The Best One Yet - Molson Coors falls 8% on mid-beer crisis, Royal Caribbean becomes pricing power superhero, and Fitbit is our “Survivor of the Day”

Episode Date: May 2, 2019

With beer sales slowing, Molson Coors is desperately focused on innovation (aka non-alcohol drinks), but shares fell because of its beer battles. Fitbit used to be profitable, now it’s using partnerships to survive. And Royal Caribbean jumped 7% as it realizes it can charge a lot more for cruises.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. This is Snacks. Daily, it is Thursday, May 2nd, and this is a PBOI. This is the best one yet. Great reason why. Market skipped. That's not the reason why.

You want to tell them why? I think markets are getting greedy. Yeah. The Fed chairman Jerome Powell spoke. He said we're not cutting interest rates. People wanted an interest rate far. We shouldn't have expected that. But the real reason markets may have jumped?

Jennifer's birthday. Mom, happy birthday. Congratulations. You are a wonderful lady. Former Homecoming Queen. State of Florida. We actually did a separate birthday recording for you, which we'll send you a separate.

We'll send that to you on the side. Now, three wonderful stories. Jack and I got a great mix in here. What we got? First is Molson Cours, the Canadian-American beer giant. It's stock fell 8% because beer is having a mid-beer crisis. But we are fascinated by their innovation investments. We're talking about kombucha.

Second story is Royal Caribbean. It jumped 7% because it is a pricing power superhero. It also had an epic wave season. Don't take that literally. We'll jump into an event. Third and final story is fit bit. This is our survivor of the day. Hang it in there.

That company will not go. way. It can't stop. It's not profitable. It used to be. And it's finding a way to get on the Snack Daily podcast. Here's the secret. Partner with everybody you see. You've got a friend in everyone. Now, before we go to the stories, though, big question. Do you want to know the most quiet part of an airplane? We were fascinated to learn this. We wanted to know where should we sit? There are like a hundred options every time you choose. So a Wall Street Journal reporter had the best job ever. He got to take like a hundred flights. It's also the worst job ever. Good point. Yeah, let's talk to this. So he had a little noiseometer. device, which, by the way, how did that get through TSA? Good question. So everybody loves a good travel hack. He

decided that, well, he didn't decide. He proved that the front of the airplane is the quietest place. Shocker, like, must be nice when you're up in business class. That's not it, though. That was kind of odd. Let's keep going. A wide-body airplane is quieter than a narrow-body airplane. And how do you find that out? Well, on Expedia, you can figure out the plane model. And then you do like a cross-reference thing. Google it. Like a friend at the CIA. Now, here's the really important key. This, everyone listen on. When you're picking the seats. This is big. Look at that little airplane chart and find a seat that is in front of the two engines. Exactly.

Makes a big difference. Huge difference. In fact, how big a difference is it? Like 15 decibels. And if you don't have your decibelometer on you right now, we'll tell you how much that is. That's about the sound of a smoothie machine. No, perspective. The back of the plane right by the bathrooms and where they make drinks for you, don't want to

be. That's like 85 decibels, which is a smoothie machine or a garbage dish. So next time you're whipping up your homemade jamba juice. situation, put your ear next to it, wait an hour, and then realize you should not be in that part of the plane. Your ears will also become numb. Now, before we hit our stories, listen to these keywords. You're tuned in to snacks daily. We spoke to the lawyers. Snacks about to hear 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. 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. Rob her financial LLC, member FINRA slash SIPC. Cracked open the story. For the first story, Jack, Moulson Cor's stock fell 8%, even though it's got an innovation program that it's just like whipping out. Can we talk about the first sentence in the earnings? Please, this thing is bold. Moulson Corz has defined brewing greatness for more than two centuries. That's how they begin their earnings.

That is liquid courage right there. That's liquid courage. Now, to keep on with that liquid courage trend, they were pretty excited over at, Moulson Coors when they revealed how they did for the first quarter. It was a very optimistic, positive sounding earnings are part. When you kind of sober up, though, and look at the numbers. And actually read the words. It's a little bit more concerned.

