Cash is less and less of a king

Cash is less and less of a king

Several new findings confirm what we have been observing over the last several quarters – the continued whittling down for the usage of cash. There is little question given the data that a key driver of this is the accelerating shift toward digital shopping be it delivered or picked up by the buyer at a locker or store location. The most revealing aspect of this shift to cashless consumption is that is it occurring across all demographic ages, which confirms this is a structural shift. Interestingly is how people are now using the Apple Pay Cash Card and Venmo, which is owned by PayPal, to flip people digital cash instead of handing them a physical bill.

Given the ballooning of consumer debt outstanding, some of this shift in how consumers are paying also reflects aspects of our Middle-Class Squeeze investing theme as well. But I’d point out that those shoppers are hunting online as much for bargains and savings as they are for quick delivery. Odds are as our Digital LIfestyle and Middle-class Squeeze theme intersect, the use of cash will continue to fall by the wayside in the coming quarters. Helping move that along are businesses, including Starbucks and Shake Shack that are becoming completely cashless establishments. 

Fewer and fewer adults are using printed or minted U.S. currency at all any more. About 3 in 10 Americans said they make no purchases with cash in a typical week, up from a quarter in 2015, according to the Pew Research Center. At the same time, the share who said that all or nearly all of their purchases are made using cash fell to 18 percent from 24 percent in 2015.

In a survey of more than 2,000 Americans, U.S. Bank found that 50 percent of respondents said they carry cash with them less than half of the time they are out. When they do carry the green, 76 percent said they keep less than $50 on hand and nearly half have less than $20.

Not surprisingly, millennials are paving the way among people ditching bills and coins in favor of credit, debit and digital payments, through apps like Apple Pay, Venmo and Zelle. In fact, more than 1 in 10 millennials use their digital wallet for every purchase, according to a separate report by Experian — especially on food, rent and Uber rides.

Overall, about one-third, or 34 percent, of adults under the age of 50 make no purchases in a typical week using cash, compared with 23 percent of those ages 50 and older, Pew found. The Pew Research Center surveyed more than 13,000 adults in September and October of last year.

Source: More Americans say they don’t carry cash

The new middle-class boom in the coming decade

The new middle-class boom in the coming decade

Amid the concerns of rising interest rates and what it may do in the near to medium term for Middle-class Squeeze consumers, new research from the Brookings Institute remind us of the positive economic force to be had with our Rise of the New Middle-class investing theme over the coming decade-plus. No wonder Apple CEO Tim Cook has been sharing upbeat thoughts about the coming demographic wave in India. He’s not alone, as other consumer product companies from Starbucks to Mondelez International and Proctor & Gamble are all focused on the sales and profits to be had from meeting this expected demand surge.

According to research from the Brookings Institution, more than half of the planet can now be considered “middle class” or “rich.” It is estimated that some 48 percent of the world’s population earns between $11 and $110 per day in PPP-adjusted dollars—a standard definition of the middle class using absolute (rather than relative) cut-offs—while another 2 percent earns more than $110 per day. According to projections and measures, the middle class will reach 4 billion people worldwide by the end of 2020 and 5.3 billion by 2030. This expansion has been driven by two phenomena: a steep decline in poverty around the world since the 1980s and rising household incomes in Asia.

There should be reasons to cheer this global “tipping” point. For the first time in recorded history, the majority of the world’s population will not consist of impoverished peasants or workers but of wage-earners who can afford to buy cellphones, washing machines and televisions, to go out to restaurants and theaters, and to take vacations with their families.

A growing middle class is supposed to be good for society. Their consumerism is supposed to boost global production of durable goods and make businesses more efficient and innovative in targeting these new customers. The global middle class is also committed to the education of their children. The middle class is more entrepreneurial than either the rich or the poor, and it demands more transparency from policymakers and tolerates less corruption. Because the middle class does not owe its wealth to privileges granted by the state, its members are more likely to support protections for property rights, as well as greater access and representation in decision-making.

Source: Fear and Loathing in the Global Middle Class – Lawfare

Restaurants ring up Big Data to drive sales

Restaurants ring up Big Data to drive sales

We’ve said it before and odds are we will say it again – applications for our Disruptive Innovators can come from a number of areas, including ones that are less than obvious. Big Data and its use in the restaurant industry is such an example as those companies look to overcome flat traffic trends and drive incremental purchases. How? By knowing what your preference are thanks to Big Data, mobile apps, and loyalty programs, which allow them to notify you when your preferred items, or ones that match your profile, are on sale. This likely means more pop-ups for last minute, impulse item additions like the extra guac from Chipotle courtesy of DoorDash. And yes, Chipotle is in the process of rolling out its own loyalty program.

