The Best One Yet - SmileDirectClub goes to Walmart — Taco Bell’s owner devours hamburger chain — The taser creator could split in 2

Episode Date: January 7, 2020

SmileDirectClub abandoned its direct-to-consumer ways to launch in Walmart stores, but it’s missing one big thing: Its core product. Taser-inventor Axon acquired a rival last year, but now it’s been accused of running a taser monopoly. And Yum Brands happens to own Taco Bell, Pizza Hut, and KFC, but now it’s acquiring a burger chain — so why burgers, why now?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 is Tuesday. It's January 7th. Nick, today's is the best one yet. By far better than what we did yesterday. It's T-Boy Tuesday. Now, Snackers, markets rose yesterday, which is inexplicable. Didn't really make any sense. We're looking at this. Because the USA and Iran may have military conflict, which would not be good. War is not really a fun thing. But we still found three great stories. Wonderful. Mix Jack. First story over here. Axon invented the taser back in the 70s, but now it's being accused of being a taser monopon.

And the government is trying to break up this monopoly. Second story, Yum Brands already owns Taco Bell Pizza Hut and KFC, aka Can Taco Hut? Well-rounded lunch situation. But now, Yum Brands is acquiring Habit Burger, a California-based burger chain. Existential questions, Jack and I have, why burgers? Why now? Third and final story, Smile Direct Club is launching a new product.

The Electric toothbrush. Sounds fancy, sounds different. It's actually like every other two-press. It's been around for decades. Pretty much not that new thing. But this one is exclusively with Walmart. stores. Except this Walmart partnership is missing one critical thing for Smile Direct Club. Smile Direct Club's core product. Teeth liners. Before we jump into all that. What would you pay for a

slice of tuna sashimi? I'm not a big tuna guy, but the last time we talked about tuna, tuna sales were down. You really want to mess with Jack. Throw some spicy sauce all over them over there. So we recommended that tuna rebrand and call itself Luna. It made so much sense. The fish couldn't hear us. They didn't do it. Apparently tuna is still known as tuna. But tuna is back in the news because the first tuna auction of 2020 just happened in Japan. In Tokyo, in the fish market, this is like a huge deal. You know, instead of like, if you want to do a good date night, you go to the fish market in Tokyo. And apparently among the Japanese people, the first tuna of the year is a big deal. It's literally a huge deal. This was a 6008 pounder, which

that's huge. Sounds big. Yeah, that's like the size of a cow. Dude, I'm not like relay. I don't know many tuna, but that seems like a big tuna. So, the king of tuna, self-proclaimed, Kiyoshi Kumar, owns a chain of sushi restaurants. He bid $1.8 million for this single fish. This tuna tycoon took home a 608-pounder for $1.8 million. Jack and I did some back of the Torah roll math on this thing. And if you take a 608-pound tuna, you can turn that into a lot of sushi. That is one piece of sushi is about one ounce we're calculated. And one pound has about 16 ounces in it. And this is a 600 pound tuna, which means there are 9,728 pieces of sushi hiding in that little tuna. And for $1.8 million for the entire tuna, that's $185 per

chopstick serving worth of tuna. It doesn't sound like it makes sense to eat this tuna. But we thought it was pretty cool. That is one big tuna. Let's hear it to restart. For 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. 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. Robohood Financial, LLC, member Fenra slash SIPC. For our first story, Smile Direct Club, just partnered up with Walmart to sell a very specific product. in its stores for the first time. Electric toothbrush. It's actually not that shock. You're actually supposed to say Smile Direct Club quickly because there's no spaces between those.

Small Dirt Club, Smile Dirt Club, Small Dirt Club. Smile Dirt Club was one of the worst performing stocks that IPOed in 2019. But then it got everyone's attention because it jumped, you know, 22% to start the week on Monday. It was a great day for Smile Direct Club stock. The way they announced this is this. They said, all right, we partnered out with Walmart to, quote, unquote, disrupt the oral care aisle. Can we please retire that phrase? If you have an electric toothbrush that is plant-based and self-driving and takes us to the moon, then you're disrupting out.

