The Best One Yet - “Skip medical school. Spend $1B instead” — Walgreens launches 700 doctor’s offices. Rocket Mortgage’s IPO. Kroger’s surprise meat strategy.

Episode Date: July 10, 2020

The lending artist formerly known as Quicken Loans has filed to IPO, calling themselves “Rocket Companies”. Walgreens is quitting medical school and pursuing a $1B investment in 700 doctor’s offices instead. And Kroger’s figured out a surprise strategy to boost sales of its own plant-based meat brand: Stick it next to real meat.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 Friday, July 10. I just taught River the profit puppy how to sit and stay. Beautiful. Good finishing move before heading into the weekend. Jack, first story. What do we got for this T-B-O-Y? This is the best one yet. Walgreens is skipping seven years of medical school going to spend a billion dollars instead. So much easier the way you put it, Jack. The company announced surprisingly bad earnings, but a surprisingly interesting move. Walgreens is adding 700. doctor's offices to their pharmacies. That's seven million minutes of waiting times. We did the calculation for you. Second story, Jack. Kroger just revealed a juicy secret about plant-based meat sales. Turns out if you stick pea protein-based burger patties in the meat aisle, you end up selling a lot more of them. If your sales are struggling, just trick consumers to thinking it's something else. The old slippery peat move. Is that the slippery peat move, Jack? Third and final story, the unicorn of the day is Rocket Mortgage, Detroit's combination of Wall Street and Silicon Valley. They're the lending artist formerly known as Quick and Loans.

And it's the number one app for getting a mortgage, so the company is IPOing. Ipsophato A to B, that's how it works. But before we hit those stories, Snackers, a lot of companies are doing less in order to survive in the coronavirus. It's cut in back, come back on people and supplies a whole bunch of things. But the carb-obsessed buddies over at the Olive Garden are doing more. They did not get the memo. The Olive Garden just announced an Alfredo campaign that is increasing the amount of salt. in pasta. Now this only applies to Alfredo socks. It does not apply to like Marsala or Red Sox. The former

Olive Garden waiter himself forgetting the Pomodoro, Jack, what is going on here? As a former Olive Garden waiter, I can tell you that the portions are very like specifically dictated by corporate. That's true. This thing is three parts science. Jack, how does it go down again? Every table at the Olive Garden gets a big salad bowl for everyone to share. Classic. And the way you decide how many olives go in the bowl, you count the number of people at the table. And you count the number of people at the table. And then you add one. So one person, two olives. Three people, four olives.

By the way, trick here, snackers. Olives are bread. No, they're not. Now, Alfredo dishes are specifically going to get 30% more Alfredo sauce at the Olive Garden at the Olive Garden starting right now. Jack, do you want to share the big question you asked me earlier? Is this optional the 30% more sauce or is it mandatory? The accountants over at the Olive Garden have dug deep into their stimulus money

to make it a permanent upgrade to Fetuccini Alfredo, chicken Alfredo, seafood Alfredo, shrimp Alfredo, and steak Alfredo, which shouldn't even be a thing. Permanent downgrade, however, to your cardiovascular health. Let's hit our three stories. You're tuned in to snacks daily. We spoke to the lawyers and we got to get something legal out the way. It snacks about to hear 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. 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 Fenbara slash SIPC. For our first story, Walgreens is going off to med school, opening up 700 doctors' offices nationwide in Walgreens. Mr. Martel, good to see you again. Now the test results are in. Thank you. I have good news and I have bad news. Ah, okay.

Let's start with the bad news. Okay, the bad news. Walgreens lost $1.7 billion last quarter. Is that what that was? I had no idea. Yeah. Okay. Yeah, it was bad. And the year before in the same quarter, you made a billion dollar profit. So things got a lot worse. I was thinking I should get this checked out. I'm glad I came in today. Snackers, Walgreens had fewer shoppers last quarter and a lot higher sales of items that have low profit margins. They're selling like Kleenex these days. No one wants to sell Kleenex. You don't make money on Kleenex. They make money on Adderall. Kleenex takes up a lot of space, but generates very little profit. Adderall, very small pills. whole lot of money. So continuation of this bad news, Nick, we're cutting 4,000 jobs at Walgreens in the United Kingdom. We're suspending share buybacks, which are nice for shareholders, which is why the stock fell 8% yesterday. Jack, I appreciate you going back and forth between first person and really owning this doctor analogy. Nick, are you ready for your Walgreens good news?

