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SoftBank Has An Easy Strategy – Mobile Payment In Every Emerging Economy

SoftBank might be the investment firm outside of China that understands mobile payments the best.

Tapping Ant Financial and Tencent’s interests in overseas markets, SoftBank has investments in every major emerging economy.

Southeast Asia: Grab

SoftBank inject another $2 billion earlier this year into Grab. It first invested in GrabTaxi back in 2014 with $250 million Series D, making itself the largest shareholder. GrabTaxi then rebranded into Grab in 2016, entering into payment service with GrabPay and other businesses. It also acquired Kudo based in  Indonesia in 2017 to beef up its payment platform.

[Also, in July, Softbank’s Vision Fund and GIC invested $300 million in e-wallet VNPAY’s parent company for Vietnam]

India: Paytm

This week, SoftBank and Ant Financial injected $1 billion into Paytm. The competition intensifies with Google Pay, payments from e-commerce and Facebook’s payment especially on WhatsApp.

Argentina: Ualá

On November 25, Ualá raised a $150 million Series C led by Tencent and SoftBank. Ualá is a mobile banking tech platform and allows users to transfer money, invest in mutual funds, request loans, pay bills and top-up prepaid services.

Mexico: Clip

SoftBank invested $20 million in Clip, leading a $100 million round in May. Clip offers Square-like products for merchant payments, as the country is more relying on cards.

Updates – Mexico: Konfio

On December 3, SoftBank invested $100 million into Konfio, which provides credit underwriting, or SMB loans.

Combining Konfio and Clip will create the Square or Clover in Mexico.

An easy model and bet on those economies.

How Card Networks May Fail: Top Merchants With Gift Cards + Mobile Wallet

In the US, as top merchants getting bigger, they are able to drive the adoption of cash-like mobile wallets, internalizing more transaction infrastructure, cutting payment networks’ growth & profitability.

We have already seen the success of Starbucks’s mobile order & pay, launched at the end of 2014. The combination of its mobile app, (gift) cards and cash-like value in the app reduces the overall transactions costs of Starbucks purchases. Other benefits like managing the loyalty program and mobile orders/pick-ups makes it the role model that big merchants (like Walmart) wants to follow.

Currently, some merchants are offering co-branded credit cards at the same time. But I think the long-term goal is to promote the usage of their own mobile app and cash (e.g. Starbucks credit card comes with an annual fee that I think is discouraging people from using the card in the long-term but can be used as a market tool for now). They can reduce (most of) the transaction costs and own the data (e.g. payment networks can only touch the reloading part of Uber Cash, but not the transactions made via Uber Cash – no fees, no data).

「What’s News In China」

Alibaba raised ~$11.2 billion in Hong Kong Stock Exchange, offering stocks at HKD$176 per share. With Hong Kong exchange relaxed its rules around “one share, one vote”, Alibaba (NYSE: BABA) is able to list its shares on HKEX again. It is the world’s largest listing so far this year. The overall sum raised could rise to nearly US$13 billion if the underwriting banks exercise an option to sell 15% more shares. // WSJ

Walmart announced on Nov 21 that it plans to add 500 new stores in China over the next five to seven years. It will also remodel more than 200 stores in China over the next few years, adding features such as self-service cash registers where customers can pay using facial recognition. The company’s China sales grew 6.3% last quarter, higher than its 2.5% growth worldwide. // CNN

Kuaishou (快手), the main competitor for Douyin (Tik Tok) in China, to become the exclusive partner for 2020 Chinese New Year Gala. The Chinese New Year Gala (春晚), or Spring Festival Gala, is the most watched annual television broadcast and Kuaishou will be the exclusive partner for 2020 to send red pockets (红包) to audience. Last year, Baidu was the exclusive partner to promote the use of its digital wallet. spending over ¥1 billion in red pockets. Kuaishou has achieved 200 million DAU in 2019 and the target is 300 million. // Jiemian

「News of the Week」Japan’s New Internet Giant

WSJ – Yahoo Japan and Chat App Line Agree to Merge

SoftBank’s announcement

As part of the deal, SoftBank Group subsidiary SoftBank Corp. and Naver said they would buy all the shares in Line not already owned by Naver at ¥5,200 ($47.78) a share. Naver owns 72.6% of Line as of Monday. SoftBank Corp. and Naver will pay ¥170 billion ($1.56 billion) each to buy those Line shares, SoftBank said.

Line Pay has 37 million users and PayPay, operated jointly by SoftBank and Yahoo Japan, has 19 million. (Nikkei)

Source: WSJ, Bloomberg

Dots to connect: competitions in ads, e-commerce, payment in Japan, monetization on 82 million Line MAU, Japan moving to cash-less, SoftBank’s consolidated financial performance, new superapp, etc.

