The Best One Yet - “Casper is the Peloton of Slumber, not the Nike of Sleep” — Casper’s IPO. 23andMe’s transition. Primo Water’s acquisition.

Episode Date: January 14, 2020

We slept on the Casper IPO documents released over the weekend, then realized they spent $80M just dealing with mattress returns last year. 23andMe hits a new corporate milestone — treating diseases with your saliva. And Primo Water boasts that it’s a pure-play water company, but it just got swallowed up.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, January 4th. Snackers, we heard you are coming, so we whipped up the best one yet. Yesterday's was okay. This one is better. Jack, three wonderful stories.

Casper Mattress is IPOing. Rewebred the S-1 cover-to-cover over the weekend. No joke. Slept on it for some additional snacks takeaways. Long weekend. Now we're delivering it to you. It's not the Nike of Sleep quite yet. Second story, 23 and me hit a new genetic milestone today.

You know, curing disease with your own saliva. And you're not even getting hate for that curing disease. Neither is your saliva. Third and final story. Primo Water is a publicly traded company that's obsessed with H2O. Moisture is the essence of wetness and wetness is the essence of beauty. Merman, pop, mermann. It just got acquired by another company also obsessed with water. That's weird. But before we get into those stories, we have to talk about Beyond Me. Right. The stock is up almost 50% in January. Jack and I are shareholders. We've been following this story about how they're trying to get the holy grail of food partnerships.

Which is the plant-based Big Mac. McDonald's has not given the rose yet to a plant-based meat company. But you know what's not getting enough love for the stock? The new partnership whipped up with, you know, Snoop Dog. D-O-D-W-G himself unveiled his own version of the Beyond Meat Breakfast Sandwich, which is already being served at Dunkin' Donuts. Here's how Duncan Donuts is going down. If you want to get the D-O-D-W-G plant-based meat beyond breakfast sandwich sandwich,

this is what you're going to get in this thing. Sausage Patty. Okay. Egg. I'm following you. She's not going to. For vegans, by the way. Okay.

No, we can't have. Wow. And the sausage egg and cheese. This is the kicker. It's smacked between. Oh, don't wait. Is it on a waffle? Is it on a bagel?

Glazed donut. They cut it glazed donut and half. And that's your bun. It's like the new croissant. This is actually called the Beyond D-O-D-W-G sandwich. By the way, plant-based rap name, Jack? P-based Diddy. I'm going with Beat Yonse.

Snackers, let's in our three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got a guess. Snacks about to hear-rain food. It's air candy. They don't reflect the views of the Robin Hood 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. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, we've got our unicorn of the day bumped up early.

One billion dollar Casper files to IPO. Congratulations, New York Stock Exchange. change, Casper has chosen you. Uncongratulations to Casper's investment banks who couldn't come up with a creative ticker symbol for this thing. Four letters you have to choose. Actually, it can be less than four. For the stock.

Yeah, they went with CSPR. CSPR. Huge missed out. What about W-A-K-E? What about R-E-S-T? We looked it up in ZZZ in case you're wondering, is already taken by a Canadian company. Actually, I like W-T-B. I see where you're going.

Wait, people think about it. Okay, now you get it. Look at that. Second, I like Tuck because it's my brother's name, and people like to get T-T-T-E-B. Hucked into bed. Good disclosure then, Jack. And then finally, how about just bed? BED.

Someone just take bed and run with this. We just looked it up. Bed is available. Yeah, we get it, guys. Just run with it. Well, Jack and I spent the whole weekend, ironically, in bed, full disclosure. We actually both own Casper mattresses. We sat in those mattresses and we jumped deeply into the S-1, which is their IPO filing paperware.

I was face down, like, sleeping in this mattress, dreaming this thing. But IPOs. Get out of the road. I'm just trying to read the S-1. Casper claims there are three pillars of wellness. that are driving all of these millennial business trends. You have the fit pillar. Yes, fitness.

You have the food pillar. Of course. Tell me about this third pillar, young Jack. Sleep. Sleep is the third pillar of wellness, according to Casper. Interestingly, you could also consider sleep to be the most important of the three pillars because it actually powers the other two. Now, I realize, Nick, we should probably back it up a little.

Yeah, let's do it. What is Casper? Okay, Casper. It's a direct-to-consumer mattress company. I think it's the first company that delivered a mattress in a box to your door on on scale. No one believes that the box. Talk comes in there, that thing pops open.

