The Best One Yet - ☕ “The $7B Peloton of Lattes” — Nestle’s barista moment. Kentucky Derby’s stock. Southwest’s DNA.

Episode Date: April 23, 2021

Nestle just pulled off its best quarter in a decade because 1 coffee habit is worth 3 Hot Pockets customers. Churchill Downs is focused on the May 1st Kentucky Derby, but the horse company has become a gaming company. And Southwest Airlines just pulled off something no other airline has (all because of its DNA).$LUV $NSRGY $CHDNGot a SnackFact? Tweet it @RobinhoodSnacks @JackKramer @NickOfNewYorkWant a shoutout on the pod? Fill out this form:https://forms.gle/KhUAo31xmkSdeynD9Got a SnackFact for the pod? We got a form for that too:https://docs.google.com/forms/d/e/1FAIpQLSe64VKtvMNDPGSncHDRF07W34cPMDO3N8Y4DpmNP_kweC58tw/viewformLearn 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, the Real Friday. April 23rd. Bada Bing. Yeah. Bada boom.

Snackers, the Dow came down 1% yesterday. On news of potentially higher investment taxes on the rich. Sprinkle a little context here. The Dow, it's also down 1% from its record trophy winning all-time high. We're all going to be fine. We are. And this is the best one. T-B-O-Y.

Jack, what we got for our first story? Nestle is the biggest food company in the world. It just had its best quarter in a decade, profits-wise. Because three years ago, it spent half a half a year. lift for the rights to a logo. For our second story, Southwest Airlines just pulled off something no other airline has in like a year. Nobody.

A profit. Profits. And it all comes down to three strands of their DNA. For our third and final story, Churchill Downs. Legend. You probably know it from the horse racing venue where the Kentucky Derby is held. That's where it comes from. The week before the big race, we're jumping into the Searsucker stock.

Pure Place Sears Searsucker? The first and only, I don't think Vineyard Vines is a stock. So the first and only Searsucker stock. It's a derivative of the Vineyard Vines. But before we hit that wonderful mix of stories today, Jack, there's a wild new trend snackers that Jack and I are noticing one year into COVID. We should all get on board. It's called the Treat Yourself trend. The treat yourself economy. Look, after 12 hours of resting Zoom face, you deserve a gift from you. Nick and I jumped in snack style to some flower delivery data that exists on the web. And it was enlightening. Just a casual Thursday for Jackney. It shows us this data that personal peonies are having a moment. Get this. Send bouquet orders of flowers. Real thing. Quadrupled in the past couple months.

We're talking the billing address. It's the same as the shipping address. Copy-Pace situation going on. And flowers with the tag just because those are the biggest sellers. They're up 150% from last year. You order some begonias just because you're baguia tired of work from home. Pro tip snackers, if you're going to get yourself flowers, fill out a card for yourself. It makes it feel like a more legitimate gift. Dear Nick, sincerely Nick. Dear Jack, love Jack Snackers, it's Friday Celebrate the Wins with a Water Lily

Oh, and we want to see your wins. Can we see your wins, Jack? If you're celebrating a win today, send us a pick at Robin and Snacks. It's Friday, celebrate the wins. We'll hit our three stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something illegal out the way. It's 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. We're not recommending any securities. It's not a research. report or investment advice. Not an offer or sale about security. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC. For our first story, Nestle just had its best quarter in a decade. Let that sink in. The $7 billion investment in strategic coffee is paying dividends three years later.

Okay, we're talking Nestle. We're talking the biggest food company on Earth. Based in Switzerland, the stock was only up 2% this year, which which is nothing in Switzerland. Nothing. But it jumped 3% Thursday on this incredible quarterly earnings. We're talking about the artist behind such hits as Gerber baby food. Hot Pocket, which is the nickname I gave my baby, as I said earlier in the week. Purina, which is the hot pockets of dog food.

Even vital proteins. Yes. A high brand collagen is thriving. Nothing gets Jennifer Aniston more excited than a collagen water. She's the spokesperson, but I might as well be because I mix it in my coffee every morning. Do you put it on your face or is it just in the drinks? I ingest it. And it results in flexible epidermis, Nick.

