The Best One Yet - California re-classifies Uber drivers, Wendy’s breakfast wars loss, and Monster Beverage’s Coke problem

Episode Date: September 12, 2019

Wendy’s is trying to jump into the fast food breakfast wars, but shares fell 10% because it’s too late — again. A Snacker asked us to jump into Monster Beverage, so we found out what it’s up to. And California’s new gig worker law hits right at Lyft and Uber, so they hit right back.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick and this is Jack. And this is snacks daily. It is Thursday. September 12th. How are we feeling right now? Markets just hit 27,000 for the first time since July. You took the words right out of my mouth. This is a better episode than we did yesterday. This is the best one yet. Best snacks we've ever done.

Jacks, what are we thinking of in terms of the lineup? Wendy's is adding a third meal to the menu. It's jumping into the breakfast war. But it's stock fell. Now, normally stocks rise when you get into breakfast because that's a lucrative meal. But this is all about the history we jumped in snack style. Second story is Monster beverage. The stock is,

down 11% even though its energy drink sales are up big. Stephen Richter, a great snacker, pointed the story out to us, so Jack and I jumped in. We dug into this further. It has to do with Coca-Cola and professional bullwreck. I like that tease. I'm staying involved. You're going to want to listen to this. I'm there. I'm there. Third one is the policy of the day. Got to say, understatement? That's an understanding. I know you've been thinking of that. California just passed a law in the house that just needs to be signed by the governor. You're keeping me on my toes here. It changes the status of Uber and lift drivers from

independent contractors to employees. This is the worst nightmare of the UberLift lawyers they have ever felt. It makes Robotaxies look really good right now. Snackers, before we jump into that wonderful mix, can we talk about the greatest innovation we've maybe ever heard of? A plant-based salad. This is a real thing. Let that sink in. Plant-based salads. I love the marketing. It's a salad made of vegetables. It's brilliant. We didn't see this coming from a mile away. Now, last week, we did the T-boy T-T-shirt challenge. We're getting a free T-boy T-T-shirt to whoever comes up with the best plant-based brand. We had a hashtag plant-based tweak going on. We got it down to four finalists. Well, we got an answer, actually. Well, yeah, the four finalists, by the way, were it never had legs.

Great one. I can't believe it's not me. I actually voted for that. Mistake. Simple. And then the winner ended up being with 37% of the vote. Do we have a drum roll situation here? The best plant-based brand is chicken of the tree. That one comes from a Karsh Vinod in Los Angeles, a Karsh brilliant work there. Chicken of the tree still makes me laugh every time I hear. You may want to get on copywriting this thing about it. Tyson Chicken has probably stolen that name from you already. Yeah, the cat's out of the veggie cats, the vegan cats out of the bag on this one. At U.S. Trademark Office. Definitely.

Let us know your t-shirt size. We're getting one your way. DM us. You're the snacks about the hair ain't food. It's air candy. They don't reflect the views of the robberhood family. It's 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 Rapperhood Financial LLC Member Fenra

Slash SIPC For our first story Wendy says it's jumping into the Breakfast Wars game And the stock dropped by over 10% This was brutal It actually happened two days ago It's getting into breakfast

nationwide And this is where it's starting off It had 300 locations They were like testing out They've been testing it out Now they're scaling to 5,000 Wendy's restaurant By the end of this year Like this isn't happening over the night

This isn't a three-year plan situation. This is a rapid-fire plan. We're talking pre-Christmas, your family may be hitting Wendy's for the morning breakfast. They are microwaving this thing. They are not cooking it on the skittles. Now, here's the problem. So Jack and I jumped and snacked out. We were curious.

Wendy's has a history of breakfast and failing at it. Yes, they've ended up with ketchup all over their shirt every time. Little sport. We got 1885. That's the first time that they tried out breakfast. 2006, when we were graduating from high school. Fool me twice. Shame on you.

2010. They tried it again. Yeah, they went for the old recession challenge there. Didn't work out. You got to get that hat-trick situation. So Wall Street is looking at this idea to get in breakfast. And they're like, seriously? Are you kidding?

