- long-tail exposure and DTC brands
- jump in acquisition cost
- Instacart and future of (virtual) grocery shopping
- data in CPG
Tag: Business
Airbus A380 to Stop Production… Officially
The European aerospace group said it had made the “painful” decision to stop making A380 after Emirates, the biggest customer, reduced an outstanding order for 53 planes to only 14. [The Guardian]
Airbus announcement on February 14 – capital market liked it.
A History
A380 is the world’s largest passenger airliner, a wide-body aircraft manufactured by Airbus. The project was announced in 1990 to challenge the dominance of the Boeing 747.

Boeing’s 747 project had its origin in a US Air Force requirement for a large heavy-lift transport carrying up to 750 troops over long distances. Losing that contract, however, made Boeing to pursue it in high-capacity commercial jet transportation. [Air Force One, the presidential aircraft version of the 747 will be modified based on 747-8; Boeing received the contract in July 2018 – a $3.9 billion contract to build two, due to be delivered by December 2024]
Boeing’s board of directors decided to launch the 747 in March 1966, making its decision public in April, along with an announcement that Pan Am had placed its first order for 25 at $20 million each. First flown commercially in 1970 with Pan American Airways, the 747 held the passenger capacity record for 37 years.
Conceived as a response to the Boeing 747, the Airbus A380 development program was officially launched in June 1994. It is the largest jet airliner ever built and is the world’s first double-deck passenger aircraft. First flight took place from Toulouse, France on 27 April 2005, A380 completed its first commercial with Singapore Airlines on October 25th 2007 with 471 passengers on board (breaking 747’s record).
Commercial Success?
A380 took the realm and record in terms of manufacturing and engineering, but is often considered an unsuccessful commercial product. As of January, Airbus had received 313 firm orders for the passenger version of the plane, of which 234 had been delivered.

But its target was to sell 700 in total. The whole programme is thought to have cost $25bn (£19.4bn). [BBC]
Consumers like A380 but not airlines do not
The average price of Boeing’s 747-8 as of January 2018 is at $402.9 million and $403.6 million for the passenger and freighter version respectively. The current list price is up 4% at $418-419 million.
The average list price of the Airbus A380 is 10% more expansive, based on its 2018 average list price of $445.6 million.
Common concerns and considerations…
- too large, hard to fill and thus inefficient
- high fuel prices, high operating cost and environmental concerns
- airlines looking at Boeing’s new family of 777s
Now, the world’s largest passenger airliner will not be produced after 2021.
The Economics
The rising global demand in the 21st century is the underlying theme, especially the rapidly rising number of air travelers in the Asia and Middle East market.
The center of Airbus’ pitch for the A380 in the early 2000s was the notion that the core of the long haul business model would be so-called hub-to-hub flights. [AirwaysMag]
On the other hand, Boeing is pursing the point-to-point (more accurately hub-to-spoke) thesis.
Boeing’s 777X, specifically the larger 777-9X variant, offers similar performance (the A380 can fly slightly further) to the A380. And pretty much every other carrier with a hub network large enough to support an A380 has ordered either the Boeing 777X or the Airbus A350. [AirwaysMag]
The airline industry is planned and started as fragmented. Then comes bankruptcy and consolidation.
And airlines are also sharing world hubs or exploring second/third tier cities. (it’s not common for a single airline to secure the majority share of an international traffic hub – which would make A380 a wise choice/investment)
Airbus may have bet that countries like China and India will have large demand centered around one or two cities. But the reality is the opposite. They have planned ahead to spread out and made several international hubs.
First tier airports/cities in terms of size will add new members to its list. That’s how the predicted increase in demand mostly absorbed.
「Video of the Week」Talk with Boeing CEO Dennis Muilenburg
The David Rubenstein Show in August 2018, when Boeing’s share price is ~$350.
https://www.bloomberg.com/news/videos/2018-08-08/the-david-rubenstein-show-dennis-muilenburg-video
JPM Coin…
So JP Morgan has created its coin… JPM Coin
Three early applications:
- Cross-border payments. The cryptocurrency will enable Chase to settle international payments between clients in real-time, and at any time of day (which does not happen today).
- Securities transactions. Rather than relying on wires to buy a debt issuance–which would create a time gap between when a transaction settles and when investors get paid–institutional investors can use the token to generate instant settlements.
- Transaction consolidation. Clients of J.P Morgan’s treasury services business will be able to replace the dollars they hold in subsidiaries across the world, enabling them to move money to subsidiaries around the world with greater fluidity.
“The JPM Coin will be issued on Quorum Blockchain and subsequently extended to other platforms. JPM Coin will be operable on all standard Blockchain networks.” — JPM
Here is what others are saying/reporting…
“In trials set to start in a few months, a tiny fraction of that will happen over something called “JPM Coin,” the digital token created by engineers at the New York-based bank to instantly settle payments between clients.” — CNBC
“For years, Chase–by itself and with the other big banks–has invested in reducing its reliance on legacy payments networks. Coin, like previous endeavors such as clearXchange, appears to be another example of that strategy to directly control the manner and method by which payments activities flow. If successful, Coin and the Chase Quorum blockchain could find many other uses.” — Charles Potts, Managing Director, First Performance
“It’s a competitive approach by Jamie Dimon to compete directly with Western Union in the $600 billion remittance market where Chase holds the #2 spot and Bank of America is on their heels. Ripple has done all the hard work by paving the way for a blockchain coin network. Our US payment systems are proprietary and not interoperable–the only way to seriously compete is a syndicate like Early Warning with Zelle and The Clearinghouse.” — Travis Dulaney, CEO, PayFi
“It’s an ecosystem play pure and simple. It’s about reducing costs and securing market share.” — Bradley Leimer, Co-Founder, Unconventional Ventures
“It really isn’t an ‘end run’–it’s more like creating a whole new playing field. It’s an acceleration of the continuing erosion of money fiefdoms. Due to margin pressures, money movement will eventually become a free utility. What the JPM Coin starts to enable is the elimination of the payment rails–which is really just a connection of ledgers–because with blockchain, there’s just one ledger. Once you have that shared ledger, the applications go beyond institutional payments to any payment type like remittances.” — James Wester, Research Director, Worldwide Blockchain Strategies, IDC
“The bank is also running a blockchain payments trial launched in conjunction with Australia’s ANZ and the Royal Bank of Canada. As reported, the three banks set up the project in October 2017, aiming to slash both the time and costs required for interbank payments using traditional methods. Called the Interbank Information Network (IIN), the platform is also built on Quorum – which itself may eventually be spun off into its own enterprise.” — CoinDesk
A data/IT system named with “coin”
Think about Gold and US Dollar in the history – Congress acted on Hamilton’s recommendations in the Coinage Act of 1792, which established the dollar as the basic unit of account for the United States; 1900, with the passage of the Gold Standard Act, US government guaranteed the dollar as convertible to gold
Read More On…
Smart Building (1): Data + Management Startups Roundup
Smart building is a hot topic and will be at the center of future real estate, a $217 trillion giant industry.
So what is the core segments of smart building? This blog will provide a roundup of startups in the data + management space.
Comfy (developed by Building Robotics)
Probably most famous for its collaboration with WeWork in 2016, Comfy is an app that lets users to adjust the temperature, lights etc. in the office from smartphones.