Yes, please, lay it on me. What do we got going on? Walgreens is investing a billion dollars to become a chain of doctors offices. That's right. Right, Snackers, get this. They've just taken a 30% equity stake in startup Village MD, who's going to be building out 500 to 700 clinics over five years. Now, they tested this out at five Houston, Texas Walgreens locations already. So we have an idea what these Village MD things are going to look like. And they're going to be inside the Walgreens. So to make this really work, it kind of feels like the 4,000 square foot space is just like every other modern doctor's office. We jumped in Snack style right beyond Isle 12.

in your Walgreens, make a left. You're going to see a 4,000 square foot, basically doctor's office. It's got generic turquoise wallpaper, calming images of flowers to soothe your nerves. The kind you go up to and you're staring at it before the doctor walks in, because you're like, is that a painting or is that a photo? Yeah, and because the magazines are like seven years old. Oh, yeah. And then you got the little swively, wheelie chair that the doctor can like cruise from his notepad over to the examination. They got to be able to turn 90 degrees. If she can't turn 90 degrees, the visit doesn't count. We assume there's a pantry with lots of white coats, too. Now, like we said, they are going to be retrofitting actual Walgreens nationwide with this

and adding additions to the Walgreens to make this doctor's office thing happen. 700 Walgreens? Doctors Office is too. So, Jack, what's the takeaway for our buddies over at Walgreens? Just like tech creates product ecosystems, retailers are starting to do that with healthcare. Snackers, Google had you on search, then it got you on Gmail, and now you're paying for cloud so you can keep your photos. Apple had you on iPhone.

Now they've got you with AirPods, and they've also got you pay. in every month for Apple Music. That same ecosystem focus is what's happening right now in retail with neighborhood health destinations. It's not just Walgreens. CVS has announced that 1,500 of their locations will become health hubs, and to do that, they acquired a health insurance company. Big move. They're not going to have physicians at these stores, but that was a bold move. And then look at Walmart, the biggest retailer in the world. They're also offering $25 dental x-rays and $40 office visits at 4,700 locations. They're keeping it a flat fee.

But Jack, what's going to be the Walgreens differentiator out of all these? MDs. Yeah. Medical doctors, real doctors, and a 24-7 telehealth option if you don't want to come in. So that means you stroll up to a Walgreens. Now you can pick up your med, stock up on Celts, buy some shampoo, and then, because you know you got to do this, get that thing on your thigh checked out. Finally get that thing checked out. You really should get that checked out.

One stop shopping can now include your annual physical. It's all part of the ecosystem. For our second story, Kroger's report about plant-based meat sales confirms the most important thing about retail sales, maybe ever. Location, location, location, location. And we're talking like a microlocation here, Snackers, in the store. But before we jump into that, we got to talk about the legendary names being tossed around these days in the plant-based meat industry. Impossible foods beyond meat. Incognito. How about a serving of before the butcher, raised and rooted? Simple truth. So then Nestle comes in and calls its product, Incredible Burger, sounds a lot like Impossible Burger. A little awkward. So Impossible sues Nestle and then they change their name to sensational burger. Snack is the dirty secret of this industry. All the R&D money

is going into buying a Thesaurus. Yes. Thesaurus.com Impossible Burger. It turned out incredible burger. We're not hiring this head of marketing unless he can give us 12 synonyms on the spot. So Kroger, the biggest grocery store besides Walmart, which like technically is a grocery store too. They saw their plant-based meat sales jump 75% in the Corona economy quarter. Now, Snackers, we heard that. We were like interested. We thought we were curious.