Smile Direct Club, you're offering a new product, and it's not even a new product. We have electric toothbrush. We have, I think my mom had an electric toothbrush, like in college. Now, this is a validator, though, for Smile Direct Club, because Walmart is adding those products to its 4,000 U.S. stores and basically saying, we stand by this product. Now, Snackers, we know what you're thinking. Smile Direct Club is a direct-to-consumer company. Direct with an emphasis on the D. Right. They got website. They got a cute brand.

They probably have Subway ads. If you talk to you friends, you're like, hey, I want to use Smile Direct. Good luck. You're going to Google it. You're going to have to buy it from their website. Their direct to consumer. But a couple of other direct-to-consumer brands have gone indirect. Casper mattresses, the matches that like show up in your home and then they'll blow up and like turn into a real mattress. You can get those at Target.

What about quip toothbrushes? You can get them at Target. What about Harry's razor, shaving all that? Targe. You can get them at Target. These are direct-to-consumer brands that started offering their products. at physical stores. That weren't their stores.

So Smile Direct Club is at Walmart now, and they're doing it only with new, new products. So they've got this electric toothbrush, but then they decided, you know what, we're not going to stop there. They were feeling kind of Oprah-ish. They started dishing out a bunch of other teeth products. A tooth whitening system, toothpaste, floss,

more, ultrasonic UV cleaner for retainers. Don't know, it sounds scary. You don't want to be in a situation we're using that. And then the last one is dentures. Which is surprising. Yeah, it's for older people. But all of these are going to encourage smiling. Now, Jack and I thought,

This was a pretty straightforward story until we got to that part because here's what fascinated us. What was missing. The core product, teeth straightening kits. Smile Direct Club has a teeth straightening braces-like product. That's what the business is based on. You chop your teeth into a mold. You send them to a remote orthodontist. You get a bunch of plastic see-through braces that you wear and it's an alternative to conventional braces to straighten your teeth.

Smile Direct Club is like DIY braces and they're not offering that product as part of this huge partnership. So, Jack, what's the takeaway for our buddies over at Smile Direct Club? This is Smile Direct Club's top of funnel strategy. Top of funnel. This is an interesting strategy where you guide people to your core product by using an easier-to-use product first. A product that is less commitment first. Let's take T-Straining, the core product of Smile Direct Club. It costs $1,900 at least, and it takes at least six months to straighten those teeth.

You want a straight-in-truth? You need like a side hustle and a separate job to get this thing done. On the other hand, just a toothbrush from Smile Direct Club. That's $25. You can use it. You can throw it away. No big deal. So Smile Direct Club's like, hey, you can build the daily habit with our cheaper electric toothbrush that you buy at Walmart.

And you'll get our email every day. You're going to end up getting our email every day. And you might see the Smile Direct Club brand at Walmart every time you visit. Eventually, after you've like just got this teeny little product, maybe when one day you want to straighten your teeth, you'll end up using Smile Direct Club. That is the hope. So a Smile Direct Club ad to get your teeth straightened is like asking to meet your parents on the first date. Big commitment. But like a cheap Smile Direct Club toothbrush you just pulled off the shelf at Walmart, that's like asking someone out for a cup of coffee.

It's just a cup of coffee. I just want to talk. That's it. This is Jack. I own an option of Smile Direct Club stock. For our second story, Axon Enterprises is getting in trouble for acting like a taser monopoly. Now, Axon's slogan is Protect Life. Volt.

I know. But it does that by hooking up police officers with gear to reduce unnecessary deaths. The real thing they should be doing is dropping the. The word, it's Enterprises from the name. Enterprises sounds evil. Sounds like a bad comic book company name. Sounds like a company with too much power. Spider-Man is never on the side of like Enterprises.

Of the Enterprise. Blank Enterprises. Now, Axon invented the taser. It sells body cameras to police officers. And it has software so you can easily upload footage of like the police pullover. You like, you like work for them over there? That was incredible. How did you nail that description?

Jack's got a booth at like the consulate. Like the Consumer Electronics show. There you go. Pitching this stuff. I actually used to be a share home. That's true. That's fair. It's a fair point to me.