This definition of stupidity thing trying the same thing? We looked it up. In 1985, Wendy's slogan was, quote-unquote, only Wendy's has breakfast like we do. Now, the details of this breakfast rollout are totally unclear. Shockingly, is it going to be square, like shaped like egg sandwiches here? Are they going to break the yolk? Are they going to keep it wet? I think it's like a baconator with your coffee.

Where are they going with this thing? Everyone knows you want to see the menu. You want to know what's happening. We have no idea. But here's the thing about breakfast. It's not only the most important meal of the day. It also turns out to be the most expensive. If you're the company, it's actually working these things up.

We're not talking about like a $5 or $10 bacon egg and cheese sandwich. We're talking about expensive for the company to roll out. McDonald's, it's been doing breakfast for a while. It took eight years for McDonald's breakfast to become profitable. And Taco Bell took two years before it reached profits. Now, there's a reason why it's expensive. Yeah. You got to open the store early.

You got to be there. Yeah. Those eggs aren't whipping up themselves. Now, Wendy's currently opens at 10 a.m., according to my Google Maps research at a local. Wendy's down the road. This is the good stuff. And for breakfast, you probably got to open the doors at like 6 a.m. I assume.

Somebody's got to unlock it. Somebody's got to light up the skillet. Someone's got to have that smile on their face. Now, it's probably going to increase sales adding breakfast because it's a third meal. But it's also going to hurt profits because they got to invest a lot. In fact, they're investing big up front already. So short term, this is going to cost $20,000. and new salaries of new Wendy's workers to get in there four hours early.

They're literally high. It's like they're trying to build the wall for the king of the north. And they're hoping long term this pays off in profits, but we'll see. So, Jack, what's the takeaway for our buddies over Wendy's? Businesses look for loyalty. Exactly. Loyalty lines. Breakfast, it's a loyalty line.

It's the one meal that you're most likely to build a habit and like do the same thing every day. Exactly. And that's why a bunch of fast food companies are jumping in and why we have the current state of affairs, the breakfast wars. Another loyalty line, another habit, this podcast for a lot of snackers out there. Love where you went with that. McDonald's is doing breakfast. Starbucks is doing breakfast. Dunkin' Donuts, crispy cream, Taco Bell.

Out of all the meals, that's where you build your routine. What are you doing, by the way? My routine is hot oatmeal in the winter, cold oatmeal in the sun. Jack's a seasonal guy. He's frigid right now. I can see that he's shivering. I'm more of, I like to alternate. I like to keep my taste buds on their feet. I got Greek yogurt one day and oatmeal the next. My intestines like a routine. As long as there's peanut butter, I'm in. And Wendy's maybe, too. For our second story, Monster Beverage. The stock is down 10% in the last couple months, so we were curious we looked into why. We dove into why, and it's thanks to Stephen Richter, a snacker from Kentucky.

I don't know what town. Wonderful. But he asked us to look into this, so we are. Monster Beverage. It's an intimidating company. Monster beverage is... We're on the website. I'm scared.

I'm hiding under a desk right now. Check your adrenaline at the door. What is in a Monster Beverage drink by them? It's five-hour energy that happened to turn into the Hulk. Yes. I think it's a carbonated can of carbonated water with sugar and mojo. It would probably beat up Red Bull. Turns out their arch rival.

Red Bull is the arch rival, which is based in Austria. And together, they own 75% of the energy drink market. Now, the names of Monsters' various beverages, which are all pretty much the same as far as I understand. Tweak one of the ingredients in the way. The names are hilarious. Live Plus. I thought it was Live Plus. It's something plus.

They have a drink called Burn. In Germany, they're selling it as Relentless. Then they've got power play and another one called Ultra. So tell us the international game plan. So here's the international game plan that they put straight up in their annual report. Assess consumer preferences, strategically launch individual products. Wow. Game plan here, translation, they take Monster and then they find a synonym in another country to just rename it.