You cut open the vacuum-sealed plastic and they're... It's actually, you kind of get worried the room is going to explode. You get a Willie Wonka sensation. It's on my wife's Insta story. Yeah. Since I opened it a couple of years ago. It's actually an adorable experience. Here's the opportunity.

Casper claims it's about to seize. Exactly. The sleep economy. We spend eight hours a day. We spend one third of our lives doing this. What they're saying is every product you engage with right now, it's probably about you being awake, right? You wear clothes, you wear shirts, you buy things, you eat things.

You're awake. during all that. Right. But that's only 16 hours a day. What about the other eight? They're like, hey, we got to sell people some stuff when they're in the bed sleeping. Casper claims that one third of your life

is its economic opportunity. Basically. And so what they're going to do is not just do the mattresses they've been focusing on. In the S-1, they discuss 16 new products that they're kind of going to come out within the next few years.

They're working on sleeping pills. Okay. Melatonin's just fine for me. Vitamins to help you sleep better. That makes sense. Sprays to like, that sounds borderline illegal. I know. Someone throw the cuffs on these guys.

They're medical machines out of nowhere. We don't know where that's coming from. Counseling to help you sleep better. Meditation apps to help you be more mindful. Now, here's the thing about this filing paperwork, the IPO stuff. Jack and I jumped in for you because they focus on both the investment opportunity and the investment risks. And there are some interesting investment risks here. The first is influencers who are vital posting on Instagram.

Actually, my wife is an unpaid influencer for Casper because she did post the story of my unboxing experience. So what Casper said is the paid influencers? though, they're kind of a risk because Casper can't really control them. No, but the real risk we're seeing here, the 90-day free sleep trial that Casper offers. Can we please talk about the internship hack that Jack and I have discovered here? Yes, a lot of business internships, especially for MBA, are 10 weeks long. Right. That fits perfectly with what Casper is pioneered, which is the 90-day sleep trial period for one of their mattresses. Snackers, if you get offered an internship in a city that's not your home city, buy the Casper mattress,

sleep on it for 10 weeks. Then you got a nice two-week cushion to return that thing for free. No coupon code needed. Just tell them Nick and Jack sent you. All right, there are three big numbers from the S-1 document, which, again, is like the dating profile. You have to show it to all the investors before you go public. All right, here are the three big numbers, Jack. I noticed. 201, 1356, and the number nine. Two hundred and one is the number of times brand was mentioned in the S-1. 136 was the number of times Casper mentioned mattress in the S-1. And nine. And nine. was the number of times it mentioned profitability, something it's not. You can see where we're going with this. The priorities were clear. Casper is obsessed with its brand and still working on profitability.

But it does some mattresses in the meantime. Last year, it had $358 million of revenues from selling these mattresses to people. But it still suffered a $92 million loss because just like every kind of company IPOing these days, they had to have a big loss. Now, its biggest cost was marketing. We're talking about the subway ads in New York City that are Casper. We're talking about the Facebook and Instagram ads you encounter that one time you mentioned I'm not sleeping well to your friend. For some reason, it's now an Instagram ad for Casper. Everyone's been on the subway when boom, boom, boom, we've got like a cartoon of Casper ads smacking you in the face over there.

They're kind of lovely. Yeah, they're charming. They look comfy. Yeah, they're very nice. They're great. It looks like a children's like lullaby. It almost makes you want to just go to sleep on the subway. So marketing, we said, was the biggest cost.

$126 million were spent on ads last year. Compare that to $358 million of revenues. Do the math on that. This is a fun stat. For every dollar it spent on an advertisement, it generated about $3 of revenues. Now, another fun stat on this, they've lost $80 million dealing with all those returns, coupon codes, and refunds from that mattress hack we kind of just mentioned to you. That's 23% of revenue.

So what is a pattern we're hearing here? A lot of revenue is $358 million, but they have to spend a lot on marketing and a lot on promo codes to get that app. So, Jack, what's the takeaway for our buddies over at Casper? Casper wants to be the Nike of Sleep, but it's really the Peloton of Slumber. Now, one of the co-founders likes to say that they're trying to become the Nike of Sleep. Thank you for not saying the Amazon of Sleep. We really not do that cliche.

