The Best One Yet - “Hey Instacart, change your whole biz model” — Nestle’s pet passion. VW goes back to work. Instacart’s 1st profit decision.

Episode Date: April 28, 2020

All your grocery delivery powered Instacart’s 450% growth, so we’ve come up with a plan for their first profit. Volkswagen decided to reopen the world’s biggest car factory, but it’s got a chicken/egg problem. And Nestle’s earnings reveal more about pets than they do about humans — an accelerated trend.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, April 28th. Spring is in the air, except up here in Vermont where we got snow again last night. Apparently on the East Coast, spring not a thing, winter straight into June. Real thing. Spring is not a thing, but this is the best podcast yet.

It's so much better than what we whipped up for you guys yesterday. Jack, first story, please? The main course of Nestle's earnings report was human food. Kit Katz are back, baby. Didn't know they were gone, but they're back. But we're digging into the fancy feast in the pet dish over next to the table. We're talking pet pampering. It's an accelerating trend.

For our second story, making automobiles isn't exactly work-from-home-friendly. Honey, can you keep things down? Trying to drill the carburetor into the chassis. Honey, I told you I've already downshifted as much as I can. Honey, stop saying random car terms to me, please. Volkswagen just reopened the world's largest car factory in Germany. We're talking about a big chicken. egg issue. For a third and final story is the unicorn of the day. Instacart has become Insta

famous because people are afraid to visit their grocery store. And the grocery delivery app just had its first profit ever. We're so happy for you. We've got a proposal on how Instacart should spend its first profit. One word, Big W warehouses. But Snackers, before we get into that, happy T-Boy Tuesday. It feels, it just felt like a T-Boy Tuesday, Jack. I woke up. It felt like a T-Boy Tuesday. T-Boy is, of course, the best one yet. And you may have noticed that Zoom stock on Friday wasn't the best one yet. No, wasn't a good situation? Zoom stock plummeted 13% before the weekend. Basically, Zoom got sucked.

And that's because Facebook decided to whip up a little thing called Messenger Rooms. Free video hangouts for up to 50 people free. And did we mention it's free? Classic Facebook style, Mark Zuckerberg mentioned the word connections two dozen times in the announcement about the new product, which is clearly a Zoom knock. Also, classic Facebook style, this blade. copy someone else's product. Facebook's biggest strength, besides knowing every personal detail about you,

is the fact that like 2.5 billion people in the world have Facebook accounts already. And it takes advantage of that by copying features from potential rivals. And you've already got an account so it's easy to use. For example, Instagram stories. Looks a lot like Snapchat. Facebook dating. Tinder vibes all over this thing. Facebook market.

Craigslist copycats, straight and simple. And this last one's more recent, Facebook Libra. Okay, let's just call it what it is. It's pretty much of Edma. This brings us to our T-Boy Tuesday question of the week. What will Zuck and Facebook knock off next? What company is going to get Zucked? I'm thinking Facebook's going to launch F-Mail, which is like Gmail, but no Google.

Snackers tell us at Robin Hood Snacks. Tweet us what'll get zucked next. You're tuned in to snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear rain food is 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. Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Nestle just enjoyed a huge sales growth for human food. But we're focused on its pet game. But before we get into this story, Nick, I have a trivia question.

Please. This company is based in Switzerland. How many official languages are there in Switzerland? I appreciate you asking such a neutral question. Well, you got French, you got German, you got Italian, and then I'm going to go with like some random obscure local like Shoshashla language. It's a very alpine guess of you, Nick. It is the fourth one that's hardest, which is Romance. A beautiful tongue. Now, we're talking about a company that's a lot like Unilever, but less creative with the brand names. Yes. Both are big food glomerates based in Europe. But Nestle, names its products Ness Cafe, Nesquick, Nespresso, Nest tea, Nets cetera, et cetera. It also happens to be the world's biggest food company and it enjoyed a solid 4.3% sales