But what shocked us and fascinated us was this critical insight in that same report. 23% of that sales growth came just because of the local. of where the plant-based meats were placed within the grocery store. And that location was, wait for it, the meat aisle, not the vegan aisle. Very impressed by Kroger grocery stores, by the way, because they set up quite a like experiment and they told us about all the results. Yeah, they pulled out their like eighth-grade lab coats and they decided to do like control stores and then experiment stores to see where plant-based meat would sell better depending on which

aisle it was in. Okay, so one of the markets that they tested this in was. was Denver, where there's already lots of people who have tried out plant-based meat. Like a third of your college class is like ski bombing out there right now anyway. So the impact of moving plant-based meat to the meat aisle wasn't that big. It only boosted sales by 12%. However, in the Midwest, where meat is 140% of your daily diet, there are more meat eaters who had never tried plant-based meat, which means more opportunity. So these Michiganders are looking at the ground beef, the ground pork, and then they're like, wait, what is that? And that curiosity,

boosted sales of plant-based meats by 32% when placed in the meat aisle in the Midwest Kroger stores. Now, Snackers, in media, content is king. We've said it on snacks before. You have to have great content if you're going to get people to read, watch, or listen to your content. But in retail, Jack and I like to say that placement is the prince and the shelf is the chef. Packaging and quality and ingredients don't matter if your product is unstrategically placed within the grocery store, especially for a new concept like plant-based meats, because they have to reach the mainstream, placement is more critical to get there.

Because remember, plant-based meat is not targeting just vegetarians and vegans. No, no, no, no. They're targeting flexitarians and reducitarians. Yeah, they want the consumer who's not going cold turkey and turkey, but just eat a little less turkey. Nick and I, full disclosure here, are reducetarians. We're not going cold turkey. No, love a steak.

Just want to reduce the amount of meat that we eat. So being placed near meat where the target customers actually are shot, is critical for a product like plant-based meats. Sales of plant-based meat are higher in the meat section than they are in like the frozen food or like the special product section where they'd typically be. So Jack, what's the takeaway for our buddies over at Kroger? Kroger is the referee of the shelves in a grocery store, but they also had their own players playing in that game. So true. Snackers, the first thing Jack and I thought of when we heard this story was the big tech to bait going on right now, Apple and the app store. Apple controls the app store. That is a

huge power because they can control who shows up where when you search for an app. That means Apple may rank Spotify lower and rank Apple Music higher. And it's actually being sued in the European Union for being an impartial referee and boosting up the rankings of Apple apps. But here's the wild thing. The same concept has always been true in brick and mortar retail. Croger controls the meat section of Kroger grocery stores because it's Kroger. So it controls what brand is placed in that location, Ed Isle. And guess what, Snackers? Kroger has their own plant-based meat brand. It's called Simple Truth. They can stick that simple truth right in the best shelf real estate. I level. So nice, baby. Apple is in trouble for being the referee and having players in the app store at the

same time. But physical retail does the same thing. Doesn't get in trouble. For our third and final story, we've got our unicorn of the day. Rocket Mortgage is prepping to IPO. Just found out. Just got the paperwork. And Rocket Mortgage is proving that nearly anything can happen on an app. So let's hop on 94, head over to Detroit Motown Motor City, eight-mile Detroit Rock City and Jack, our favorite. What's the nickname? The Arsenal of Democracy because during WW2, they retrofitted the car plants to become bomber plants for the war effort. Snackers, we're talking the fourth biggest city in the United States in the mid-20th century that then suffered a massive decline. Yes. At its lowest point in 2010, Dan Gilbert chose

downtown Detroit as the headquarters for his company, which was called Quick and Loans. And this entrepreneur, Mr. Dan Gilbert, kickstarted an economic revitalization of the Motor City. Dan Gilbert is now the Cleveland Cavaliers owner and the biggest billionaire landlord in the city of Detroit. And that's because his company just filed to IPO. It's about mortgages and an app, Jack, the name. Rocket Mortgage is the name of that app, and it is such a popular app. It's taken over the name of the company. Yeah, this used to be known. quick and loans, but that sounded too much like an oatmeal, so instead they're just changing the whole company name to Rocket Mortgage, starting with now. Yeah, like, slowly, but surely, you're just

going to see Quicken Loans disappear and Rocket companies replace it. Also, borderline creativity on the ticker symbol. They went with RKT for Rocket. Could have gone with the Rocket emoji. We think that should be a thing. They could have been the first company ever whose ticker symbol is an emoji. There's a perfect Rocket emoji. New York Stock Exchange, NASDAQ, let's make this happen. Oh, by the way, Dan Gilbert, the chairman of Rocket companies. He's pulling a major zuck here. Classic zuck. Not a zucking, but a zuck.

He's hanging on to super shares so that he'll have the final say on all corporate decisions post-IPO. Now, Rocket Mortgage's goal is to make it way easier to get a mortgage to finance a home. And they're starting with calculators.

