Business – Page 10

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

Luckin Coffee (1)

Luckin Coffe (Nasdaq: LK) released its Q3 quarterly earnings last week.

More than 700 new stores opened in Q3. This might be fastest growing coffee chain in history.

Luckin grew to 3,680 stores from 9 store at the end of 2017.

You can’t even see the number for 2017 Q4 in the chart below.

「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

「News of the Week」Walmart Continues To Grow

If we need one figure this week to tell how the US economy is going – then the Walmart US store comparable sales is the one: 3.2% yoy.

WSJ – Walmart’s Sales Growth Streak Hits Five Years

Dots to connect: inflation, Walmart’s online sales growth, international sales growth, tariff impacts, etc.

An Update On Cannabis Market

One year after the legalization of recreational use of cannabis in Canada, and following up on the previous discussion of those public companies gathering partners/supports, ramping up production and declines in ASP, here is an another snapshot as of 2019 Q3.

The number of kilograms sold is soaring.

But ASP keep falling.

And here is the graph for aggregated market cap of cannabis companies as of 11/15.

Growing Number Of Paying Users On China’s Streaming Platforms

Paying to become a member of a video platform has gradually become mainstream in China, at least for the younger generations.

Consumer behaviors have been changing from searching for free sources (as there are fewer of them now than before) to paying for high quality and hassle-free subscriptions.

The leading platforms, iQiYi and Tencent Videos, have paying members exceeding 100 million in 2019 Q2 and 2019 Q3 respectively. The paying percentage is around 20% for a 500 million MAU (iQiYi 2018 Q4 MAU 454.5 million).

Alibaba’s Youku is only little behind (numbers are not disclosed).

Similar trends are found in Tencent Music and NetEase Music. While paying percentage is ~4-5%, it is picking up. Tencent Music’s online music paying users grew 42.2% yoy to 35.4 million (5.36% of 661 million MAU).

Emerging platforms like Bilibili are also seeing more paying users percentage.

DTC Brands Stocks Revealed Their Margins

As Direct-to-Consumer (DTC) businesses are booming and going public as companies, their earnings report gave us some insights into their gross margins and what those products cost the companies to produce (cost of goods sold is the flip side of gross margin).

Canada Goose, in their Second Quarter Fiscal 2019 results, said that DTC gross margin is 75.6%, a 40 bps increase from last year.

cost of goods sold: 24.4%