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Consumer Weekly: AMZN, TSLA, DEO, BUD and Breaking the Status Quo

Humberto Rocha | September 22, 2022

Whether it’s relentlessly breaking into a market dominated by two players or making sure your competitors aren’t gaining on you, we have valuable insights from the top expert call transcripts published last week by Stream by AlphaSense.

We tune into how e-commerce giant Amazon (AMZN) offers clients real-time data in a way that stays ahead of retailers Walmart (WMT) and Target (TGT), and what an expert sees as a cloudy horizon for electric carmaker Tesla (TSLA) due to its exposure to a difficult real estate market at a time when rivals are recharging their batteries (see what I did there?). 

We also pick out a bullish case for heavyweight alcoholic beverage company Diageo (DEO) and a warning to beer-based alcohol businesses like Anheuser-Busch InBev (BUD).

Take a look at our top expert call transcripts from last week based on highest total engagement. Break your investment research status quo: sign up for 14 days on us here. 

Top 10 Expert Call Transcripts – Consumer Cyclicals

  1. AMZN (Amazon.com Inc) – Customer Thinks AMZN’s Complete and Sustainable Ecosystem in Advertising Is an Advantage That Is Sustainable Long-Term
  2. POOL (Pool Corp) – Customer Sees Normalization for New Pool Construction but Is Positive on Industry Resilience Particularly in Texas
  3. AMZN (Amazon.com Inc) – Competitor Believes the Single-Cloud Approach Is Superior to Multi-Cloud Despite the Inevitable Lock-In
  4. AMZN (Amazon.com Inc) – Former Chief of Staff Thinks AMZN Could Benefit From Better Employee Communication but It Is Improving
  5. EXPE (Expedia Group Inc) – Former Director Doesn’t See GOOGL Travel as a Big Factor
  6. QSR (Restaurant Brands International Inc) – Former Manager of Franchise Performance Thinks RBI Has Done a Good Job Incentivizing Employees and Improving Franchisee Relationships in Recent Years After a Rocky Start
  7. NKE (Nike Inc) – Former Sr. Director Thinks Value Segment Is an Opportunity for NKE
  8. TSLA (Tesla Inc) – Former Real Estate Manager Believes TSLA Must Continue Market Expansion to Maintain Moat With Newcomers Such as RIVN and LCID
  9. EXPE (Expedia Group Inc) – Former TRVG Manager Believes EXPE Has Room to Grow in Asia
  10. F (Ford Motor Co) – Former Sr. Product Designer Believes F Has Taken UX Seriously and Implemented Positive Changes to Attract and Retain Customers

The ad business has become increasingly tight, with AMZN breaking into what was once recently seen as a duopoly between Facebook’s parent company Meta Platforms Inc. (META) and Google (GOOGL). AMZN has plowed into the digital-ad space, with The Economist saying it’s expected to take up 7% of worldwide digital ad-revenue in 2022 alone, a sizable chunk when you consider it was only taking only 1% of the same just six years ago. 

What places the e-commerce giant in a good spot is its use of first party data, protecting it from the current and incoming anti-tracking measures like the ones that Apple Inc. (AAPL) has pushed in the name of privacy. While AMZN offers clients a self-service platform detailing its clients’ performance and other metrics, WMT and TGT are struggling.  

“For example, Amazon has built out an entire ad display network. You can build everything in there. They have specific inventory. They can connect everything all the way from TV inventory, to display, to search, to who bought that product.

Walmart and Target are in a similar place where they’re trying to figure out the best way for them to deploy their first-party audiences for brands to utilize… The only problem right now is that some of these other retailers, their product is not built out enough yet or it doesn’t work to the standard that brands have essentially set with Amazon…

All the other retailers outside of Amazon are behind in the sense of what information they give you, what metrics they give you, what you can actually run, what placements you show up on. That’s the battle right now. Brands are ready to look at this omnichannel approach from how they deploy their e-commerce media dollars. A huge factor in that is ‘What are the actual products available and how can we best utilize them?’ If a Target or a Walmart doesn’t have the products needed or it simply doesn’t show the performance that brands expect or at least need to show that it’s working, then while brands have a huge sum of money ready to be deployed to Walmart or Target or Home Depot or whoever it is, they’ll essentially just say, ‘Well, okay, not yet. You guys haven’t built it out yet.’”

Director, CommerceIQ (Current) 

In the electric vehicles sector, TSLA has seen competitors like Rivian (RIVN) ramp up their efforts in recent years – ahem, like this company’s most recent deal with AMZN – but the factors that an expert says serves as a “moat” to keep TSLA ahead of the competition are the company’s number of car sales and deliveries. 

In order to keep that, though, TSLA  needs to dish out more cash on real estate, which this expert sees as an increasing liability due to problems within and without the company. 