You're not going to complain if a little bit spills. But the biggest growth driver for this company, it wasn't any of those things we just mentioned. It was coffee. Coffee growth was 17% from the same quarter last year. That's a lot. And it wasn't just any coffee. It was a very particular type of coffee, not drive-thru, not barista. Buy at the grocery store?

Yeah, brew at home. But Snackers, this all goes back to 2018. When Nestle did something wild, they made a huge bet on take-home coffee with a $7 billion. Starbucks deal. Nestle paid half the value of lift to Starbucks. And get this, as part of the deal, 500 Starbucks employees had to go start working at Nestle. This is wild. Leave the Starbucks. You're now part of Nestle now. Here's how the deal went down. Nestle got to make single cup coffee packs and like those one pound bags of ground or whole bean bags that you can get at the grocery store. And Nestle now has the privilege to slap a Starbucks brand on all that coffee they're pumping out for

home consumption. And those 500 Starbucksers, they're at Nestle for quality control to make sure that the coffee is good so the reputation of Starbucks stays strong. Funny thing about that absurdly large 2018 deal? Today, working from home means you're brewing from home. You may

have used to have a barista robot at your office making your coffee. Fantastic. But now you have to become a latte artist yourself in your kitchen. And if you are, it means you're like going home, you're putting your French press on a podium is what you're doing. I'm blending my coffee with the collagen, as mentioned earlier. It's a skin cream. I know what you're thinking, Nick. It's not going to

melt the blender. Don't worry. The plastic is Brazilian. It wasn't what I was thinking, but I'm so glad you clarified that. Now, people snatched up a whole bunch of those one pound Starbucks bags of branded coffee, but Nestle took home the profits every single time. But here's the real story, sales growth over at Nestle's single serve pods for coffee, that doubled analyst's expectations. And those single serve pods, they only work in Nestle's Virtue coffee machine, like a curing coffee machine. Yes, it is. But like the Peloton version.

Honestly, Jack, it looks more like an art installation. So, Jack, what's the takeaway for our buddies over at Nestle? One habit can be worth three customers. Sure, snackers look. You could snag one in Nestle's DeJourna pizzas or a crunch bar. You're going to do it every now and then. But those are treats. Those are not routines.

But your Monday through Friday, collagen-infused blended coffee, that isn't just a product. It's a behavior. Now, I don't drink coffee and more of the coffee ice cream type. But here's how apparently this goes down. First, you drop $200 on the Nespresso virtual coffee machine situation. Then you buy a month's worth of inventory of pods so you can use the machine to brew coffee. But then third, you start buying more of those pods on a monthly basis because they become a habit. And then forever for the rest of your life, you're so guilty you spent $200 on that machine that you only drink coffee on that machine you spent so much money on, which means even more pod sales in the future.

It's a wonderful hamster wheel effect. So if Nestle can own that one habit, you're actually worth three times as much to them as a customer. Or maybe five or six or infinity times. And that one habit just delivered Nestle its best quarter in a decade. Four second story, Southwest Airlines just did something that no other major airline has been able to pull off in a while, Jack. Profits. Profits, ever heard of them? Because leisure travel is back and not all airlines are created equal.

Okay, airlines, I mean, I feel bad saying this. Airlines are getting hammered right now. Somehow, though, Southwest Airlines isn't. Delta American United, each just announced losses over a billion dollars in just the first quarter. And then Thursday, Southwest Airlines reported a $116 million profit. Interesting. From the January to March first quarter period, which sent the stock up. Jack, can you share the asterisk here? There's a little bit of an adjusted situation. It's quite a caveat. The profit is completely thanks to the government bailout check of $1.2 billion that Southwest got. Yeah, it is. Sent by your... yours truly you and me and taxpayers. And its rivals got the same bailouts, though, but they couldn't

make a profit with that money. So we're looking at Southwest. We're trying to figure out how they're profiting while the rest of the industry isn't. How'd you do it? And we realize we're doing what every business school is doing, which is using Southwest as a case study. Dirty little secret here, Snackers. In business school, the professors like want to talk about innovation, this, innovation, that's sexy companies. They're all doing the same thing. They're all covering Southwest Airlines. It's like the number one case study we saw in those two years. Now, we see three dozens, particular to Airlines that we want to talk about with you now. Three dozens. The first doesn't is that unlike all the other airlines out there,