But they're really, when Jack and I look closer, not quite yet the global diversified industry-leading brand that Nike is, and they shouldn't be saying that. That's why we think it's more the Peloton of Slumber. Both Peloton and Casper depend on sales of one really big expensive product, a mattress and a bike. Both are promising new things are coming, like Sleeper. pills and rowing machines. Both are not profitable and could never become profitable. And they've lost a lot more money this year than they did last year. And finally, both are relying on future technology to connect customers with their products. Apps, apps, apps, apps, apps. This is Jack, I own options of Peloton and stock of Amazon. For our second story, Jack, throw me a towel and

wipe me off. We got Prima Water. Just got acquired for $775 million to take itself into big water. This is a story about two water companies becoming one bigger water company. It's actually a beautiful story. Let's pour them together. Well, everybody's 2020 resolution is to drink more water. Jack, remember my 2015 resolution? Drink more water? No, I was trying to pee clear for the whole year.

It was more indirect. Now, there is a merger of water companies that was announced yesterday. One is Kot, which is based in Canada. Nothing to do with mattresses, by the COTT. It's acquiring Primo water, which is H-Q down in Winston-Salem, North Carolina. Right. Now, Kot is so pumped about Primo. the smaller company it's acquiring, that it's ditching its name, Cot, and it's going all in on Primo Water.

This is like asking someone on a date and then saying to them, by the way, I'm taking your name if we get married. Yeah, and they're like, um, what time are we meeting for pizza? So Cot is changing its name to Primo Water, and it's selling off its coffee and tea businesses so it can focus just on H2O. Now, Snackers, this is why Jack and I found this digestible story so fascinating. It's because it's the perfect example. Primo Water is the perfect example of the Razor-Rasur Blade model. Except for water jugs and water dispensers. Okay, so let's look at the business model of old Primo water, which, by the way, sounds like the name of a fake water company and a fake movie.

It's very real, though. Primo. Primo. There are three business lines. The first is the low margin business, selling water dispensers. You've all seen these in waiting rooms at doctors' offices. It's got the blue tab and the red tab. And you start filling up and it goes, glug.

Clug. Yeah. Now, they look a little more modern than like those old school ones with the blue. They're a little sharper. They're not quite sharp. image level of what they're cool. That's the low margin one because for every dollar of sales, only eight cents of that or eight percent is profit. Right. So it means it's low profit. And then the high margin, the high profit item they have is these exchanges. When you're a huge jug of water,

which is like 10 gallons gets empty, go to a store. They have a full one waiting for you and you can exchange for a small cost. Right. They have 14,000 locations that are whipping through those exchanges. For every dollar of sale for exchanges, that's 30 cents of profit. Right. So that's a little bit more profitable. And then third, they have their highest margin, most profitable business line. Refills. Refills. Refills. When the jug gets empty, fill it up yourself. They have 23,000 locations at grocery stores, hardware stores, and pharmacies where you can fill up your like 10 gallon jug of water. You're that guy walking who kind of looks kind of cool because you're carrying all these jugs of water. And that business has a 31% profit margin. Every dollar is 31 cents of profit. This is the best

visual of the Razor-Rasurblade business model Jack and I had seen in a while. And remember, Razor companies barely made money on that handle that you actually hold. They're sending you the handle and you're like, oh, this is cool now I have the handle. But then a four pack of razor blade refills is like $29. Yeah, because remember, you're going to actually need the razor blades later on to actually make that razor worthwhile. Primo barely makes money on the dispensers, but makes lots on refills in exchange. So, Jack, what's the takeaway for our buddies over at Primo water? Is Primo a punicorn or an opportunicorn?

Well, technically, Primo is not a tech company. It's not a private company, so it's not even a unicorn. But we tried to make up a new name for this. We actually just really like rhymes. It's on trend in a couple of ways. One, water. Water is a health trend. In 2017, bottled water surpassed soda as the top beverage sold in the United States.

And Snackers, get this. This year in the Super Bowl, Bud Light is doing a strawberry-flavored seltzer commercial. Can you imagine a strawberry-flavored Bud Light Seltzer commercial? It's wild. Back in the day that never would happen. Is it messing with our minds? A second trend that's online? Sustainability.

Everybody knows that single-use water bottles are bad for the planet, and Primo sells like 10-gallon jugs. There's definitely a snack right now, drinking out of a water, single-use plastic bottle, wishing it was a buttline salt. Feeling extremely guilty because of Jack and I right now. So, here we go. Is Primo a trendicorn or a fadicorn? For our third and final story, 23 and me just reached a new milestone. It's curing diseases with your saliva. Never used 23 of me, but I have used ancestry DNA.

Yeah, we did. That was a good timeline. I took the DNA test. I figured out the random parts of Europe where most of my blood is from. It can be freaky. And it's actually a buy one get three free deal because I shared it with my three brothers and works for them. You just got to get one family member to do this. And then you play with a little bit of math.