Plus a data analysis and insights tool for office managers.

The company was founded in 2012, raised Seed & Series A from Claremont Creek Ventures and other investors including the Westly Group. In 2016, shortly before the WeWork collaboration, a Series B of $12 million was raised. Then in 2018, Building Robotics was acquired by Siemens (in a series of acquisitions) for an undisclosed amount.
Euclid
Euclid is a leading spatial-analytics platform based in San Francisco. With fundings from NEA, Benchmark and other investors, It has built a proprietary analytic offering that uses WiFi signals to understand how space is used without the installation of any additional hardware. It can track the identity and behavior of people in the physical world.

In Feb 2019 (a few days ago), Euclid was acquired by WeWork (“The We Company”). The blog post from The We Company.
Teem
A maker of office management software, Teem was acquired by WeWork in Sep 2018 for around $100 million. Teem has grown from a conference room management tool to include office space management, (office) room display, visitor management, etc.



BuildingIQ
An energy-efficiency focused startup, BuildingIQ listed on Australian Securities Exchang and raised A$20 million in 2015, with an IPO marketcap of A$85 million.
Back in 2013, it raised $9 million from Aster Capital (backed by Schneider
Electric, Alstom and Solvay), the Venture Capital unit of Siemens Financial Services (SFS VC) and Paladin Capital.

In 2018, BuildingIQ acquired Buildingsense, another building data analysis company in Australia.
Flywheel
Formerly known as SCIenergy, Flywheel is a maintenance (task) & energy management startup based in Dallas. Invested by DFJ, Flywheel raised its latest round in 2014 by a group of energy focused funds, led by Braemar Energy Ventures and joined by the Westly Group and others.