Yeah, they're not whipping out like the TI83 plus and doing a Y equals MX plus B situation. Way easier. No, no, no, no. They're taking out a mortgage payment calculator and affordability calculator and a refinancing calculator.

So you type in your metrics, and it tells you what you're working with. And then after that, they connect you to your home's price range, let you apply for the mortgage, you get approved, you begin payments, and Jack, where does all this magically happen? All in one app. Not 12 human beings, one app. Now, Rocket Mortgage lent out $145 billion worth of mortgage financing last year,

which, according to the average selling price of a house in America, is 465,000 homes they financed. So this is what we thought was Wild Snackers. It's now the biggest mortgage lender in the United States beating out Wells Fargo in 2018. 9.2% of all mortgages in the United States are rocket mortgages. And what makes this particularly relevant today is that just like Lemonade, the insurance tech startup we told you about last week, the key here is first timers. 75% of rocket mortgages, homebuyers were first-time homebuyers.

So, Jack, how do you get all these renters to become first-time homebuyers? You put up huge signs at sporting events. So it's extremely unstrategic. They've splurged $5 billion over at Rocket Mortgage on pure marketing. They also have their own PGA golf tournament. I think it's in the city of Detroit. Rocket NCAA this, Rocket Golf, that, Rocket Invitational, that. Now, the big risk is the same risk that like almost crushed our economy in 2008.

The mortgage market. Yeah, the R word, recession, drying up of home sales, home foreclosures, that would hurt Rocket. So, Jack, what's the takeaway for our buddies over at Rocket Mortgage? Software is not taking over the world. Apps are taken over the world. Snackers, another key risk that Jack and I noticed in the S-1 IPO paperwork, we face intense competition that could adversely affect us. It's not just like the Wells Fargoes of the world that competes against.

There's also loads and loads of local lenders, like probably in your hometown, as well as government loan programs to help out people like afford their first home. Historically, to get any of these kind of loans, though, it means going to the guy or gal your local bank in town and like physically chatting. Now Rocket, they use an app instead, which massively lowers the cost for Rocket mortgage to actually execute a loan. It's letting them process literally three times more mortgages a month than the average lender. That's how much power there is in just the app.

That app-powered scalability led to almost a billion dollars of profits in 2019 on $5 billion of revenue. Jack and I have literally not used the word profit when describing a tech company IPOing in ever. SoftBank just looked up what the word profit means. Jack Kenyo, whip up the takeaways for us before the weekend. Walgreens is plopping down doctors into 700 of its locations. One-stop shopping is increasingly including medical errands. Second story, Kroger just revealed that moving a product's location in a grocery store

can boost sales by 23%. Next move, put their plant-based products here, leave their competitors' plant-based products there. Third and final story, rocket companies is getting ready to IPO. They're bringing the mortgage industry into a single hour. form. Now, time for our snack fact of the day. This one tweeted in, which you can do two Snackers at Robin Hood Snacks, by Larry Stroud in lovely Fort Lauderdale, Florida. Jack, what do we got? Nick, I'm going to frame the snack fact in the form of a trivia question. What is Snack Factor the Day? And Frank, Martin Luther King, Jr. Yes. And Barbara Walters. Okay, trio. What do they all have in common? Turns out Snackers,

it's the birth year. They were all born in 1929, which is wild. Jack and I are blown away. by this, all incredible people, but we think of them as like from different chapters of history. But they actually would all be the same age if they were all still alive today. Total crazy one right there. Now before we go Snackers, we also want to wish a happy birthday to Dan Rollins in the East Village of New York, Jackson and I former hangout great spot. Michelle from Flagstaff, Arizona, we give Scottsdale so many shoutouts, but Flagstaff is pretty cool too. And then Brandon Wright's in Jacksonville, Florida. Also a nice place. Finally, Jocelyn Kim from San Francisco. She's an Appler and loves when we mention Apple. This is Jack. Nick owns stock of Apple.

Glad we could cover Apple today. Snackers, remember this weekend, you'll wear a mask, you'll wash your hands, and you ask your buddies one question. H-Y-H-YS-D. Have you had your snacks daily? Have a great weekend? See you Monday. If you know, you know. This is Nick and I own shares of Apple, Jack owns shares of Spotify, and we both own shares at Beyond Meat. 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, 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.