What’s for Dinner? Meal Kit Fatigue!
The American diner is continually searching for ways to get dinner on the table quickly, as evidenced by the meal kit phenomenon of the last several years. The plethora of meal kit choices is almost overwhelming for the consumer. Need a paleo box? Options abound. You want to eat all organic? No problem. Vegan? There’s a box for that. While the optionality for the consumer is appealing, it highlights the challenges of the meal kit market – it is a crowded space with high customer acquisition costs and significant customer churn (not to mention the difficulty of managing perishable ingredients and challenging distribution dynamics). With numerous competitors in the space competing for consumers’ attention, such as Blue Apron, Hello Fresh, Sun Basket, Gobble, Home Chef, and Plated, just to name a few, it is no wonder that many of these companies are struggling to retain customers and turn a profit. As one data point on the challenges in the meal kit market and investors’ view of the space, Blue Apron’s (NYSE: APRN) stock is currently down more than 90% from its IPO pricing of $10 a share.
Public Investors are Hungry for Beyond Meat
Beyond Meat, Inc. (NASDAQGS: BYND) went public on May 2nd, raising over $240 million, and its shares received a rousing investor reception to the tune of a 163% pop by the closing bell. Should market valuations remain in the ballpark of $3-4 billion, or even half that range, the ten-year-old alternative protein company’s IPO will be seen as a smashing success for the founders and early investors.
Growing Diversity Amongst Outdoor Enthusiasts
If you’ve spent much time in the outdoors over the past twenty-plus years, you’ve certainly seen trends emerge and fade, fads take hold and then dissipate. One of the changes that has taken hold (and is here to stay) is the increase in diversity seen amongst participants in outdoor activities. There are a host of reasons as to why outdoor enthusiasts have tended to be predominantly white over the past several decades, but the most pronounced is simply demographics, and those are rapidly shifting. In 2010, 64% of the population was white, 17% Latino, 13% black, and 5% Asian. In 1970, those numbers were 84% white, 4% Latino, 11% black, and less than 1% Asian, according to analysis of U.S. Census data. Those trends are projected to continue, such that by 2060, the U.S.’s population will be 42% white, 31% Latino, 13% black, and 8% Asian.
Where There’s Smoke There’s Fire – a CBD update
I recently attended Global Pet Expo, and over the prior two and half months we also attended ICR, Fancy Food, OR and Expo West. To say CBD has dominated the conversation would be an understatement. In general, here’s a few seeds to chew on – I promise I’m not just blowing smoke . . .
Global Pet Expo Trade Show Review
I recently attended the Global Pet Expo trade show in Orlando and came away with the following impressions:
In what one would deem a highly unique marketing campaign (which should perhaps be dubbed Snack Wars), Clif Bar’s co-CEOs, Gary Erickson and Clif Crawford, have recently challenged competitor Kind Snacks to start utilizing organic ingredients in the Company’s snack lineup, which includes a variety of bars made from whole nuts, fruit, and natural flavorings. In an open letter to Kind founder Daniel Lubetzky published in The New York Times this week, the Clif team even offered to donate up to ten tons of organic ingredients to Kind to kick start the process, as well as lend expertise to Kind should they wish to reformulate their products to incorporate organic components.
Trumped by Tariffs?
Trump’s tariffs have trickled down to impact middle market companies, and nearer and dearer to our hearts, middle market deals. We have several consumer growth clients that have been impacted by the tariffs, and each company is scrambling to figure out how to respond. For any company that sources a significant portion of its products from China, the tariffs create an immediate hit to EBITDA, which of course often leads to valuation discussions. What happened here, and what is a seller to do?
Asahi's Push Into the EU Beer Market (not China, not the U.S.)
Last week’s announcement of Asahi Group’s acquisition of the British beer business of Fuller, Smith & Turner marks Asahi’s third substantial beer acquisition in Europe since 2016. This deal further supports Asahi’s international expansion goals, but is this push strategic? Reactive? Opportunistic? Why has Asahi ignored the U.S. craft beer market (and craft beer in general), and why not focus on the massive growing beer market in neighboring China?
American Association of Equine Practitioners (“AAEP”) Trade Show Review
I attended the recent American Association of Equine Practitioners (“AAEP”) trade show in San Francisco recently, December 1-5. The show was a great reminder of how varied, robust and global the equine market is. Attendees were the usual mix of veterinarians, salespeople, scientists….and guys with big belt buckles and cowboy boots (a rarity in San Francisco). In the vein of San Francisco, while I’ll never complain about attending a trade show in my home city, in this case, I will nonetheless grouse a bit. While quality of exhibitors and attendees was strong, quantity was lower. Attendance felt down significantly from last year (held in San Antonio – certainly more “horse” country than the Bay Area) and was a common theme echoed by nearly everyone I met. Chief reasons for diminished attendance were 1) coastal city that is a long trip for anyone on the opposite coast, 2) expensive city where hotels, meals, etc., were viewed as “not worth the investment,” 3) the city too liberal a venue for companies from more conservative parts of the country, and 4) San Francisco’s current reputation for dirtiness, particularly in areas around the Moscone Center. My $.02, but AAEP would be better served holding court someplace “in the middle of the country” in the future.
What You Really Need: Smarter Offline Retail
For those consumers overwhelmed by choices when shopping at a traditional big box retailer, good news – smaller footprint, well-curated retail formats are on their way. Specifically, Amazon is continuing to experiment with various offline retail formats (“clicks to bricks”), recently opening a second Amazon 4-Star brick-and-mortar retail location in Denver, Colorado, to augment its first 4-Star location in New York City. 4-Star locations offer the consumer a variety of items, including consumer electronics, kitchen tools, home goods, toys, books, and games, which are either best sellers or new and trending on the Amazon e-commerce platform, in an approximately 4,000 square foot retail footprint. This format is meant to give the consumer a more streamlined set of purchase options and utilizes online data to curate products that will likely sell well at the local level. The 4-Star format joins Amazon’s other forays into the brick-and-mortar retail world, including the cashier-less Amazon Go grocery/convenience store, Amazon bookstores, Amazon pop up kiosks, and Whole Foods. Amazon is clearly trying to figure out what works in terms of structure for offline retail, to compete with the likes of Walmart, Target, etc., and it will be interesting to see which concept(s) are most successful in the long run.