Southwest doesn't use a hub model. If you're wondering what a hub model is, if you've been stuck at the Atlanta airport overnight, you know what the hub model is for Delta. Oh, I'm sorry. It's going to take three hours to get from gate A to gate F. Oh, you want to go from Florida to Georgia? We're going to send you to Houston, Texas, because that's where United's Hub is. You actually take a flight within the Atlanta airport for Delta. Instead, Southwest just flies planes.

between smaller secondary airports from where people live to where they want to go on vacation. Cheaper for Southwest, and it's like where you actually live and where you actually vacation. All right. The second doesn't, Southwest doesn't do much international flights. Pretty much just the Caribbean and Mexico. Domestic travel, that is strong right now. International, not so much. A lot of more uncertainty with like the COVID vaccination abroad. People are comfortable flying to Naples, Florida. Yes, they are. Not Naples, Italy.

Wild stat, Jack and I noticed from the CEO of Southwest, he sees 96% of, normal ticket demand, hitting Southwest flights by June. Wow. So June, things are pretty much normal, domestic travel-wise. Then the third doesn't here, Southwest doesn't rely on business class. Southwest keeps cost down by not offering poached lobster for just the front 10 rows of the airplane. Oh, yeah. Are you going to need a spork? I'm sorry, a spoon for that, sir? A spoon. Yeah. Now, they do have some business class on Southwest flights, but if you're wearing a suit, warning, you're going to be surrounded by people wearing Mickey Mouse hats. I don't think they let you on the planes for Southwest if you're wearing a suit, Jack. So what's the takeaway for our buddies over at

Southwest? Not all airlines are created equal, so you've got to find the winners. Snackers, April 7th, Jack and I covered right here in this pod, a shocking confession we noticed from a travel industry executive. The booking.com CEO said business travel will never fully come back from the pandemic. Get this. This is insane. Business flyers are 12% of passengers on flights, but they make up 75% of the airline profits. In a logical investing conclusion, airlines that rely more on business travel will suffer more than those that don't. And guess what? We can see that in the stock prices for all the airline stocks. Southwest stock is up 7% since a month ago because the vaccine rollout is going well and leisure travel is returned.

Oh, Jack, you fly into like the middle of Utah and I interest you in Frontier or Sun Country, two more domestic leisure airlines? Both IPO this year and their stocks are up 9% and 23% because they don't rely on business. Funny thing, though, Delta, United and American Airlines, which like rely on the Heathrow to JFK triple business class whammy, they're down 4%, 10% and 13% in the last month. All airlines aren't created equal. No. Some need business class, some don't. And if you understand the differences, you can react to the new information and find the winners. For our third and final story, Churchill Downs has its most important weekend of the year coming up.

You've got to tie the wins or nots. It's the Kentucky Derby. It's sometimes on my mom's birthday May 2nd. It's a lovely birthday. But Churchill Downs also just announced earnings, and it reflects that things have changed in the gambling industry. Changed a lot, but we got to go back to 1875 back when this company was the Louisville Jockey Club.

That's when a 26-year-old entrepreneur named Meriwether Lewis Clark traveled to France to figure out what horse racing was all about. It's actually, that's the only name that could have founded a horse racing company. Not from Fairfield County, but he did buy up a bar. bunch of tracks all across the country, and that's when he made his millions. Yes. And Meriwether, Lewis Clark called the company and the famous racetrack Churchill Downs. And now it's worth $8 billion. We got ourselves the first pure play seersucker stock is what we got. And it's a hospitality company at the end of the day. If you go to the website, they're going to show off

a steakhouse that is anchored by the iconic flagship event, the Kentucky Derby. Not our words. Those are just their words. Now, it's been a publicly traded stock since 1993. Has it doesn't done much since 1993. It's kind of just sat there. It's been less C-Biscuit, a lot more donkey. But like the rest of the betting and gambling industry, it took off during the pandemic. And the stock has tripled in the past 12 months. Okay. So last quarter, revenue's up 28%. 36 million in profit. That's good. That's decent. Not quite Seattle slew. No. But also not American Farrow. I don't know if that makes sense. I think that works. Now, horse racing has been closed for the last year. Their $300 million hotel they plan for Louisville, that was canceled.