 

Data is emerging as a powerful weapon in the increasingly competitive battle for the restaurant consumer. An explosion of food vendors—and menu items—is giving diners more choices than ever. Some restaurants say using customer data to tailor menus to their tastes can give them a leg up.

“Total restaurant traffic is not growing, so anything restaurants can do to offer a better customer experience differentiates them from the competition,” says David Portalatin, a food-industry adviser at market-research firm NPD Group Inc.

Many restaurants collect customer data through their loyalty programs, which diners can sign up for online or via an app. (After customers make a certain number of visits, they earn points that can be redeemed for discounted items or at no charge.) But the data that companies collect through such programs offer a window into the habits of only their most loyal customers, who aren’t the ones they really need to convince to return. And there are limitations to some online loyalty programs: Restaurants that collect email addresses without logging specific purchases can only send out emails about promotions to the whole customer base. An email for half-priced Frappuccinos, for example, would be wasted on someone who only ever orders coffee.

By contrast, individuals’ purchases are easier to track on mobile-order apps. Starbucks Corp. realized that its mobile app, which had only been accessible to members of its Starbucks Rewards loyalty program, could be more effective if it were open to everyone. Starbucks had 15 million active Rewards members, but it had another 60 million monthly customers it knew nothing about. Starbucks in March opened the app to everyone.

Source: How Restaurants Are Using Big Data as a Competitive Tool – WSJ

SodaStream to help Pepsico ride the Clean Living slipstream

SodaStream to help Pepsico ride the Clean Living slipstream

From reducing salt and fats from its snack business to the introduction of Bulby, its own line of flavored seltzer waters, PepsiCo continues to transform its business in line with shifting consumer preferences that are reflected in our Clean Living investing theme. With the acquisition of SodaStream, Pepsico takes several steps forward as it not only gains entrance into the home market but with a solution that is plastic bottle free and further shifts it away from sugary products and introduced healthier alternatives.

This move follows the recent introduction of healthier beverages at Starbucks and Coca-Cola testing vending machines offering clean, water-based drink alternatives.  While we may not be in the wee-early innings of this Clean Living transformation, we are still quite far from anywhere near the 7th inning stretch. We expect more M&A activity of publicly traded clean(ish) companies, as well as private ones in the coming quarters as entrenched food and beverage companies, look to ride the Clean Living tailwind.

 

Beverage and snack giant PepsiCo announced plans Monday to acquire at-home carbonated drink maker SodaStream for $3.2 billion.

Purchase, New York-based PepsiCo agreed to pay $144 per share in cash for SodaStream’s outstanding stock, a 32 percent premium to its 30-day volume weighted average price.The deal gives PepsiCo a new line through which it can reach customers in their homes rather than through stores.

It comes as U.S. grocers are in a state of transformation, with 70 percent of shoppers expected to buy groceries online by 2025, according to Food Marketing Institute and Nielsen. Meantime, retailers are squeezing brands on price and giving increasing shelf-space to upstart and private label brands.

“We get to play in a business — home beverages — where we don’t play,” PepsiCo CFO Hugh Johnston told CNBC.With this move, PepsiCo is doubling down on its drinks business, which has struggled in North America as consumers move away from sugary, carbonated beverages. It also seemingly addresses the challenge that buying new drink brands risks cannibalizing its legacy beverages.

Tel Aviv-based SodaStream makes a machine and refillable cylinders through which users can make their own soda or carbonated water drinks.

PepsiCo has made its own efforts at sparkling water, launching Bubly earlier this year to help fight against LaCroix.

Source: PepsiCo to buy SodaStream for $3.2 billion

Plant-based protein coffee debuts at Starbucks

Plant-based protein coffee debuts at Starbucks

According to data published by the NPD Group:

  • Three out of five Americans say they want more protein in their diets;
  • Fourteen percent of U.S. consumers, or more than 43 million people, regularly use plant-based products and
  • 86 percent of them aren’t vegans or vegetarian.

These figures are in sync with the growing influence of our Clean Living investing theme and we are seeing companies respond. One of the latest is Starbucks, which has introduced its first plant-based protein offering that is part of its efforts to craft a healthier image as it attempts to move past its sugar and calorie ridden Frappuccinos. Starbucks isn’t the first company to introduce such products, and it probably won’t be the last, but given its reach, it likely means we are approaching a tipping point. All that remains is to see if consumers opt for it.