Now, the company itself is based in Scottsdale, Arizona. Which we like to call the most innovative city in America. Now, you know who loves that claim? Scott Ferreira. Big time snacker. A big fan of snacks. That's because they do a lot of self-driving car testing over there. They also have companies like this located there.

It's a fascinating place. But let's get back to Axon. In 2018, Axon acquired another company that makes body cameras called VVU. for $7 million. Full disclosure, we did not know how to pronounce that. Yeah, we think it's Vibu. It could have been incorrect. That means that there's now one less company making body cameras in the world. So then December 23rd came up. Two days before Christmas, Axon gets a call from the FTC, which says that they have a problem with the acquisition, even though it happened almost two years ago. You can almost picture the Axon team picking up

the phone, thinking they're going to get a nice holiday message, instead being told their company may be split up in the future. The FTC is claiming that Axon has been raising prices on body cameras substantially. Keyword. Abusing its big size in the market. Bold move. And abusing police departments with higher prices for body cameras. And then the FTC also delivered a very specific demand for AXon.

Axon was spin-off part of itself into a separate company that will compete against AXon. And then not just that. They sold AXon. They then have to give their very special IP, their intellectual property. Their cherished business secrets. The secret sauce that's protected legally. To that new company. They're basically saying, hey, you've to split yourself off from your best friend and then give them your arm.

Okay. So imagine the Von Trapp family, the singing troupe back in Austria. They are so good at singing that the Austrian authorities are like, you got to take Maria, start her own singing troupe and give a couple of the kids to her because, like, there needs to be some competition. We can't have one family with this much vocal power in Austria. So action, understandably, is unhappy. They're suing the Federal Trade Commission, claiming this is government overreach, and they want their fair day in court. So, Jack, what's the takeaway for our buddies over at Axin? This could be the first of many government-required breakups of companies.

Snackers, for decades, it's been open season as the Justice Department and the FTC have allowed mega-mergers to happen in a lot of industries. The Bush administration, the Obama administration, they allowed companies to merge. Look at tech. Facebook was allowed to acquire Instagram, which was the only real commercial. competitor Facebook could have been. Look at airlines. Four major airlines now handle 75% of the travel market. Even in TV and movies, Disney has acquired Marvel, Star Wars, Pixar, and Fox recently. And with less competition, regardless of the industry, companies can charge more to you or us, or in this case with Axon, police departments. Now, Democrats want breakups of Facebook, Amazon, Google, and more.

And this is what that could look like. For our third and final story, Jack, one sec, get a little schmutz on your face over. Let me just fix this. Yum Brand is acquiring California's Habit Burger Grill for $375 million, which begs the big question. Why burgers? We know we're not the only people asking. But Nick, was that a ketchup joke with the Schmutz thing? Was it a joke?

I'm pretty much on the ketchup right on you right over there. I had a vegan ball. I'm actually practicing VGAuary. Yeah. Which I hope doesn't turn into VGABi. And then V quarter one. Vigarch. And this is Yom Brand's first acquisition of a fact.

casual chain, habits shares are up 33%. Not too shabby. So we know what you're thinking, who is YUMBrands exactly? What is YUM? Jack and I have spoken about Yumb Brandsie for it, but there is like a lot more depth

to this company. The first thing you notice about Yumb brands is the exclamation point. They're like the only one of two companies we could think of. With an exclamation point in the name. Yum Brands. Actually, the exclamation.

You just startled, I think I'm scared. The exclamation comes after Yum, not brands. Right now, the only other company? Yahoo. Which, RIP. So this actually all goes back to Pepsi, like all good things in life. Pepsi acquired Pizza Hut in 1997. It acquired Taco Bell in 1978.