So, volume, the actual amount of drinks sold. Beer is a liquid. Decreased by 4.7% worldwide for Mulsin course. Now, let me tell you, Jack, that was the six straight quarter that's happened. That's a lot. A problem. I remember I had a statistics class. I heard two or three things happening as a trend.

Four, five or six, that's reality. It's a serious problem. prices, by the way, if you are into, you know, premiumization. So they're trying to offset the drop in volume by increased prices. Right. And they're calling it premiumization. Which we're calling BS off. Because that changes.

Are they changing the drinks or they're just raising the prices? They raise them like 4.8% on your average beer. Sounds like rip-offization. They need to come up with an newization. So what we found fascinating was how desperate and focused they are on innovation. Now remember, this company is called Mulsin course. Molson is a Canadian beer brand. Coors is an American beer brand. What they do best is macro beers. Exactly. Now, they launched something called an innovation program. And Jack and I were fascinated in this. We looked into it a little further. What is the key win for the innovation program? Some companies have sustainability goals to be like renewable energy by 2025. They have a goal to have non-alcoholic beverages in all markets by 2025. Where they operate. And they're doing this beginning with non-bears.

Yeah. They have a new drink. called Arnold Palmer spiked. Sounds ambiguous. It sounds like a John Daly, which is half ice tea, half lemonade, spiked with vodka. But when we looked into this one a little further, we couldn't figure out what it's spiked with. Well, we know it's a non-beer alcoholic drink, but they were not telling us what it spiked. What they did tell us is that it had quote-unquote rapid growth over the last quarter. Okay, so that's one innovative area. Another is tap ventures. Right, that's the VC arm for Molson Cors. They're going out and they're buying entire companies. Literally, they just bought like a California kombucha company based in San Francisco, which is called clearly kombucha.

And they recently invested in like a chai tea situation, alcohol free. Let's talk about the third leg of the innovation stool. Oh my God. Cannabis. Really focused on cannabis. It has a joint venture that is developing a whole drink lineup of cannabis infused CBD drinks, but they're waiting for Canada to clarify whether edibles are legal. Right. Technically weed is legal in Canada, but there's some like confusion about what's the deal with edibles in particular. It's policy ambiguity. So literally, the executives over at Moulson Kour said we've got a whole lineup of cannabis-infused drinks ready? Just waiting to pull the sugar. In October. So, Jack, what's the takeaway for our buddies up north over at Nolson-Cores?

Their beer market is shrinking. That's the biggest problem. Alcohol sales overall, in the U.S., they've slipped a bit. But beer sales are down the worst. In the U.S., they dropped by 1.5% last year, and I think they felled the year before. That means the size of the liquid pie, it's shrinking. and competition is vicious. Okay. Budweiser, that's the big beast in the room. Yep. It is a marketing powerhouse.

How much did it spend? It bought eight Super Bowl ads in February. That's like six economies worth. It's pretty obnoxious the amount of ads they have, and Moulson has to fight it. And then Mulsin's facing Corona, which is owned by Constellation Brands. Corona, whose beer is just about gluten-free, everybody, I have to remind you again. It is about to pass Coors as the number two biggest family of beer brands in the U.S. So if you're looking at this whole beer slipping situation,

you're Mulsin-Cores, you've got a way harder strategy than you would have in any other scenario. You're not trying to find new drinkers. You're trying to steal drinkers from the competition and defend your own drinkers from Corona. And that is harder. For our second story, Jack, you didn't have to wear a bikini for this, but I appreciate the commitment. Royal Caribbean Cruises jump 7% because it's become a pricing power superhero. Caribbean, by the way, one R, two Bs. Yeah, we learned that the hard way.

That's how you spelled everybody. Very true. And it had a record wave season. Real thing. Wave season is from January to March. Not a literal thing. It's when everyone goes down south per vacation. Yeah, inside joke among the travel agents.

Wave season. Yeah, now you're like in the crowd with travel agents. Larry, a barefoot travel agent. Very cool. Now, Jack, you have like a personal connection here with Royal Caribbean, right? I know a thing or two about Royal Caribbean. He's hit a few all you can eat buffets. I was 22.

Didn't have a hair on my face. Nope. Had a suit that was way too big and it was a fresh investment banking analyst. It was not living the slim fit lifestyle. Royal Caribbean? my first memo. So what did you do? Well, I learned that they're legally based in Liberia, which is a West African country.

