- Peak Perspectives: Business Intelligence & Insights
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- Peak Perspectives - #2
Peak Perspectives
Business Intelligence & Insights
Logan in his Prime
Marketing wizard & WWE Superstar (among other things) Logan Paul, is shaking up the beverage industry with his new company, Prime. For the first quarter of 2023, Prime Hydration has captured 5.8% market share of sports drinks. First is Pepsi-owned Gatorade (43.8%), then Coca Cola-owned BodyArmor (14.4%) and Powerade (7.6%.) In their first year (which was last year) Prime did $250 million in retail sales but is already pulling in over $50 million a month since April.
Safe to say the big names have taken notice and it appears their first line of defense is to fire up their lobbyists. Prime has seen a run of bad press recently following a Chuck Shumer public request to the FDA to investigate Prime's caffeine levels in their energy drink as he called out deceptive marketing tactics and labeled the brand controversial, veiled under the guise of protecting the children and his great concern for their caffeine intake……. Keep in mind, the Hydration drink is sold in a plastic bottle like Gatorade and the energy drink is sold in a small can like Red Bull. One is carbonated and one is not. Even for a booger eating 12 year old it's impossible to mix the two up.
In addition to promoting the brand on their social media, Prime has inked deals with the Los Angeles Dodgers, the UFC and FC Barcelona to become their official energy drink. Prime's new six figure deal with Base Sports Group will promote its drinks directly to targeted youth consumers through both digital and on-site activations at 60 youth sports events. Youth sports sponsorship is a brilliant grassroots marketing strategy. I expect this company to continue to print money and be on a rocketship to a billion dollar valuation in no time.
Bottoms Up
After what will go down in business school textbooks as a prime example of not knowing your customer and subsequently one of the biggest marketing fails in history, Bud Light's parent company Anheuser-Bush has sold off 8 popular brands and grabbed $85 million dollars in an all cash deal with cannabis company Tilray. The brands include include Shock Top, Breckenridge Brewery, Blue Point Brewing Company, 10 Barrel Brewing Company, Redhook Brewery, Widmer Brothers Brewing, Square Mile Cider Company and HiBall Energy. Bud Light's infamous Dylan Mulvaney endorsement deal sank behemoth AB INBEV stock 20% in a month.
Tilray is a Canadian company that had an IPO on the Nasdaq in July of 2018 for $30 bucks a share. This stock soared out of the gate amid the bubble in cannabis stocks and 3 months later hit $145 a share. From there the stock dropped like a rock and cratered to $3 a share by March of 2020. They have not been able to get off the mat since and are still sitting south of $3 a share. There are some synergies here as Tilray already owns several beer brands and a spirits brands, as well as a CBD sparkling non-alcoholic cocktail line. It seems like a good purchase of these brands likely at a discount as AB INBEV could use the cash and Tilray needs to bring some excitement to their business and generate some new revenues.
Student Loans
Student loan payments are set to resume soon and I'd like to offer some interesting insights on how this will affect households with tight budgets and which industries and companies will be impacted. The info is derived from real time credit card data provided by a data scientist/head of AI at a $1B+ PE fund specializing in using AI/Alt Data to source deals for larger PE funds.
There’s no question that continuing to delay student debt payments is boosting the economy but whether or not it’s being used as a political tool is for our friends in the Oval Office to comment on. In April of 2020, the number of student loan payers in the data dropped by 40%. By June of 2023, 70% of those with student loans weren't making payments. The average payment pre April 2020 was $300/mo, so we can assume consumers will pay that. So, we can assume that 30 million people will randomly have $300 less to work with starting in September. In fact, the data showed that non payers outspent their peers by almost 3% over the next 2 years. People get aggressive with that loan money!
Where did they spend that money? Electronics, Air travel, pet supplies, and home furnishings dominate the dataset. In fact, there are a few companies in the dataset that seem the most at risk: Peloton, Old Navy, Market District, Shein, Nintendo and Target. Other honorable mentions in our non payer category: Airbnb, Chipotle, Hello Fresh, Pizza Hut, and Sephora.
So, if all that money isn't going to those companies anymore, what will happen to the economy? If we assume users were spending that money, that's $100bn being sucked out of the consumer goods economy. What will happen when $100bn goes missing from the economy? Companies like Peloton and Hello Fresh better get defensive.
Goldman Bites the Apple
A fascinating saga of twists and turns during Goldman Sachs' endeavor into personal banking.
In 2016, Goldman Sachs, known for being a titan in investment banking, IPOs, wealth management and the like, launched Marcus, their first attempt at a consumer banking brand. Marcus by Goldman Sachs is an online bank offering high-yield savings accounts, high-yield CDs and no-fee personal loans. Fast Forward to 2019 - Apple wants to offer a credit card and the frontrunners to partner with them were AMEX and JP Morgan. At the last minute, Goldman swooped in and proposed a deal with terms that none of the big established players in the space were willing to offer and they would be using the MasterCard payment network. In hindsight we now know why the terms would not be matched by other companies as Goldman seriously underestimated this undertaking as it was their first foray into consumer card business.
One of the more publicized snafus as this kicked off was when Apple CEO, Tim Cook, went through the standard consumer experience - applied for a card and was declined. Turns out the automated underwriting flagged it for fraud and thought it was an imposter. It's possible this type of headache turned off celebs and influencers that might have helped roll it out and accelerate public adoption. More bad press followed as the card was being labeled gender-biased when a tech exec got approved for a card with a 20x higher limit than his wife of many years whom he has been jointly filing taxes with for said years.
The issues began to mount as 0% financing for Apple products was offered through the card which meant less money for Goldman as they dealt with the pouring in of disputes and customer care calls that they were unprepared to handle. Ultimately, Goldman Sachs saw this as a fintech startup. It wasn't a highly experienced group of credit card pros inside an organization like AMEX who does cards for airlines etc. Originally, Apple told Goldman to expect 5 million cards in the first year to 18 months. They then revised to say it would be 10 million cards, so further resources were deployed and infrastructure was built to accommodate. After 1 year, only 3 million cards were issued and it took a few years to get to 10 million.
Apple Savings was then launched and some billion dollars poured in as people wanted to take advantage of their decent interest rate and crashed Goldman servers. Enter the Consumer Financial Protection Bureau and their investigation of Goldman. Then, the numbers started to come out. GS was losing billions of dollars. Scott Young, who brokered the deal back in 2019, left GS and in January of 2023 they announced they would wind down Marcus. As of July, they sold $1 billion of personal loans from Marcus to alternative investment firm Varde Partners at a discount to their face value. This was the second tranche of unsecured loans offloaded by Goldman after it disclosed earlier it had sold about $1 billion from the $4.5 billion loan portfolio in the first quarter. The Wall Street giant booked a $470 million loss on the sale of some Marcus loans in the first quarter, which dragged down its earnings.
It's probable that AMEX is talking to Apple saying "we told you so", waiting to take over. Apple has the right to hold GS accountable and that's likely why GS extended the deal to 2029. MasterCard, for their part, is locked in until 2026 and they are doing fine as a payment network being the service provider. In short, corporate partnerships should be with proven players in the specific space you are getting into. It should be their core competency. Apple should have always gone with American Express instead of taking the extra money from Goldman who were just running this out of a small department.