They look up the local language and they figure out the most intense word in that language. Case in point in Cambodia, Pakistan, and Myanmar, Monster is selling a drink called Mutant. Same thing as Monster. In South Africa, they're calling it Predator. Exactly the same thing as Monster. They're just even keeping relatively similar packaging with the scraped eye situation. They announced their second quarter earnings about a month ago, and those were very strong. So we're wondering why the stock is down 10% since.

And the answer is Coca-Cola. Two-cellular. Basically. Let's talk about the distribution drama joke. All right. In Monster's annual report, they show a map of the United States. 49 of those states are covered in red. This isn't a political thing.

No. It has to do with Coca-Cola. Exactly. Coca-Cola handles the distribution. of Monster beverage in 49 states. So Monster makes the stuff. Yep, and then Coca-Cola ship in the thing. And Coca-Cola ships.

And they get it to the store. Side note, Coke also happens to own 20% almost of Monster. Now, here's the deal, though. Since 2015, the deal was, Coke will make money distributing Monster Beverages, but it cannot compete with Monster beverages. It cannot make an energy drink of its own. Well, it turns out that Coca-Cola just came out

with something called Coca-Cola Energy. That seems like a violation of the deal. Sounds like a little bit of a competitor. So Monster kind of sued Coca-Cola. They went through arbitration, which is like court, but faster and cheaper. And basically the result was that Coke kind of came out the winner on this. Yeah. Coke was allowed to continue distributing Coca-Cola energy. I'm no marketing expert, but it still sounds like a competitor. It really does. So, Jack, what's the takeaway for our buddies over at Monster? Coca-Cola and Monster, they don't compete on the same field.

It sucks that Coca-Cola is making a pretty much rival product. That does suck. But Coca-Cola is targeting the mainstream here. Super mainstream. We're talking ads on the wall in Yankee Stadium. We're talking Super Bowl commercials. They got those polar bears. Adorable. That's Americana through and through. I still don't understand the connection. Monster, on the other hand, is alternative A.F. And we're not just making this stuff up. If you jump into the annual report from Monster, they literally state this with images throughout the thing. Yeah, they target the country music, the bike culture, and the military scenes. We're talking professional bull riding, summer X games and Papa Roach. Also, the mountain from Game of Thrones. Like the literal guy.

That's an endorsement guy from Monster. He's huge and he's sponsored by Monster. So Coca-Cola sponsors people like LeBron James, mainstream high-profile. Monster sponsoring actual e-sports teams. Yes. So they aren't really competing with each other. Coke and Monster kind of leave each other alone. For our third and final story, the understated policy of the day, California just disrupted

the disruptors. We're talking law. AB-5 just passed in Sacramento, California, requires Uber and Lyft to classify their drivers as employees. Now, to fully appreciate this, we've got to travel back in time to May. That's when Uber was IPOing. We were there. We were there.

It was in May. It was in New York. And they listed a number of risks on their filing document called the S-1. Exactly. The key risk here? Our business would be adversely affected if drivers were classified as employees instead of independent contracts. Well, say hello to AB-5 Uber.

I think some politicians in California read this S-1 as well. Welcome to your nightmare of a legal law situation. So let's talk about how Uber works today. You sign up to be an Uber driver and you get paid like 75. percent of each fare. Every ride you give, you get 75 percent of what the driver pays. That's it. And if it happens to be like a day where there's a big need and there's search pricing, you make a little more. Yeah. So during rush hour or after that big game or after a big concert, you're going to make more money because there's surge pricing. And if there's less demand, maybe you don't make as much. And that's why people don't

drive during less demand hours. It's the beauty of dynamic pricing that creates a supply demand perfection. And that's what Uber's secrets office is. That's the genius of Uber. And also hiring them as independent contractors, that saves them a lot of money. We'll tell you why in a second. Exactly. In the meantime, all you have to know is that the new law, it changes that. So now you have to get hired by Uber as an employee. You have to work a shift. You get paid a like pre-negotiated salary or hourly wage. That's benefits. That's what AB5 is going to change. And the governor says he's likely to sign it. But what's Uber saying here? Uber says they're not going to comply with this law. They're basically saying sue us like we are absolutely not doing this. All right. So this law brings up the key question that you've

heard these terms, but you want to know the answer. The difference between the independent contractor an employee. There's a lot of differences. Huge differences. Employees get unemployment insurance if they stop working. They also could get health insurance. They also get paid parental leave. They also get overtime. If you work more than 40 hours, you get overtime.