Starbucks is getting into the plant-based protein game for the first time.

The chain is introducing Protein Blended Cold Brew in almond and cacao flavors, available now through fall, while supplies last. The nondairy 16-ounce drinks are made from pea and brown-rice protein.

“Plant-based beverages, plant-based proteins are a choice that many consumers are gravitating toward,” CEO Kevin Johnson told an annual institutional-investor gathering in June, highlighting health and wellness as a strategic priority for Starbucks.

The new almond drink is made with almond milk, almond butter and 12 grams of plant-based protein and contains 270 calories, 12 grams of fat and 22 grams of sugar, according to Starbucks. The sweetness comes from what the Seattle-based chain calls the Banana Date Fruit Blend as well as coconut sugar; there’s no refined sugar.

Starbucks customers can also request a shot of plant-based protein be added to a different drink, the company said.

From faux-beef burgers to infused energy bars, plant-based proteins are a growing trend in the U.S. – and not just among people who eschew eating animal proteins, such as beef, poultry and pork.

KFC started testing plant-based chicken in the United Kingdom and Ireland in June, while two months earlier, White Castle introduced its Impossible Slider, a version of its iconic slider made with a plant-based meat equivalent. And Dunkin’ Donuts began serving almond milk in September 2014.

Source: Starbucks debuts its first plant-based protein coffee

Starbucks taps kombucha to pivot from sugary drinks and recapture consumers

Starbucks taps kombucha to pivot from sugary drinks and recapture consumers

First Cold Brew and now kombucha is being added to the beverage fold at Starbucks as it, much like Coca-Cola and PepsiCo, are contending with the increasing consumer preference for healthier beverages, snacks, and food. In other words, less sugar as evidenced by the consumer wane for high calorie, high margin Frappucinos, and sugar soda as well as diet soda. While kombucha is a growing market, it’s not quite as mainstream as the Frappuccino was, which likely means it is part of larger salvo to be had by Starbucks as it looks to reposition its beverage portfolio to meet consumer tastes. Never an easy feat, and one that probably means trial and error.

 

Starbucks is brewing up some kombucha.The coffee chain announced it’s going to sell its own line of the trendy fermented tea. Starbucks (SBUX) is offering six flavors of kombucha under its Evolution juice brand and said the drinks have started shipping to stores in select cities.

Why kombucha? The cold-pressed drink is hot right now because of its probiotic punch and zingy flavor. Sales of the fermented tea totaled $1.2 billion last year, skyrocketing nearly 40%. Starbucks says “consumer interest” also spiked the same amount in 2017.

Tapping into the booming drink could help Starbucks reverse its fortunes. Recently installed CEO Kevin Johnson said customers have soured on sugary drinks, like the Frappucino, and he wants the brand to sell more healthy drinks. Evolution’s kombucha is low in calories and has 3 to 7 grams of sugar depending on the flavor.

Source: Starbucks’ new menu item: Kombucha

Coca-Cola: turning free water machine into a cash stream?

Coca-Cola: turning free water machine into a cash stream?

As part of our Clean Living investment theme, we’ve seen case volumes of not only sugary beverages but also those laced with artificial sweeteners come under pressure as consumers shift to healthier alternatives, including a variety of waters both still and sparkling. Existing soda giants, such as Coca-Cola have been expanding their beverage offering in recent years adding a water, teas, sports drinks and even milk to their global line up, but those still come in a can or plastic bottle.

Looking to more fully embrace the shift to Clean Living and potentially shun plastic bottle, Coke is sampling what it is calling Dasani Free that lets a consumer use their own reusable water bottle for free water or pay for added bubbles and flavors, but NO sweeteners or other ingredients are available. That sure does sound like Coke looking to pivot from its legacy business but it’s not as extreme as the move made by Cott Corp. when it sold its entire soda business.

This is a twist on its Coke Free-Style Machine, but it marks a huge shift in mentality for the company. Perhaps one day we may wind up calling reusable water bottles something like reusable beverage bottles… it could happen, look how the war on straws is forcing change, and yet all those plastic cold cups at Starbucks still remain…just saying.

 

The world’s largest soda maker is testing a fountain that lets people fill reusable water bottles with free, filtered water — but also offers the option of paying to add bubbles and fruity flavors. It’s an example of how the maker of Fanta, Sprite and Powerade is searching for new ways to make money as Americans cut back on traditional sodas.