So the co-founder of 23 and me is also the CEO. It's highly ironic because she's also the most connected person in the world apparently. Her ancestry is all over Silicon Valley. Yeah, she used to be married to Sergey Brin, who co-founded Google. And she is the sister of Susan Wochewski, the CEO of YouTube. We're talking about Ann Wochewski. Which is owned by Google, of course. Anne is making all of those close members proud.

So nice for her. Because she's using the company's data to make money. Classic Google moves over here. Here's the news. 23 and Me created a new antibody to treat inflammatory diseases like psoriasis. And then they sold the rights to that new antibody to a Spanish drug company called Almeral. And Almeral is going to take that little antibody and turn it into a pill that we can to treat psoriasis, not the diseases.

It's kind of like a nice circle of life kind of thing. Not too shabby. Not too bad. So 10 million customers have spit into a tube, mailed it in, waited a month, and then got their ancestors. Jack, I'm going to have to correct you there. I think this is how it actually works. 10 million customers have spit into a tube, told everyone around them they spat into a tube,

mailed in that tube, told everyone they're waiting, waited a month, then got their interesty results, and then told everyone about their ancestry results, even though we didn't ask them. This is a super braggy thing. People love posting it, too. I'm a pure Brad. All right. So a key part of the transaction with 23 and me is do you opt in to participate in the research?

80% of customers say yes. Right. They may not have noticed that because they were really focused on making sure they did or did not have that little bit of Greek in them. All right. So 80% said yes. 10 million total customers. That means 23 and me has a data set with the DNA mapped out of 8 million people. That data set is being sifted through by scientists looking for patterns.

Now, 23 and Me also makes money three different ways. The first is it had to sell you that DNA kit so it could get your saliva. For $99 to $199.009 bucks. Second, it sells access to its dataset of 8 million different DNA. Right. There's one drug company that has an exclusive deal to use that data. And third, it develops its own drugs from its own scientists who are sifting through that DNA data. That means your saliva helped solve a disease and you didn't get credit for it.

In fact, you paid money for it. In fact, we all kind of pay. money for it. It's messed up. So Jack, what's the takeaway for our buddies over at 23 and me? This is a classic, you are the product economy. If you hear something's free, you probably are the product. Common example. Facebook and Instagram are free to use, but companies pay Facebook to advertise to you on Instagram and Facebook. In this case, drug companies are paying 23 and me for access to their data, which is really your data because they're so innovative and impressive with this. They've marketed it in a wild way. This begs the question, could 23 and me

make their core product the DNA test free? All right. So let's talk about this. Let's talk about this. If say they do, it did, it would lose revenue because it would stop selling those DNA kits for $99 to $199. But then think of the upside here because they could get way more DNA data, potentially cure more diseases, and make more money for 23 and me. 23 and me. Tell us what you think about our plan. We know some snackers are some 23 and me people out there. Jack, can you whip up the takeaways for us over there? Casper wants to be the Nike of sleep, but it's not there yet. It's more like the peloton of slumber.

It's got potential, but it's got basically one key product, and it's still unprofitable. Second story, Primo Water is the new opportunicorn focused on water. Publicly traded, selling water dispensers and huge water jugs. Third and final story, 23 and me is a DNA company, also in the drug making business. Your spit is its data, and then it turns that data into drugs, and you get to tell people you're half Laberdoodle. Now, Snackers, time for our Snackers. snack fact of the day that this one is from Sykirin in Hyderbad India. He now lives in Chicago, and this is more like a mind messer than a snack fact. Every mirror that you buy is already

in used condition. Think about that. That one, that one sink in. That reminds me of an old snack bag. This is a great one. The brain named itself. This is so good. If you got something like that, send it our way. Snackers, we told you this was the best one yet. And we've also got a couple corrections from the previous podcast, which was not the best. Not the best one. That was not as good. All right. Yesterday we said that cocoa and cacao are the same. Not the case.

Actually, that was according to Wikipedia, by the way. So everyone beware of Wikipedia. Cacao is the plant. Coco is a chocolate powder that's made from roasted and grounded cacao seeds. Also, we mentioned that sweet green was cashless. Turns out they were cashless until April 2019, and they've started accepting cash in cities because cities pass some laws demanding they accept cash. Right.

Without accepting cash, you face accessibility problems. Not everyone has an accident. Right. We've been to Sweet Green plenty times and we're used to seeing those signs. And not all cocoa powder is 100% cacao. So make sure it'll look out for that. Love to having you for the best one yet. We'll see it tomorrow. 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.