A Meatless Future By CBInsights

  • traditional food companies consolidation/acquisition
  • startup companies making meat out of labs or plant-based products
    • In 2019, one of the world’s biggest alternative protein brands, Beyond Meat, the manufacturer of the plant-based Beyond Burger, went public at a valuation of almost $1.5B

Differences in numbers:

There are other related trends in meal replacement & dairy substitutes,
insect protein and seafoods

Why now:

  • Forces like urbanization, population growth, and a rising global middle class lead to greater meat consumption
  • Alternative protein sources can reduce the negative environmental impact associated with meat production
  • Consumers are seeking healthier food alternatives
  • Advances in ag tech and synthetic biology are enabling high-tech meatless products
  • Meatless consumption could alleviate ethical questions around current meat production practices
  • Alternative meats could reduce contamination, reducing global health problems

Full report here.

Luckin Coffee (3)

Previous post on growth in stores and per store/unit growth.

Now here are some number about the coffee market in the US.

  • 64% of American adults consume coffee every day
  • An average American drinks 3.1 cups of coffee per day
  • Americans drink about 400 million cups of coffee every day
  • Americans drink about 146 billion cups of coffee annually
  • 65% of US adults drink coffee with their breakfast
  • The average price of a cup of coffee in the US is $3.28
  • Coffee shops see a 7% annual growth rate on average
  • The annual coffee retail sales in the US are about $5.2 billion

In China, first we can find a subset of the 1.4 population by taking the ~60% between age 15-45 and ~60% in urban areas -> 500 million.

Then assuming 20% of the target 500 million customers will visit/purchase in stores like Luckin (-> 100 million) twice a week (100 cups per year) -> 10 billion cups per year.

The current average monthly transacting customers is 9 million.

Using average price of $2 per cup, the estimated market can reach $20 billion easily in 1-2 years.

And given that Luckin is expanding into other categories like cream cheese teas, fruit teas and juices, twice per week is not an overestimate.

An annualized revenue of $2 billion is only 10% of the addressable market.

Luckin Coffee (2)

Previous post on Luckin’s store counts growth.

As Luckin also reported the number of items sold, we could get the average net selling price, which is growing slowly. The discounts on items sold have already been considered in net revenue. (Free items are included in Sales & Marketing expenses).

Given that the menu prices are usually between RMB 21-27, the overall discount is still over 50%.

Another chart tho, is net product revenue per store. The number of store is averaged between the beginning and the end of the quarter. Since more stores are maturing, this figure is growing significantly.

In comparison, Starbucks International has a little bit less than $1 million per store, KFC China has a little bit over $250k per store.

  • Starbucks International company-operated per stores revenue $~0.9 million
    counts as of CY2019Q3: 5,860
    revenue as of CY2019Q3: $5,256.2 million
  • KFC China company-operated per stores revenue $~0.27 million
    counts as of CY2019Q3: 4,925+863 = 5,788
    revenue as of CY2019Q3: $1,546 million

「What’s News in China」

BeiGene (NASDAQ: BGNE; HKEX: 06160), announced on Nov 14 that BRUKINSA™ (zanubrutinib) has received accelerated approval from the US FDA as a treatment for mantle cell lymphoma (MCL) in adult patients who have received at least one prior therapy. This is the first time that the FDA approved a drug based on efficacy data that is predominantly from China. // reuters | BeiGene

Trip.com (NASDAQ: TCOM), formerly Ctrip.com (Nasdaq: CTRP) and TripAdvisor (Nasdaq: TRIP) announced a strategic partnership on Nov 6 to expand global cooperation, including a joint venture, global content agreements and a governance agreement. TripAdvisor will own 40% of the joint venture. Trip.com shall acquire up to 6.95 million TripAdvisor shares or TripAdvisor shares valued at USD317.6 million through open market transactions within one year following regulatory approvals. Trip.com will have a nomination right for one TripAdvisor board seat commencing upon the relevant regulatory bodies’ approvals of the transaction. // TripAdvisor

Luckin Coffee (NASDAQ: LK), a coffee chain founded in 2017 in China and operating only 9 stores that year, grew to 3,680 stores at the end of 2019 Q3, with quarterly revenue expanding more than 6-fold to RMB1,493.2 million from RMB227.1 million a year ago. Also mentioned in the earnings release, Luckin “strategically launched Luckin Tea as an independent brand and developed our new retail partnership model, .. engaged in ongoing discussions with potential strategic partners to set up joint ventures in markets outside of China.” // Luckin Coffee

Source: luckincoffee.com