That sounds typical. They have some moral flexibility on labor and tax laws there. So rural Caribbean's taking advantage of them. As opposed to if they were based in Miami, for example, where their headquarters are. That's where they're actually working. Legally, it's a little more, you know. So questionable ethics there, but they are trying to cut their greenhouse gas emissions by 35% by next year.

Very nice. There you got. Very nice. Now, the earnings report really impressed investors. Profits rose by 14% last quarter to $250 million. Ticket sales are up. On board splurging is up. Shares are up. 7%. Close to a record high. Now, there was one bit of warning here, and it was that their profit forecast for the rest of the year got downgraded. Two reasons. The first reason is really embarrassing. Yeah. So they're calling this in their earnings report the Grand Bahama Shipyard Incident. Yeah, of 09 or 19. Sounds like a Tom Clancy novel. This one's intense. Two cranes fell on one of their cruise ships during a routine

maintenance. No big deal. Turns out that cruise had to be like totally canceled, of course. The ship's out of commission for a full month. Three cruises, you know, week-long cruises are getting canceled because of a single crane. These guys got to work on the nautical risk management. My father-in-law could help them with that. It's always a communications issue. Then the second reason, we're kind of out of their control. Yeah. The stronger U.S. dollars means that foreign they actually own half of a German cruise line. You know Germans love cruises. Everyone does. But the profits from that are worth less because of the stronger U.S. dollars. And second, the higher fuel prices. Right. Oil prices are up and the ships are not

Tesla-sized yet. So it costs money. So investors forgave them for one big reason. Jack, nice lead-in. What's the takeaway for our buddies over at Royal Caribbean? Pricing power. Royal Caribbean has it. This is a corporate superpower of pricing power. It's like being able to see through wall. but instead you can just make profits. And just charge people a lot more money. It's been raising prices, but people are paying for those higher prices. That's called pricing power. It's very strong.

Royal Caribbean communicated that through its net yield. Can we talk about the net yield? Net yield is basically just a cruise line thing. Yeah, it sounds complicated. It's basically what the price is. Yeah. And their net yield rose seven and a half to nine percent this year. Now, this is a reflection that people are paying so much of a strong economy,

people wanting to travel and a house. And a solid product. I mean, people are willing to pay more to do it. Now, it's not just them, though. This news boosted all cruise company stocks. We're talking Norwegian, Carnival, and Carnival. There you go. The trifecta.

Powerful. For our third and final story, we've got our survivor of the day here. Fitbit. Yes. You're still hanging on. It's still there. They're still on the stock market. They're like that one guy in your spin class.

He's in the back where there's no fan and needs it to frivolator after the class. I want to see a motivational poster that says, don't give up. And it's just Fitbit and a cat. Now, Fitbit released its earnings yesterday. And what it showed us is that it's really focused on partnerships. Partnerships are the only way they've been hanging around. But the first thing we noticed in this thing is just how freakishly seasonal sales of Fitbits are. Christmas is a really fun time for Fitbit.

The other 11 months of the year? Not that fun. They're going for this Mother's Day promotion right now. Mom, happy birthday? Yeah. You don't need a Fitbit. No, Jennifer. You are in phenomenal shit.

You definitely don't. And it'd be weird if I got you want. So sales in the first... Yes, it would. Sales in the first quarter were less than half of the fourth quarter, which had Christmas. Right. So it looks like sales dropped from the holidays. But you got to do an apples to apples comparison.

Exactly. The first quarter of this year compared to the first quarter of last year, when you do that comparison. Rows. So there is still hope. Now, after we looked at that, we then looked at the number of fitness trackers and smart watches that they were selling. Rose by 36%.

Very nice. Sounds very good. But again, we got a little asterisk here. The average price of those Fitbits... were down 19% So they were selling more Fitbits, but they were selling them at a lower price. So there's two ways to think about it.

Either they have no pricing power like Royal Caribbean has. Or... They're just trying to be affordable. So they used to be a profitable company, our friends over at Fitbit. Now they're not. And it's basically because Apple Watch happens.