Consolidation is coming faster than most could imagine…
Apparel Comparables
Fast Food Comparables
with Yahoo Finance and Google Sheet…
And fast food companies can be such profitable
Apple’s Service Bundle
Apple may know well before the investors that their flagship iPhone would face a slowdown and it needs new growth strategies.
[Read more on iPhone’s sluggish sales and challenges & its recent pricing strategy]
Apple has talked about its services for a while and it’s not limited to Apple Care or Genius Bar (“Physical Services”), but more about Distribution Services.
System/Platform Level
I guess the most obvious change happened in 2016 when a new revenue sharing scheme was introduced by Apple – from a 30% cut to a 15%-cut-after-first-year. And other features were included such as “subscription group“… marching into subscription-based services revenue model.

Apple News

Available in Australia, UK, and US, it’s currently a curated display place for publisher subscriptions. It could be developed into a Toutiao-like app for personalization and could be complimentary with Apple’s Stock app.
And it won’t be surprised to me that in the future you can trade stocks through this app – probably by upgrading to a premium version with other complementary benefits (like news/reports).
Apple Music
Anyway, music is where Apple found its turnaround with iTunes and iPod. Plus, it is the most explored region with established companies and new entrants.

Spotify Premium – $9.99 / month

YouTube Music – $9.99/month

Pandora Plus – $4.99/month & Premium – $9.99/month

Apple TV & Streaming Channel
Apple has long reported to be interested in contents distribution especially video. And rumors about an acquisition of Netflix didn’t come from nowhere.
A New York Times report back in March 2018.
A CNBC report in October 2018 – Apple plans to give away original content for free to device owners as part of new digital TV strategy.
Apple has cash and ability for original contents (and can acquire/build a studio). Apple has educated customer base (thanks for Netflix). Apple has introduced Clip for iOS short videos (think about Snapchat and Douyin, plus its ability in music and messaging). Apple has AppleTV and AirPlay.

There are just too many things to do in this space, broadly speaking.
And the competition is fierce. Netflix, Amazon Prime Video, Youtube TV, Facebook/Instagram TV, Disney/Hulu, AT&T/HBO…
And the AR/VR future…
Let’s see.
Gaming
It might be something new. But Apple could introduce a monthly plan to play most iOS games freely (with some exceptions maybe). Just like what Tencent did with WeChat Read – subscriptions that can read all books on its app.
Let’s see what Steam will do… Steam has subscription-based products, although not a bundle.
A master bundle plan for Apple users in the future? Possible.
India E-commerce Chaos and Complexity
The New E-commerce Regulation in India – Be a participant or an organizer, not both
Starting from February 1, 2019, Amazon India and Flipkart by Walmart, among others, are not allowed to hold inventory and sell to customers.
The rules now bar any entity in which an e-commerce firm or its group companies have a stake from selling on their online platform. This is a problem for Amazon, which had been picking up stakes in offline Indian retailers to boost its market share. (Reuters)
The Regulation In Four Dimensions
eCommerce in India can be broadly categorized as:
- domestic and cross-border
- B2B and B2C
- marketplace and inventory based
- single brand and multi brand
B2B: 100 percent FDI is allowed in companies engaged in B2B eCommerce, e.g. Walmart and Alibaba can operate a cash & carry (B2B) business.
B2C Marketplace: 100 percent FDI is allowed in the online retail of multi-brand goods and services B2C under the marketplace model, e.g. Amazon, Flipkart, Snapdeal. Any eCommerce entity providing a marketplace cannot exercise ownership over the inventory and is not permitted to sell more than 25 percent of total sales through its marketplace from one vendor to their group companies. There are also conditions restricting to offer discounts by marketplace.
B2C Inventory-Based: FDI is not allowed in inventory-based model of eCommerce.
Single Brand: A single brand retail trading entity operating through brick and mortar stores is permitted to undertake retail trading through eCommerce subject to local sourcing requirements. Food retail: 100 percent FDI is allowed for trading (including eCommerce) of food products manufactured or procured in India.
Multi-Brand Retail: No FDI is allowed in companies which engage in multi-brand retail trading by means of eCommerce.
Source: https://www.export.gov/article?id=India-e-Commerce
Other Conditions
- E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
- An e-commerce entity will not permit more than 25% of the sales value on financial year basis affected through its marketplace from one vendor or their group companies.
- In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.
- E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.
- The government has also prohibited e-commerce firms from pushing merchants to sell any product exclusively on its platform. The sellers can, however, choose to have a preferred online partner.
Source: https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17.pdf
Some Context
Indian marketplace is dominated with many small shops and business. If foreign investment in multi-brand retail is to be permitted, then the business of these small shop owners will be in danger. Consumers will be spoilt with choices and due to high competitions, prices will go down, thus these multi-brand retail establishment will be able attract consumers at a large scale. However, in case of single-brand retail shops, they usually bring premium or luxury goods in the market so as such they are not in direct conflict with Indian small business. (blog.ipleaders.in)
「Podcast of the Week」Restaurant and Food – Not Easy Business
Two Bloomberg interviews…