So, like, it hasn't been a fun year. So to understand the company we control FDit, they mentioned horse nine times in their earnings report. They mentioned gambling zero times, even though this is a company that owns lots of casinos nationwide. Jack, I'm no poker prints, but 11,000 slot machines and 200 tables, I feel like this company is a gambling company. Here's the deal there.

They don't like using the word gambling in corporate America. No, they don't. Because banks don't like seeing the word gambling. It reminds them of the mafia. Instead, they used the word gaming, which was mentioned 31 times in the earnings report. Wild, which leads to our takeaway, Jack, what's the takeaway for our buddies over at Churchill Downs and Mr. Maryweather, Lewis Clark himself? The Supreme Court's liberation of gambling isn't happening in casinos.

It's happening on apps instead. Snackers, until 2018, there was this strange band on gambling nationwide, except for Nevada, except for Atlantic City, and except for Native American reservations and like a couple other places. Then nine jurists, dressed in. black robes ruled in 2018, that that ban was arbitrary and unconstitutional. Since then, dozens of states have legalized gambling and sports betting feels like a problem for Churchill. It's actually harmed Churchill's casino business because it's introduced more competition. But the gambling industry pie, it's expected to explode now thanks to eye gaming and betting apps

that it has jumped into. Twin Spires is the name of Churchill's gaming app. And it is a sports betting app, it's the new profit puppy. It brought in 100 million revenues last quarter. This is a horse racing company that's no longer just horse racing. They're doing betting apps for like March Madness and football. Churchill Down says the most important event of the year is coming up with a Kentucky Derby, maybe on my mom's birthday. But their most important asset is their app. Jack, can you whip up the collagen-infused takeaways for us over there? Nestle's 2018 Starbucks licensing deal. Yeah. Perfect giving brew from home lifestyle we're in. Here's the deal. One virtuoso a coffee machine customer, worth infinite customers. It's virtual, but I think Nestle should have

got with virtuoso. Roundup situation. Second story, Southwest doesn't do hubs. They don't rely on business class. They don't do much international. Hey, Jack, they also doesn't not make a profit last quarter like the rest of the airlines. Churchill Downs is known for their physical horse racetrack in Louisville, Kentucky. But it's future, it's betting on apps. Now, time for our snack fact of the day. This one tweeted in by Shrey Astahar in Hyderabad, India. We mentioned yesterday, Husqvarna is the oldest publicly traded company we've ever covered at 330 years old. You don't look a day over 229. But Saint-Gomain in France, apparently the company St. Gomenes beats them.

At the German bank I used to work for, we pronounce this Sangobal. Now, I don't know if that's a German pronunciation, a French pronunciation, or a German mispronunciation. Well, Saint-Game is 356 years old. Look at the corner of your car's windshield. It's probably Cinco Ma. Yeah, they started with mirrors back in 1665. King Louis, good client. Versailles, the ultimate house hype.

Snackers, you look fantastic today. Jack, the best ad yet. You're looking fantastic over there. This is a win to celebrate. First full week of the pod with a dadcaster. What the Snackers don't know is during this recording, I had to run downstairs to change like two diapers. Jack's burping while potting over here.

Glad this recorder has a pause button on it. Snackers. Celebrate the wins, we want to see your picks. Have a great weekend. We'll see you next week. And before we go, congrats to Josh Sloan just graduated Coral Springs, Florida. And congrats to Zach Exum for graduating in Pensacola, Florida. And Jack, John Allen, just offended his dissertation down at UMish. The greatest university in the world.

And Pavitra, congrats on the new job in San Francisco. Happy promotion to Joe Rossi in Uruguay. And Christina and Mike, first baby in Toledo, Ohio. Happy birthday to Nathan and Christoph, twins in Quimper, France. Two-for-one deal. Billy Lee, happy birthday in Hong Kong. Happy birthday to Snea Aura in Mumbai. And Matt Conelli and Mia Riley over in Boston.

And Daisy Riley in Providence, Rhode Island. And Aria Vasquez in Irvine, California. And Dean Hong in Santa Clara, California. And David Sue in Portland, Oregon. And Brandon in Tennessee. And Sam Blumenthal over in hometown, New York City. And Esther in the Bronx. The most powerful of the five Breweries.

Have a fantastic weekend. This is Jack. I own stock of Pelton. 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. Thank you.