For now, Coca-Cola is testing just one “Dasani Purefill” machine on the campus of Georgia Tech, across the street from its headquarters in Atlanta. It says it plans to expand the test on a rolling basis this fall to 20 machines on campuses in 15 states, though it did not specify locations.

The concept: You can have filtered water for free, or swipe a credit card to add bubbles or flavor for 5 cents an ounce, plus a 15-cent transaction fee. So filling a 20-ounce bottle with bubbles and flavor would cost $1.15.

You can’t get sweeteners and other ingredients.

The idea hitches a trend that has no sales potential for Coke (reusable water bottles) to one that does (sparkling, flavored water such as La Croix). If it catches on, it would help Coca-Cola squeeze money out of an increasingly popular habit that could otherwise hurt its business.

Source: Coke hopes to turn free water machine into a cash stream

 Our Clean Living theme hitting Frappuccino sales at Starbucks

 Our Clean Living theme hitting Frappuccino sales at Starbucks

The war on sugar has hit companies like Hershey Foods (HSY), forcing it to pivot its snacking M&A strategy to better meet shifting consumer preferences for healthy, natural and organic snacks.

We’ve seen a prononced shift for waters and seltzers that is driving companies like National Beverage Corp. (FIZZ), home of LaCroix, and Cott Corp. (COT), a now pure play company on water, coffee, tea and filtration, as consumers increasingly reach less frequently for sugary sodas or ones that have artificial sweeteners.

In other words, Hershey, Coca-Cola (KO), PepsiCo (PEP) are contending with the headwind associated with our Clean Living investing theme, while National Beverage and Cott are rising the tailwind.

Now we are seeing consumers balk at the sugar laden Frappuccino that has become a staple at Starbucks (SBUX) complete with seasonal specialites. While this is the latest thorn in the side of Starbucks, it has the potential to not only hit it on the profit line but also force an accelerated re-think on its beverage and even its food offerings.

 

Frappuccino sales are struggling, and concerns about how much sugar the slushy drinks contain may be among the reasons.Starbucks says sales from the drinks that mix coffee, ice, syrup and milk are down 3 percent from a year ago, and is blaming the “health and wellness” trend for the dip.”These are oftentimes more indulgent beverages — higher in sugar, higher in calories,” Starbucks CEO Kevin Johnson said during a presentation to investors Tuesday.

A 16-ounce Cupcake Creme Frappuccino has 400 calories and 63 grams of sugar. A Triple Mocha Frappuccino has 390 calories and 51 grams of sugar. That’s with 2 percent milk and whipped cream.

Peter Saleh, restaurant analyst for BTIG, notes that interest in healthy eating isn’t new: “It’s not something that popped up out of nowhere.”

Another problem may simply be “people not wanting to consume full-price Frappuccinos…” A medium Frappuccino costs between $4 and $5. Exactly how many calories the drinks deliver varies.

Source: Starbucks claims Frappuccino sales down due to ‘health and wellness’ trend | Fox News

American brands are heading where the middle class is growing

American brands are heading where the middle class is growing

Plain and simple, we are seeing more American retail and brand companies from Starbucks to Walmart tie their growth prospects to the rising middle class in Asia, and China in particular. We here at Tematica are not surprised given prospects for discretionary spending to be had compared to here in the US where debt service is taking a greater and greater bite out of disposable income for consumers that are undersaving as they live longer.

Pretty much a no brainer as we see the cross roads of our Cash-strapped Consumer, Aging of the Population and Rise of the New Middle Class investing themes. What we’re seeing is a Harvard Business case study in the making.

 

American retailers are heading east: They’re opening the doors to brick-and-mortar stores in China, while listing on China’s dueling marketplaces — Tencent and JD.com. Walmart, for example, brought a small-format supermarket to the city of Shenzhen as the popularity of “small retail” grows in China.

And, like many retailers in China, Walmart’s small-store rollout comes with a digital payments option. Shoppers can pay for items using a program within Tencent’s WeChat while shopping.

Walmart is hardly alone in its brick-and-mortar and eCommerce efforts. Brands from L Brands — which counts Victoria’s Secret in its portfolio — and Ralph Lauren, as well as Starbucks, are bullish on China. Here are their executives on how they plan to build their brands in the country.

Source: American Brands Are Bullish On China | PYMNTS.com