growth last quarter, which was way more than it expected. That doesn't sound that good, 4.3% sales growth, but for a packaged goods company, that's the best in five years. It doesn't get much sexier than that. And it's all powered by comfort foods that were like whipping up in the microwave during work from home. We're talking, no, it's not delivery. It's Dejorno. And also Hot Pockets is made by Nestle, which is DeJorno, folded into a tiny rectangle. Not to be confused with Stoufers, which is then unfolded Dejorno pizzas that were originally

hot pockets. All of these are Nestle products, but Nestle has a new profit puppy, pet food. This is what fascinated Jack and I. Pet food is Nestle's fastest growing product category when he cut through all the other information about their food products. We all remember Purina, which like has the most space in the pet aisle at any grocery store, that experienced double-digit sales growth last quarter. Oh, and for that food segment of Purina, it's up 14% in North America. As of 2019, pet food is now Nestle's second biggest category, and this is a huge company. We're talking about a company that produces Wonka Candy, L'Oreal, Hot Pockets, and Gerber baby food. This is their second biggest category. Like all of us pet owners, Nestle is stocking up on pet food companies. Get this, Snackers, while you loaded up your cap

with like pasta. On April 1st, made a quarantine, Nestle bought Lily's Kitchen, which is a British fancy pet food company that, according to its website, sells grass-fed lamb dog food. A 12-kilo bag cost 69 pounds. That's the most confusing sentence I've ever read. This is the kind of thing the Prince of Wales is serving as like corgi, medium rare. And Nestle's American competitors, General Mills and J.M. Smucker, they've both followed that trend with multi-billion-dollar, fancy pet food acquisitions since 2018. If you're not buying fancy pet food, then you're just not a cool conglomerate. So Jack, what's the takeaway for our buddies over at Nestling? Another accelerated trend in the corona economy is pet pamper. Snackers, think about it. Millennials are putting off

having families. Aging boomers want companionship. And those trends are even more serious when we could be stuck at home and avoiding people for a year or more until we get this vaccine. Get this from the Humane Society. Fostering turns out it's up 90% in some cities. for pets and animals. And pet shelters across the nation have run out of puppies to adopt. River, our new profit puppy is just one in that dataset. In the corona economy, people are cutting back on themselves, but we're not cutting back on our pets. Take a look at chewy.com stock price. It is doubled in the past month as people are splurgeon on their pets. And in a socially distant economic recession, that accelerates the pet pampering trend aggressively. For our second story, VW, just restarted the

world's largest car factory. But will anybody buy new cars right now? And that's all going down in Volkswagen's lovely headquarters in Wolfsburg, Germany. Wolfsburg von Wolfsburg. Not a fake name. Sounds like where three of the characters in the Twilight series came from. It was the greatest car in all of the Vaz. It's also adorable this time of year out there. It's really pretty. This plant in Wolfsburg, Germany, is gigantic. We're talking 70 million square feet. Which we did the calculation for you, That's 667 Walmarts. That's right. You could pack 667 superstores in this one superruel Wolfsburg plant.

Oh, and if you want to talk about more big numbers, guess what Jack and I found? They managed to employ 63,000 human workers in this place. I think that's the working age population of Vermont. They're producing 3,500 cars a day, which is about an eighth of a lift. Now, that's been a problem because the CDC says to avoid gatherings of 63,000 workers in one You hate to see when that happens. And by the way, it's been closed for 39 days. Normally in that period of time, they would have pumped out 136,000 cars. Because of all those missing cars, Volkswagen stock is down 30% since its recent high because nobody is buying any cars from Volkswagen. But because

everybody knows there's nothing that Germans do better than a sense of humor, they open up the plant in an incredibly charming way. How did they do it, Jack? Picture the Volkswagen logo. They turned it 90 degrees, and it looks a lot like a Pac-Man. And then they put that recognizable green COVID-19 germ so that the pack band's like eating it up. You're going to see it. You're going to chuckle for five seconds. And if you work at the plant, you're probably going to be like, can I go home now? You'll chuckle for two seconds. Now, we know what you're thinking, Snackers. Are they doing it the Lear way? Are they reopening Volkswagen with Lear methods? Now remember, Lear is the Southfield, Michigan-based seat company within cars

Yes. That just published a 52-page PDF on how to safely open a plant in the era of COVID-19. So if you're Volkswagen, you're doing like the basic table steak stuff. You're adding the sanitization stations and you're like making sure workers are nowhere near each other. Yeah, you're adding space between workers. But there's actually a hundred changes in total to reopen this safely. And they've set up 8,000 posters across the plant to make sure workers are informed. I hope there's like an art school in Wolfsburg.