We're still hungry. And it acquired KFC in 1986. Interesting snack fact here. That last one was bought from a tobacco company called R.J. Reynolds. That's right. RJ Reynolds Tobacco Company based in Winston-Salem, North Carolina, owned Kentucky fried chicken until 1986. So then Pepsi came along and said, we got all these, you know, fast food brands. going to bundle them up, spin them off, and call it Yum and stick an explanation point out of So the core restaurants of Yum brands are KFC Pizza Hut and Taco Bell, which is why we call them in Southern Vermont can Taco Hut. In case you're wondering how many few thousand there are,

there are 49,000 restaurants owned by the Yum brand worldwide. There were so many in the past that Yum Spun off its Chinese business into Yum China and there's a whole bunch of other thousand ones there. We can't even handle this KFC China. We've got to make it its own business Let's pivot over to Habit. Habit Burger Grill is like if Shake Shack and In-N-Out Burger had a baby. We're not totally sold on the name here. Habits tend to imply not good things. Most habits are bad habits. You're biting your nails, you're picking your scalp, I don't know. If it's a good habit, you're just calling it like a hobby or a virtue. You think they would be the burger ritual company.

So Habit has been making premium California burgers since 1969. And it's not just burgers. What they're providing here is a fast casual option. They're also whipping up like a Santa Barbara Cobb salad if you're not in the mood for the beef. Its headquarters are right outside of Santa Barbara, which explains why it also offers fried green beans instead of just French fries. We would bathe in these things. They looked adorably delicious. We checked out hashtag Habit burgers on Instagram. We got very hungry.

It's much smaller than any of the Young Brands restaurants. There are only 265 Habit burger joints around, and most them are in California. But Habit thinks it can multiply that 265 restaurants by 10 under Yonbrans. Yum's leadership. That's the power of this acquisition. So, Jack, what's the takeaway for our buddies over at Yum? Why burgers? Why now? It's because fast food needs a little fast casual. When you hear fast casual, you think of like harvest bowls with local beats and like a cumin roasted carrot. But burgers are also fast casual at many chains, and Yum CEO calls burgers the sweet spot within fast casual. Premium burgers are a good transition cuisine,

for fast food that's thinking fast casual. And Young Brands is dabbling with fast casual. It's a little bit. And they're thinking burgers because from 2005 to 2017, the number of burger restaurants in the United States quadrupled. And the average price for the burgers they were serving rose, so people are willing to pay for fancier burgers. You've got five guys.

You got ShakeShack. You got Bear Burger. More and more chains are expanding across the country with high-priced burgers. Right. This isn't like your standard American cheese situation. They've got like a greer flown in, hand-done by some guy in. in Switzerland. It's some fancy-pants stuff. Now, Yum wants a piece of the fast casual trend without going too far outside its company. Habit is just fast casual enough without getting

too fast casual. Jack, can you whip up the takeaways for us over there? Smile Direct Club is going after Walmart's customers, but not with its core product. It's going indirect through Walmart with a top of funnel strategy. Federal regulators are demanding that Axon create a clone company of itself to compete against itself. And depending on the 2020 election, we could be seeing more of these breakups. This could be like a blueprint situation. Yum Brands is acquiring Habit to expand its repertoire into expensive burgers.

Habit burgers fast casual, but not too fast casual for Young Brands. The sweet spot. AKA Kantako Hut. Now Snackers, time for our snack fact of the day. This one's sent it by John McNamara in East Lansing, Michigan. Home of the Spartans.

Snackers, you may be wearing clothing right now. Hopefully you are. odds are 6% of you are not but for the 94% rest of you who are wearing clothes we have a crazy stat it takes an average of 6 miles of thread and 32 people to make the average t-shirt

this t-shirt you're wearing it is not just a random piece of thing that came to from a machine no it is the product of a lot of resources of this earth and a lot of human labor the next time you're wearing a shirt especially if you're not wearing clothes right now and you should put on a shirt right now think about it a lot of resources a lot of people a lot of effort in that island

I'm not sure if we should buy fewer shirts because it's so many resources or we'll buy more shirts because we're employing so many people. But appreciate that shirt. We just hope people aren't undoing their shirts right now to count the thread because just trust us on this at six miles. Snackers, thank you for snacking on this T-boy Tuesday. If you haven't given us a review yet on Apple, please do so. It helps us get discussed. Drop down, drop five stars. We'll catch you guys 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.