Good morning,
CMG, PZZA & OLO
We are removing both CMG, PZZA, and OLO from the SHORT list. First, Digital and delivery are alive and well in the Restaurant industry, and we are refining our longs/shorts with this thesis. This is also consistent with our bullish thesis on DASH. Second, CMG posted an amazing quarter, much better than we had thought possible, despite our personal experiences with eating at the chain. As CMG said last night, digital occasions are holding up better than expected, which is leading to better results in 2H21. While uncertainty still exists with the potential impact of the Delta variant, as well as the pace of the economic recovery, the companies are guiding to “low to the mid-double-digit range, which implies a nice sequential acceleration in our geometric 2-year.” Importantly, there appears to be little resistance to the company raising prices on its delivery menu. Finally, the strength in digital and delivery will benefit PZZA and OLO, which does not make it a compelling short, despite the aggressive valuation for both companies.
GoPuff is getting into the restaurant business.
GoPuff has unveiled plans to open delivery-only kitchens inside its micro fulfillment centers across the country. This is the official convergence of online convenience and restaurant delivery channels. GoPuff Kitchens marks a new phase in the evolving business of last-mile delivery. Although DoorDash and Uber Eat now deliver from various verticals, including restaurants, grocery stores, and pharmacies, GoPuff appears to be the first to bring all of those segments under one roof. It stocks more than 3,000 products, including snacks, groceries, health and beauty items, and pet supplies, and will now be running its own restaurants. GoPuff offers a lot of value to the consumer, as it charges a flat $1.95 fee per delivery and looks to be more efficient with larger tickets because of the variety of products for sale. This is possible through a network of hundreds of our own micro-fulfillment centers, and now, kitchens. GoPuff Kitchen's menu will include pizza, chicken tenders, salads, coffee, breakfast sandwiches, and more across all-dayparts. The company said the all-electric kitchens would have no open flames, odors, propane gas or fryers, but bring into question the food quality they serve. They have a modular design that allows for interchangeable menus and equipment depending on the market. GoPuff has a network of more than 450 sites across the U.S. and U.K., most of which operate 24/7. The company said it delivered "hundreds of thousands" of food orders through a pilot program in 20 micro fulfillment centers in Miami, Tampa, Nashville, Philadelphia, Austin, San Antonio, Phoenix, Scottsdale, Tempe, and Mesa, Ariz. It plans to open more kitchens by the end of the year. The kitchens build upon Gopuff's acquisition of delivery-only coffee shop Bandit last year. That deal laid the groundwork for Gopuff's fresh food business and gave it a leader in Bandit co-founder Max Crowley, who is now in charge of GoPuff Kitchen.
UBER Goes all in on Grocery
Uber Technologies is expected to close on its deal to acquire the shares in the grocery delivery app Cornershop this week. Following the transaction, Cornershop will become a wholly-owned subsidiary of UBER. Cornershop is the leading grocery delivery service in Mexico and Chile. It expanded to the U.S. through a majority acquisition by Uber last year. Uber would acquire the remaining 47% of Cornershop for about 29 million Uber shares. Cornershop’s financial results are already fully consolidated in Uber’s financial statements given the company’s existing majority ownership; therefore, no change is expected to the company’s gross bookings, revenue, or adjusted EBITDA due to the transaction. On the last earnings call, Uber CEO Dara Khosrowshahi described grocery as a “global initiative” for the firm and suggested the U.S. would be a long-term play for UBER as it battles an entrenched Instacart and Doordash. “Grocery is a potentially significantly larger total addressable market than food. It is much earlier in the development life cycle regarding the percentage of groceries that have gone online. … In the U.S., we have a very strong competitor in Instacart and others. And I think the U.S. is going to be a battle that we’re going to be in for some period of time. We expect grocery to be a pretty significant percentage of our business, 18 to 24 months from now and more importantly, five years from now.”
UBER is followed by @Hedgeyeindstrls
Function in disaster; finish in style.
Howard
