Why Food Delivery Services Like Maple And Sprig Are Failing, Plus Podcasting By The Numbers

by 5 months ago

morning brew

Enjoy your May 30th hand-crafted Brew!

QUOTE OF THE DAY

“Are you sure … ? He won’t cook you fries.” — Burger King’s new ad that pits its mascot king against Belgian King Philippe ahead of the company’s first restaurant opening in the country. The king was philipp-ing out to say the least.

Market Snapshot

Another One Bites the Dust

Sprig, a SF-based food delivery startup that has raised over $56 million, will be shutting its kitchen doors.

The Uber of Food Delivery

Sounds sexy, but it’s not quite living up to the hype.

Let’s backtrack for a second.

Between 2011 and 2013, companies like Blue Apron and Postmates, valued at $2 billion and $609 million, respectively, wooed Silicon Valley’s elite to pile dollars into on-demand food delivery.

And these VCs were starved for success, as on-demand app usage continued to increase and analysts estimated the market to be worth $210 billion.

It was a simple recipe

Step 1: Investors fork over millions to shower hungry customers with jaw-dropping coupons.

Step 2: Consumers get hooked, turning into regular customers.

Result: Profits then exceed the cost of acquiring those customers. Dinner is served.

Well, for Sprig, Maple and several others, the recipe went awry.

What happened?

Intense competition for the $210 billion market led to an all out price war, which in turn, ate at profits.

Companies have also spent way more than expected on customer acquisition and retention. Look no further than Postmates, who has missed profitability targets for the last two years.

Inventory management has been a struggle as well. Munchery, another SF-based delivery company, is burning over $5 million a month, primarily on food waste.

And the most important ingredient? Willingness to pay.

Research shows 71% of people would not be willing to pay over $5 for a $30 order, and 15% of people said they would not be willing to pay at all for delivery.

A double-edged knife

It isn’t all bad for the delivery space. GrubHub announced 324,000 “daily average grubs“, while Domino’s delivers 1 million pizzas per day. But with others struggling, VCs must move with caution as they look to take their piece of the pie.

AI Learns Its ABC’s

The always buzzworthy Google has officially launched a new VC fund that will focus on artificial intelligence.

For now, the group will invest ($1-10 million) separately from the mammoth that is Google Ventures, and let engineers rather than venture capitalists run the show.

While unorthodox, this AI fund should be no shocker.

Just two weeks ago, CEO Sundar Pichai (Google’s B.M.O.C.) made it clear that we are transitioning to an AI-first world and his company wants to be in the driver’s seat.

And with a laundry list of actionable AI items…

like this new VC fund OR a conversational Google Home OR AI games

…Pichai is clearly putting Google’s money where its mouth is.

PepsiCo Ain’t Afraid of a Deal

1965: Merger with Frito Lay
1998: Tropicana for ~$3.3 billion
2000: Quaker Oats (includes Gatorade, remember?) for $13.4 billion
2006: Izze sparkling water for “let us know if you find out”

Believe us now?

PepsiCo is at it again, now in talks to buy All Market Inc., the owner of coconut water brand Vita Coco for an undisclosed amount less than $1 billion.

The celebrity-backed CPG company (Alright, alright, alright) is the global leader (with 26%) in the plant-based water market, which grew 21% in 2016 to $2.7 billion and is likely to double by 2020.

PepsiCo wants be the market-leading coconut connoisseur for a few good reasons:

  1. Diversify product mix as consumers trend away from sugary drinks
  2. Add onto an already solid foundation of portfolio coconut companies (One, Kero Coco, Naked)
  3. Continue its Hundred Years’ War with “that other company down South”, who owns Zico and bought Bai for $1.7 billion in January

Coconut King 2017: TBD

China Puts on Protection

A consortium of Chinese investors is buying Ansell’s condom division, the second largest in the world, for $600 million (all in cash).

The Australian healthcare protection firm has been trying to offload its oldest yet smallest division since last August, as it looks to refocus on its core products like non-consumer industrial and medical rubber.

For Chinese investors, this is a stellar opportunity: benefit from exploding condom demand in China as sex becomes more widely accepted and gather ammo to take on market leader Durex, head first.

What Else Is Happening…

  • LinkedIn co-founder Reid Hoffman leads $30 million investment round in Change.org (also joined by Bill Gates and Sam Altman)
  • Snap “goose(s) ad business” with discounts to avoid same traumatizing Q1 fate
  • Thanks to Google (see above), Apple must’ve felt AI FOMO. Developing AI chip for iPhone.
  • British Airways returns to normal after IT collapse that left 75,000 flyers stranded and 800 flights canceled

Economic Calendar

  • Friday (May 26): Big Lots (+) Earnings; GDP (+), Consumer Sentiment (-)
  • Monday: Memorial Day (Markets Closed)
  • Tuesday: Consumer Confidence, Dallas Fed Manufacturing
  • Wednesday: Hewlett-Packard Enterprise, Michael-Kors Earnings; Farm Prices
  • Thursday: Dollar General, Mobileye, Lululemon, Express Earnings; Weekly Jobless Claims, Motor Vehicle Sales
  • Friday: May Jobs Report

Water Cooler

(Podcasting) By the Numbers

Welcome to the Brew’s first installment of By the Numbers.

The goal is simple: break down an industry, individual or innovation that has an intriguing story to tell, but hasn’t had it told the right way. Time to let the numbers do the talking…

  • 22% | 55%: Familiarity with the word “podcasting” in 2006 vs. now
  • 57 million: U.S. monthly listeners in 2017, up 23% YoY
  • 60%: Podcast downloads that Apple accounts for
  • 2%: Average American allocation to podcasting out of total audio consumption
  • 85%: Podcast listeners that consume majority or entirety of an episode
  • $200 million: Projected 2017 ad revenue for podcasting (still 1/15th of billboard ads)
  • 38%: Episodes in fivethirtyeight.com survey that had no advertising at all
  • 5: # of brands that represent 35% of podcast ads

Podcasting is clearly a thing, but boy, do they have a long road ahead.

Why?

For starters, one player controls over half the market (cough Apple cough). Plus, advertising is downright scary for brands (due to laughable data collection).

And don’t forget, podcasts still take up just a sliver of time for the average audio consumer.

But listen up…the market appears ripe for new players and according to some, it’s a market that could be home to a big and beautiful unicorn.


The Breakroom

Interview Question of the Day

If you started spelling out numbers (one, two, three, and so on), how far would you have to go until you found the letter A?

(Answer)

Personal Finance Tip of the Day

Have you ever thought about what the cost is of your daily coffee habit? No?

For simplicity, let’s assume that you buy a Grande Latte from Starbucks every single day.

You are spending $1,332 ($3.65 (not including tax) * 365) on your precious lattes each year or $6,661 over five years.

Should you throw that coffee cash into the S&P 500 today, what would it be worth in 10 years (assuming ~10% historical return)?

$17,276

Maybe it’s time to stick to just one Brew per day––the free kind…

Stat of the Day

2 years.

That is the amount of time it would take for the average Cuban to save up, such that they could stay in the country’s first luxury hotel for…JUST…ONE…NIGHT.

The Gran Hotel Manzana, which is set to open in early June, sits atop a 350-year-old colonial-era wall and commands as much as $2,500 per room per night.


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