Yes. Through 2015, Fitbit was riding this new health tracker thing to the moon. Just crazy. It was sprinting with this thing. The stock was exploding. It had a phenomenal IPO. Then profits were there.

16 happened. That's when smart watch. 17 happened. That's when the Apple Watch was thriving. Then 2018 happened. That's when Apple Watch kept thriving. So all those years we just mentioned, losses kept building. And it was unprofitable this past quarter as well.

So Fitbit's turned around and said, you know what? It's looked in the mirror. It said, we've got to kind of pick ourselves up and do something here. And it's partnerships. And it's partner. They're constantly reaching for ways to stay wrong. It's like someone who just showed up on the first day of school and just wants to be friends with everyone, which is great. Now, its big bet is healthcare.

True. It thinks it can convince doctors and health insurance companies to slap a Fitbit on your wrist, and it will make you work out more and lower your health care costs. I'm walking 20,000 steps a day, so therefore I should have to pay less for health insurance. Now, health solutions grew by 70% but it's still, last quarter, yeah. Right. But it's still just 10% of the total business. So it's not there yet.

We notice it has a little bit, some more questionable partnerships. This is more of a gimmick this next one. Snapchat, which owns Bitmoji. Yeah. You can put your little Bitmoji. as the background of your clock on your smart watch. So adorable partnership, not necessarily a game changer. Not a game changer.

And then the third and final partnership we found. Activity. Oh my God, yeah. Adidas and Blue Apron. I don't really get this one. They kind of teamed up together, Fitbit. They all got together. It's like a group running thing.

If you get more Blue Apron, mailbox deliveries, you'll get more Fitbit points. Yeah, like the more points you do on Fitbit and contract, maybe the more discounts and points you can get on these other products. It's still alive. So, Jack, what's the takeaway for our buddies who are hanging in there over Fitbit? To survive with Apple Watch as the competition, it is focusing on price. Exactly.

The stock is down 90% from its high point in 2015. Investors aren't expecting much. But remember before we end? Like we said, that the price was lowered on Fitbit stuff? Prices were down 19% this past corner. Very strategic move. That could be to Fitbit's benefit. Exactly.

Look at Apple. They're key competitor. Apple would never lower price. No. I'm never going to say never. But they're very unlikely to lower prices on a price. product. Because it's such a premium product. So Fitbit can market itself as the discount smart watch and the discount health track. So that's the opportunity Fitbit seeing is maybe a lower price can help it save. And it can get the bargain hunters and the health nuts. Great combo. Who want them. Jack, can you whip up the takeaways for us? Molson Cor is innovating itself away from beer because beer is a shrinking market. They did not expect to be buying kombucha back in like 1786 when they were founded in Montreal.

Royal Caribbean is flexing its pricing power. And people are still. paying. People will pay anything to get on one of those ridiculously long slides. You know what I'm talking about? Yeah, I went on one when I was 13. They're always really long. I was actually mostly just by the ice cream bar. Third and possible, Fitbit, it has no pricing power, but lower prices might actually be the key to its survival. If you're down on life, just make a partnership, a friend or a partnership. That's for the same thing. That's for the same thing. Now, we have a wonderful snack back to the day sent into us by Daniel Mossbarter in Chicago, Illinois. Yeah. A.k.a. Deep Dish Dan.

Great nickname. Run with the game. So the delete hashtag delete Facebook campaigns, you might have heard that they failed. Yeah. There's actually a survey that shows that 15 million users ditched Facebook in America. And most of them were like under the age of 36. And that's all since 2017. Now, Facebook did add new users to make up for that.

So overall, it's either flat or like barely grown in the US. But there was a drop in delete Facebook. Now, those users are probably just going to Instagram though, which Facebook also owns. Right. That's a good key asterisk right there. A couple other big stories happened yesterday. First, Clorox announced that because the flu season wasn't that big this year, they actually sold fewer wet wipes than they expected.

Yeah, disinfectant wipes are a big part of their business. A little awkward. Bad for Clorox, good for society. And then Square, the electronic payments company, it shares are down 7% and we'll tell you why. Now, remember to send in your facts of the day to us at Robin Hood Snacks on Twitter. And give us your hometown too. We love getting that. I love talking to you today.

Can't wait 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.