2PM - No. 772: 8:24 AM

CPG wars / Quartz: Coca-Cola is taking aim at the Gatorade brand owned by its arch-rival Pepsi by buying BodyArmor. Coke, which already owns 30% of the sports drink, is spending $5.6 billion to gain total control of the brand, the Wall Street Journal reported. The deal values BodyArmor at $8 billion.

Kobe puts up 81 again: With the purchase, Coke is buying out athlete investors including James Harden, Mike Trout and Kobe Bryant, who served on the brand’s board prior to his passing. The NBA legend passed away on January 26, 2020 alongside his daughter Gigi, her teammates, and their families. His wife and daughters are set to earn $400 million from his early stage investment of $6 million. 

The deal marks the largest acquisition in Coke history. BodyArmor has become the second largest sports drink brand in the US, following Gatorade and taking over Powerade’s former spot. Coke also owns Powerade, while Gatorade is owned by PepsiCo. BodyArmor is marketed as a more natural alternative to the other two, made with coconut water and without artificial colors and high fructose corn syrup. Healthier drinks are becoming a more significant area for Coca-Cola, which has also acquired a coffee brand and launched an alcoholic version of Topo Chico in a broader effort to be everywhere in the beverage market.

Below is a breakdown of the competition as of this month. The top figure is annual sales to date in 2021: 

But drinks with less sugar and more health benefits in general are an ample opportunity and Coke has learned that authenticity matters after the successful but often-panned 2007 acquisition of Vitamin Water parent Glaceau set the table for healthier solutions. Sorry Mr. Cent, it was just sugary vitamins merged with grape drink. In a reflection of a shifting market, Coke also led a $15 million investment in Dirty Lemon, known for its charcoal-infused lemonade (and notably healthier offering).

BodyArmor also represents a newer generation of athlete sponsors and investors who are aligning themselves with different and more modern brands. BodyArmor, as the better-for-you Gatorade, has attracted Harden and other younger athletes. Coca-Cola is now looking to widen its net to include younger customers. This may be one of their savviest bets to date. The deal was announced at 8:24 AM ET today, in honor of the late athlete's two numbers. Mamba may have cracked a smile today. 

Why are department stores a target for eCommerce spinoffs?

eCommerce / Retail Dive: The Macy's DTC revenue run rate will make the property far more valuable to shareholders than the Saks transaction has.The reasons for temptation is clear for Macy’s, which was not far from bankruptcy during the pandemic. Macy’s has already been closing underperforming stores and testing new, smaller store models in order to lighten its retail load. Still, there’s fear that the cash-in would be quick and short-lived, and the move isn’t a fix-all. "The motivation behind extracting the eCommerce side of a retail business is largely, if not entirely, financial, stemming from Wall Street's deep devotion to tech-oriented companies. So far, though, it's been applied just to department stores — if two only hypothetically — and not specialty or big-box retailers."

Black Friday Special: Conversion Bear has partnered with 2PM Inc. throughout the month of November to help brand retailers sell more products. They're offering a 30-day trial during the year's most important month. You're going to want to be store #2. 

Snap, Facebook, Twitter and YouTube lose nearly $10bn

Data / Financial Times: Apple iOS 15 is designed to further wean us off of our favorite social platforms. Snapchat, Facebook, Twitter, and YouTube have lost "around $9.85 billion” in ad sales according to this report. It's clear that Apple wants to lead in advertising and it may just do so. Consider that iOS 14.5 led to a 3x growth in ad network for Apple. "Mike Woosley, Lotame’s chief operating officer, said advertisers are now getting less bang for their buck on iPhones. He gave as an example a men’s underwear brand that would have gained one customer for a $5 ad targeted at 1,000 men."

Solo Brands CEO says his company has cracked the code 

$DTC / Business Insider: As I explained in Club EBITDA, retail is an EBITDA sport and this outcome is more than encouraging.  It's great to see more brands optimize for profitable growth. "Solo Brands went public Thursday with the "DTC" ticker. CEO John Merris said he wanted the company to be a model for how DTC brands could grow sustainably. He took a swipe at other companies that went public without being profitable."

Why DTC brands are opening stores with ghost-retailers

Retail Real Estate / Forbes: This is a new approach to testing physical retail. Leap uses "data, systems, and scale" to run retail stores on behalf of modern brands. Here's a list of other properties. "A full-time retail team is costly given the changing retail landscape of more eCommerce and fewer physical stores. In addition, it’s evident through the pandemic that there is a greater risk to signing leases directly and managing retail in-house. But ultimately, brands desire an omni-channel presence, so having a store of some kind is essential. So, why would a brand risk figuring it out when it could rely on a ghost-retailer?"

From bootstrapped to acquired by Assembly in a nine figure deal

Brands / GeekWire: In a comment to 2PM, Assembly CEO Sandeep Kella explained the significance of this deal: With commerce increasingly being everywhere, it’s going to inevitably lead to advertising being everywhere. It’s already happening - when you look at how fast Walmart, Instacart, and Amazon DSP are growing - marketplace advertising ecosystems are rapidly growing and essential to success for eCommerce merchants. "Pacvue flew under our radar here at GeekWire, as it quietly bootstrapped its way to a large acquisition. The 4-year-old company provides advertising and sales tools to online retailers selling products on Amazon, Walmart, Instacart, and other marketplaces.”

By 2PM: Read up on the "Intuit of DTC" in a recent memo of ours. 

A new market emerges for online delivery: 10-minute groceries

A. New Class System / Wall Street Journal: The new class system is simple: either you are above the algorithm or beneath it (on left). On-demand delivery is the biggest tell. Either your life allows you to command from the comfort of your home or hybrid office, or you are being told where to be within 15 to 60 minutes. "The new fast-delivery startups use small warehouses known as “dark stores” staffed by fully employed personnel. Executives say that employing a dedicated staff to deliver their companies’ own inventory of products allows them to offer faster delivery times and a more consistent quality of service compared with existing delivery companies, which typically employ gig workers to ferry products sold by third parties."

Remote-first work is taking over the rich world

B. New Class System / The Economist: This is the life that many Americans tweeted, Instagrammed, TikToked, and Facebooked about about over months of remote work and quarantining. Are we surprised that more of the workforce wants the same hybrid experience? That a large number of workers seemingly evaporated into thin air? It makes sense to believe that a number of them are now positioning themselves for work arrangements that allow for hybrid sensitivities. "Most office workers remain steadfastly “remote-first”, spending most of their paid time out of the office. Even though a large share of people have little choice but to physically go to work, 40% of all American working hours are still now spent at home."

TRENDING ESSAY: We are close to dropping the “e” for good. As the metaverse takes shape, there will only be commerce.

The pivot from Facebook to Meta is far less surprising than you may believe. Mark Zuckerberg understands that agglomeration will be digital. What does that mean? Agglomeration economies are the benefits that come when firms and people locate near one another together in cities and industrial clusters. [1] The 20th century’s period of suburban hyper-development relied on this principle. Commerce followed. This Zuckerberg quote sounds like a mixed-use suburban development for a reason: the concepts are quite similar.

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