And you get paid rest breaks. Paid rest breaks. That's huge for Uber and Lyft drivers. You get a guaranteed $12 an hour. You get a minimum wage. Plus, the X factor of all of this. Unions? Employees can unionize.

So imagine an Uber union in America that could have a real strike and shut down Uber. So Uber's pointing out there's some issues here. It may have to make some changes in response. And those changes could have serious negative consequence. So one of them could be that they have to schedule drivers instead of letting drivers just show up whenever they want to drive. Right. So drivers could lose the freedom to drive only when they want. Another issue here is they may just have to increase prices because having employees and paying for all those benefits, that's expensive. Now lift, DoorDash, Uber. They're all based in California and they've all lobbied really hard to make this kind of a thing not happen. That's because this isn't just about California. California could

become a precedent for the 49 other states, we expect this thing will end up in court or maybe in a ballot box with a referendum. So, Jack, what's the takeaway for our buddies over at Uber, Lyft, DoorDash, and everywhere else that are now facing an old AB5? I'm going to single out Uber here. We got to talk again about Uber's dirty little secret. I know what you're talking about here. I feel like we shouldn't even be talking about this.

Uber whispering this fine time. We got to bring this out to the Snackers. Uber's got to do one of three things if they want to become profitable. And if they don't do one of these three things, they won't become profitable. The first is they got to pay drivers less. Yeah, that's one option. Or, number two, they could raise prices for Uber rides. Or they could eliminate drivers altogether with self-driving tech like Robo Taxis.

And that's the kind of thing that could eliminate a bunch of issues that Uber is facing. Now, with AB5 and drivers classified as employees, which are, by some estimates, 30% more expensive than independent contractors, this is going to push Uber to make driverless cars actually happen. Yes, we think this could accelerate the path for Robotaxies, because, drivers are more expensive. And they're harder from Uber's business. Jack, can you whip up the takeaways for us over there? Uber, Lyft, and other companies using gig workers have to treat them as bona fide employees in California. If the governor signs the bill, it would start January 1st. Now, Monster lost its battle to keep Coca-Cola out of the energy drink market. But they're not competing

with the same customers. In fact, just want to point this out, they say that they're going after something called fire. I don't know what that is. Yeah, I really don't know either. Completely confusing. Monster, you have to explain yourself. Check the deck, seriously. Third and final story, Wendy's wants breakfast again, but Wall Street's not sure that this will help profits. You all fool me thrice. Shame on Wendy's situation. Divar, snack fact of the day. This one has to do with your flights and who's watching you on them? Yeah, if you're flying on one of the new air buses, you better watch yourself in the bathroom. Check yourself. Is this thing occupied? Yes, it's occupied by surveillance.

Exactly. Airbus wants to install sensors in its planes to see how often you're using the bathroom, but they've got a motive here that's not creepy. Here's the deal. First of all, the flight attendants need. to know if anyone's in the bathroom because they can't take off or land if you are. Second thing is they got to run out of materials. Yeah, it's an inventory question. Yeah. They're basically calculating if you're in the bathroom, that's like 12 squares. That's how much they need.

And then they multiply and figure out when they need restock. It's a mathematician situation over there. It's kind of a fun one. Snackers, if you got a great snack fact, hit us up at Robin Hood Snacks. We want to hear it. We want to hear your hometown and we want to get you a shout out. We'll see you tomorrow. We'll be talking about Smile Direct Club's IPO.

In the meantime, chicken of the tree, you know what to do. 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, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and 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.