What Will Become of the Sharing Economy?
We had (and still have) “excess capacity” in personal assets – everything from office space to cars to restaurants to boats to houses to bikes…even apparel. It is physically impossible to use all of our “stuff” 100% of the time, and conversely, it is often inefficient to purchase all of these assets when you can’t afford them, can’t store them, or just want to use something once. Enter an explosion of entrepreneurs and their apps that virtually connected intermittent demand with intermittent supply. The sharing economy was born, and until a few months ago, society had developed a feeling of accomplishment (wasting less, saving money) while billions of dollars were being generated by property owners and app developers. Further, the sharing economy includes the “gig economy,” which shares all of the same network effects previously described. However gigs are personal and professional services performed remotely (e.g., legal services, graphic design) or in person (TaskRabbit, Uber, NetJets, Wag.com, etc.). The gig economy contributed to a dynamic transformation in our society, as millions of workers around the world pieced together multiple occupations, often lifestyle-oriented, to generate a desired level of income.
The Bicycle is Back in Black!
A simple mechanical contraption has surged in popularity over the past couple of months as people struggle with restlessness at home, public transportation unavailability, shuttered gyms, the temptation of all day work-from-home snacking and bulging waist lines – the bicycle is back in black!
Whether it be road bikes, mountain bikes, e-bikes and the latest, gravel bikes, all have seen a surge in demand from “state of the art” versions to beginner varietals. While some of this mechanical mania will surely subside as “normalcy” returns to recreation, work and commuting – we believe a significant percentage of this change to consumer behavior will stick.
Pet Space Update During COVID-19
The pet space continues to be an attractive investment arena in the midst of the pandemic. As a leading consumer investment bank very active in the space, we field a steady drum beat of inbound interest from sophisticated investors. Notably, CD&R’s recently announced pending acquisition of Radio Systems, Corp. serves as an apt example of recent M&A activity, growth and liquidity. The rumored sale price of $1.3B represents 12.75x pro forma adjusted LTM EBITDA as of June 30 – all the more noteworthy in the billion dollar plus range.
Getting the Goods During the Pandemic: Pivoting Consumer Supply Chains
As millions of Americans are sheltering in place during the pandemic, the at-home demand for food and supplies, including paper goods such as toilet paper and paper towels, has increased, while restaurants and offices no longer need these items in bulk. According to Alix Partners, U.S. household demand of toilet paper is up 40% due to the closure of schools and offices nationwide. Coupled with consumer desires to “stockpile” some items for preparedness sake and to avoid shortages, the demand for many items in the direct-to-consumer channel has increased dramatically in the last two months. Out-of-stock shelves in brick-and-mortar grocery and sold-out e-commerce channels have forced consumers to get creative while sourcing their needed items and forced manufacturers and distributors to figure out how to pivot supply chains in order to meet these changes in demand.
Food & Beverage Opportunities in the Midst of COVID-19
COVID-19 has certainly created challenges and pain in a host of industries. That said, adversity often breeds opportunity, and it is no different for the consumer packaged goods (“CPG”) industry. With respect to the food & beverage side of things, below are a few observations:
Play to Connect: Gaming is Engendering Social Connection in the Age of ‘Shelter in Place’
By all accounts, the U.S. gaming industry is booming due to shelter-in-place ordinances systematized throughout the country. From video game consoles, like Microsoft’s Xbox or Sony’s PlayStation, to mobile apps and board games, consumers are turning to gaming not only to escape the onslaught of COVID-19 headlines, but also to connect with friends and family safely and responsibly.
COVID and Food Delivery: Paradigm Shifts in Foodservice in the Midst of the Pandemic
It is evident that the COVID-19 pandemic is wreaking havoc on the foodservice economy, with multitudes of local restaurants struggling as diners are staying home, forcing restaurants to limit service to takeout and delivery options. As COVID-19 started to spread globally, as of early March, the OpenTable reservation system reported that year-over-year seated diners were down by 20%, and reservations obviously ground to a halt by the end of the month.
Perspectives from a Consumer Lens - Rays of Light Amongst the Storm Clouds
First and foremost, we hope everyone is safe and healthy. Given the abundance of uncertainty and ambiguity in today’s world, we thought it might be helpful to provide some perspective on sectors of the consumer economy that are doing well, relatively speaking.
Clearly there are sectors suffering mightily right now and net net, there will be winners and losers from a structural perspective once the pandemic settles down and “normalcy” (a relative term) returns.
Review of Global Pet Expo 2020
I recently attended Global Pet Expo and came away with the following thoughts and observations.
Overall, the show was slloooow. Traffic was down significantly, palpably, depending on your location on the floor, due to, not surprisingly, coronavirus fears (yes, there was some bad weather in the Midwest as well, but that was not the main issue).
What Happened to Ballast Point?
Among the hundreds of consumer product M&A headlines in Q4 2019, one corporate divestiture in particular stood out to us: Constellation Brands’ sale of Ballast Point to the virtually unheard-of Kings & Convicts Brewing Company. Was this a shift in strategy for one of the leading beer, wine, and spirits producers as it pursued the cannabis space? Had Ballast Point fallen out of favor with consumers in the four short years since Constellation acquired the super-premium brand? Who / what is Kings & Convicts Brewing Company and what will be the fate of Ballast Point?