We found some very interesting new policies at the plant that we've done. We wanted to enlighten you on. Kids, you can try this at home. They're encouraging you to open doors with your elbows. The Germans don't encourage, Nick. They order you to open the doors with the elbows. If you don't do it, then don't show up tomorrow. Also, it's a B-O-I-O-Lunch policy.

They've shut down their famous canteen, so I know what you're thinking, no more Friday vice first breakfast. But we know what the real deal is, no more Broughtwurst five days a week for five weeks straight. Then this one's super interesting. One-way traffic only. Yes.

All the hallways of the building. Some of your grocery stores may be doing this now. If you make the wrong left turn down aisle 6, you're all the way. You can't come back. You don't want to make that mistake. It's like a bad map experience. Now, there's actually 40,000 parts suppliers that supply things in a Volkswagen globally. And Volkswagen has asked all 40,000 of them to follow the same standards.

So they're doing this slowly. They're ramping it up from 10% this week to 40% production next week. So, Jack, what's the takeaway for our buddies over at VDUB? Volkswagen faces a chicken and egg problem. What comes first? supplier demand. Snackers, we got to ask, why is Volkswagen making more cars when no one's expected to buy them or be going outside? Even as companies slowly start to reopen, we doubt people will feel confident enough to buy an expensive thing like a new car. You're going to give this thing a

test drive? Absolutely not. There is a toilet paper shortage in America. The opposite is true of new cars. And if Volkswagen starts pumping them out from Earth's biggest factory, that could exacerbate this entire over supply problem. And car dealerships will be even more full of cars that they can't sell. So this leads us to a few questions. Should companies wait for demand from customers before they add more supply? Or should companies stimulate demand by signaling to us all a return to business as usual, like Volkswagen, like Volkswagen, like Volkswagen, test this whole thing out? That's what Daimler is doing. If you're running the Snacks challenge, your gate looks beautiful and efficient, but it's time to turn around. We're a little over halfway through the pod.

For our third and final story, Jack, paper plastic. Paper, always. Trick question, you're not supposed to be at the store right now. You're asking this question anyone. Self-checkout moments, Jack. Instacart Snackers, is enjoying a record moment. Yeah, that record moment is profits, which means it's the perfect time to change its business model.

Snackers, we're talking about the eight-year-old, $8 billion unicorn. That is basically just the digital savvy face for like 350 grocery stores. According to Instacart, which has no relation to Instagram, In 5,500 cities, you can order on the Instacart app for Whole Foods delivery, public's delivery, Italy, Costco, you name it. Place the order online and boom, at your door arrived like six bags of groceries, even though like one of them has a single Chobani yogurt in it.

It doesn't make any sense. And you ordered broccoli? They might have brought you brocolini because they couldn't find the broccoli. You're a little frustrated, but you're understanding because, you know. Nick and I have both used this service. It's shockingly time-saving for busy people living in cities. It's also using these same gig model as Uber. So they've got a bunch of independent contractors, aka shoppers,

who are going to the stores while you're not. Instacart calls their gig workers shoppers. Now, Snackers, you know, Jack and I can't make financial recommendations, but we can tell you right now that if you're ordering something on Instacart, you should be tipping big. $5 minimum, but if it's like a big order, they need money. Someone just risked their life so you could have like three more bananas. Good point.

