like, magic. Let me put on my Beyond Meat sales hat right now.

Put on an apron. This is a burger for people who want a burger but are guilty when they eat burgers. This is a burger for people who want a cocktail party trip, so they bring this thing out. Say it's not meat and then it like actually bleeds. It's made of plants and somehow it bleeds. So this is the first earnings report since the IPO and it crushed expectations. Intense serving of revenue growth they got us going on here. $40 million of sales last quarter, which is triple from the same quarter of the year. before. Now, we looked at the sales a little further. Half those sales are coming from restaurants where it served, and half of them are from, like, the meat aisle over at the grocery store. Yeah,

half of their sales are in a grocery store, and grocery stores are totally confused where to put this thing. The vegan aisle, the vegetable aisle, the meat aisle. Who knows? Vegee meat. Who knows? Now, the company lost $7 million over the last quarter, but the stock surged 17% on news about its earnings. Yeah, that's because profits aren't the most important thing right now. It's all about growth. True. Now, interesting timing. here because the meat industry, you know, just happen to declare a religious war against, you know, alternative meats. There are bills in the State House of Missouri and Nebraska that are trying to ban the word meat if it's not coming from livestock, chicken, or other like live things. If this thing doesn't

have eyes in a mother, then you cannot call it meat down there. That's what they say in Missouri and Nebraska. Now, the meat alternative growth story, some analysts are comparing it to electric vehicles, which we find fascinating. I like the way they were rolling with this. Okay, so the reason why is first, you get the early adopters. And the early adopters are the ones who see something and they're willing to spend because they can look cool or use it. Right. Like the first Tesla was like $100,000.

And you know what? The first meat alternative burgers, these things are costing twice as much as beef. In case you're wondering about early adopters in your lives, think of that person who can't stop telling you about how much they love using that one thing like Google Glass a thousand times over. They'd like to say they're part of the solution and not part of the problem. We all know them. We all have them in our lives.

Now, the next key question after the early adopters is, when will this become mainstream? Well, I'll tell you. The price has to come down for it to become mainstream. Beyond Meat CEO, Ethan Brown, says the price is going to be the same as meat for his alternative meats, like really soon within five years. Yeah, he says five years, and that's because he's going to build out more factories. He's going to find more efficient ways to make pea protein taste like beef, so on and so forth.

Interestingly, we're already starting to see early science of the mainstreamification of fake meats. A widely read Wall Street Journal report a couple days ago said that 15% of restaurants in the United States are already selling meatless burgers, and that's up from 3% the year before. That's five times growth. So, Jack, what's the takeaway for our buddies over at Beyond Meat? Beyond Meat needs to defend its first mover advantage fiercely. Just this week, Nestle decided to announce it's come up with something that's uncreatively named The Awesome Burger, and it's a fake meat burger. And down south, Tyson Chicken is working on a meat alternative as well. Jack and I have been going back and forth in this.

We think this reminds us a lot of what was going on with Tesla when it had its head start in the electric car biz. Tesla is fiercely defending its first mover advantage. Beyond Meat and Impossible Meets are the two guys who have the first mover advantage here. Now, good news for Beyond Meat, it has no legacy big meat baggage, which is a scary. True story. Tyson, whatever product it comes out with, it's going to have to overcome its big chicken stigma that consumers know it has. And Nestle is already in bed with like the big beef guys over in Missouri and Nebraska. Oh, you know they are. And that's why Beyond Meat needs to defend its first mover advantage.

Speaking of Beyond Meat, this is Nick and this is Jack and we both own shares. Thanks for speaking to my behalf. Jack, before the weekend, can you do me a favor and whip up the takeaways for everyone over here? Certainly. Barnes & Noble tried the millennial playbook. didn't work, and now it's getting acquired. Ironically, like, the least millennial move it could ever have made. Kronos is already building up brands, so it's cannabis and CBD don't become commodities. Snacks original here, better brand, better profits. And beyond meat, you had a great start.

But now you need to defend your first mover advantage. The big guys Nestle and Tyson are coming hard, and they know food really well. But they have big meat baggage. Now, time for our snack fact of the day. This one tweeted into us by Talandah in Dundra in Dundon. duplicatively named Melbourne, Florida. Today we talked to you about Barnes & Noble. Yesterday we talked to you about GameStop.

Turns out the two have a shared history. Their paths have crossed. As my mom likes to say, they used to be an item. Barnes & Noble actually acquired the predecessor to GameStop, which was called Babbage in 1999. Then it changed the name to GameStop and took the company public with an IPO in 2002. And then Barnes & Noble sold the 59% stake in GameStop in 2004. Talon, we love a good history over at Snacks Daily.

Thanks for sending this one in. Now, a couple other great stories we're covering in the Snacks newsletter. We're talking Toyota and Subaru. Two Japanese electric slash hippie legends, they're teaming up for electric vehicles. And then remember when we were talking about Bird on the podcast yesterday? Jack, you're there. Yeah. Well, apparently Bird decided to wait a day and just is about to make an acquisition of scoot,

the scooter company that we actually scoot up. No joke here, Snackers. Check out our tweet from yesterday. It explains everything. We got it covered on you there. Jack, what are you doing this weekend? Squeezing some orange juice over there? I am bone-in chicken thigh grilling right now as we speak. I'm going to be squeezing some orange juice over here. Well, Snackers, while you're barbecuing or doing whatever we're going to do this weekend, why don't you do as a shout-out, mention your buddies Snacks Daily.

We think your buddies are going to like Snacks Daily. We'd love to have them snacking with us. And then how about we do this on Monday? You know we'll be back with your Monday morning. See you there. 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 sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.