Now, these numbers are going to need to be double-backed. This company just sold 700. million dollars worth of groceries in just the last week. Get this, compare that to December of 2019. That is 5.5 times as much groceries delivered per week. That is literally one-tenth of a lift, no joke. And it's also like the future came early for Instacart. The CEO had this amount of sales in his projections for 2024. Now, this company has so much going on right now to meet demand. It has doubled the number of shoppers who are like buying your food to 500,000. And since so many people are avoiding grocery stores during COVID-19,

they're adding 250,000 more shoppers, which is convenient because a lot of newly unemployed people could use the work. That means Instacart will now employ more people than four states in the United States. I'm guessing Vermont's included in those four. Oh, it absolutely is one of them. I think that's like one portion of one part of a neighborhood in my hometown of city. And yesterday, we learned some fridge-worthy news milestone for Instacart. It's expecting its first ever profit in April,

$10 million. That's thanks to a leak reported by the information. Here's what we found fascinating. One company has jumped to the top of video calls and that's Zoom, but similarly, one company has jumped to the top of grocery delivery, and that's Instacart. Prior to the COVID-19 crisis, Instacart controlled 50% of the U.S. grocery delivery market. Now that has risen to 70%. Interestingly, Amazon used to have 20% of that U.S. grocery delivery market, but that's fallen in half down to 11%. Translation, Instacart is beating Amazon in grocery delivery, and we got to give credit to its one and only company status. That's because Instacart's focused on one thing, while Amazon has like 3,000 different business lines going on with 10 million MBAs working on the whole project.

Jeff Bezos is not spending time on Amazon grocery delivery. Which brings us to two questions. One, what should Instacart to with its profit? And two, Jack, what's the takeaway for our buddies over at Instacart? We got a bold idea for Instacart. Now is the time to invest to cut out the middleman. Ironically, Instacart shoppers, they shop at Whole Foods literally, which is owned by their competitor, Amazon. It's a digitally antiquated part of Instacart's business model. They send shoppers to random grocery stores in the neighborhood. Boom, you want Dave's killer bread?

That got plucked by an Instacart shopper from Price Chopper or Kroger or Safeways from the shelf, literally in the store where you would shop. But now that Instacart has a profit, it has an opportunity to do better than that. Think about it. It has years of data on exactly what groceries were buying in exactly specific neighborhoods. In the last seven minutes, 12,000 San Franciscans in the marina got the frozen cauliflower pizza crust at the same time. They know this. Knowing that, Instacart could cut out retailers like Whole Foods by investing in their own warehouses in stocking up on frozen cauliflower crust. And that means Instacart's 750,000 shoppers can focus on delivery, not like wandering aisles checking to make sure the avocado is,

soften us for what you said. And now that it's making 10 million a month in profits, it could invest in warehouses right now. Jack, I sound like AT&T over here. Can you whip up the T-Boy Tuesday takeaways for us? Please tea. T-T&T. Triple. Nestle's human food sales inched up last corner, but

pet sales are growing like an 11-week-old puppy. With an economic recession in state-home life, pet pampering is an accelerating trend. Second story, Volkswagen just reopened the biggest car factory in the world, which now has one-way hallways. And the business faces a chicken and egg problem with supply and demand. Classic. Instacart is enjoying a record moment and a first ever profit right now.

Which is exactly why I should invest in a completely different business model. Now, time for our snack fact of the day. This one's sent in from David Semrad in San Francisco, California, sounds like he may have been studying abroad in Munich. Nick, I got three words for you, Bud, Wise, er. The American beer was first brewed in 1876 by a Adolphus Bush in St. Louis, Missouri. Now, he named it after the checktown, Bud Weiss, that inspired the recipe. Key point. That checktown isn't too happy that its name is being used in America for beer sales,

which have become quite a worldwide, well-known beer company. Which has resulted in a pretty ongoing lawsuit. That's why American Budweiser is legally sold as just Bud in many European countries, because that check town owns the name Budweiser. Seems like a missed opportunity to go with the name, Wiser. Snackers, remember to tweet at us today who you think Facebook is going to copy next. Treat us at Robin Hood Snacks with the hashtag T-Boy Tuesday. Love the pod Jack. You look fantastic over there, by the way, up in VT.

We'll see you tomorrow. Can't wait. This is Jack. I own stock of Volkswagen and Amazon. 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.