“I think that if they’re going to continue to deliver higher numbers quarter over quarter, that they still need more real estate. I hate to say this because it sounds obnoxious, but when I think of market share and what people want, I still feel like Tesla has an advantage over the others. [Big automotive groups] already have those existing manufacturing lines where they can produce cars quicker and more consistently. I think that’s a big risk for Tesla.

I think the market growth is coming from delivering cars as opposed to being able to service them. I think more money was made on selling cars than servicing them. It was non-traditional in that way, whereas a lot of dealerships make their money on servicing vehicles. When I was there, Elon had this mentality that he didn’t want to make money servicing cars. He just wanted to sell as many cars as possible. If they’re delivering more cars, for sure, they need more places to service them, but I think if they build another plant, I think that will say a lot…”

Manager, TSLA (Prior)

What about if TSLA expanded into the real estate business? Perhaps franchising locations? According to this former TSLA manager, the opportunity to enter the real estate business is there but the company prefers to keep a centralized corporate control. 

I think that Tesla becoming a real estate company would be incredibly lucrative, and I don’t think they’ll ever do it. I think there’s too many egos, and I think the same thing goes for the franchised or traditional dealership model. I think there’s too much ego, and there’s a huge lack of control in doing that dealership model. I can’t fathom that ever happening.”

Manager, TSLA (Prior)

While RIVN is still reeling from dealing with unhappy customers who were forced to either cancel their order of the least expensive version of the RT1, or spend another $6,000 for upgraded trim. On the plus side, at least the company has been able to poach talent from TSLA. 

“I feel like this is public knowledge with a little bit of digging, but I think it’s super interesting. I would say that probably 75% of the people that I worked with at Tesla, that I worked closely with cross-functionally went to RIVN. I think they’ve also got a lot of market knowledge that’s gone from one to the other.”

Manager, TSLA (Prior)

Top 10 Expert Call Transcripts – Consumer Staples

  1. DEO (Diageo PLC) – Former Competitor Thinks DEO Has Strong Brands and a Dedicated Salesforce That Will Push Product
  2. PEP (PepsiCo Inc) – Former Sr. Finance Manager Is Bearish on PEP in Light of Supply Chain Issues
  3. HRL (Hormel Foods Corp) – Former Territory Manager Believes Supply Chain Problems Are Here to Stay
  4. MDLZ (Mondelez International Inc) – Former VP Believes MDLZ Is Facing Continued Pricing Pressures in Canada
  5. LW (Lamb Weston Holdings Inc) – Former Manager Believes LW Has a Great Relationship With Its Suppliers and Superior Plant Infrastructure Both Act as Competitive Advantages
  6. BUD (Anheuser-Busch InBev SA/NV) – Former VP Is Bearish on the Supreme Reign of Major Beverage Companies
  7. PM (Philip Morris International Inc) – Former Regional Manager Believes IQOS Reinvigorates Customer and Employee Engagement for PM
  8. MNST (Monster Beverage Corp) – Former Competitor Thinks MNST Has Great Social Media Presence and Is Very Ingrained Into the Community
  9. PM (Philip Morris International Inc) – Former Government Affairs Director Believes a Doubling of Prices for Premium Cigarettes Due to Tax Increases Is Hurting Profitability for the Industry in the Middle East
  10. KO (Coca-Cola Co) – Former Innovation Strategy Director Sees Continuing Profitability Gains for KO From Shifts in Container Size

From our top consumer staples transcripts, two stand out: DEO and BUD. The alcoholic beverage giants have seen their stocks go down on a year-to-year basis. In recent weeks, DEO sold Archers Peach Schnapps to Dutch liqueur company DeKuyper Royal Distillers and hired a new president for its U.S. spirits operation. It hasn’t helped that both DEO and BUD are also experiencing rising input costs, namely through higher commodity prices like aluminum and barley. 

A former competitor believes that DEO is on the come up, though, as the company is able to maintain the premiumization of smaller brands even after acquisition:

Analyst: “Now, I wonder though since Diageo has so many products, the one thing they don’t have is the smaller brand price premium. When something is not as well-distributed… I just wonder if they lose that price premium there because of these smaller brands that are independent and that can do it. 

Being so large versus somebody that may have 100 barrels of something of whiskey or whatever it is, they’re a smaller distiller and they can charge that price premium because the quantity is limited.”

Expert: “Yeah, there’s going to be some of that. I think that you might find where there’s a well-known whiskey or a brand that has caught on, it’s won awards or somehow it’s gotten this following. People anticipate it. It’s going to come out every year and they’re looking forward to it. They’re willing to pay a premium on it. I think those are probably few and far between.

I think just in a cost efficiency, Diageo will be able to squeeze so much more profitability out of the system that the things that that small guy is doing that came at a higher price, Diageo would just save money on would be better and, Diageo, they’re capable of making small batch, small things and selling that as, ‘Hey, this is a really special thing.’

I think of Beam. Jim Beam can do it too, but they have some high-end Japanese whiskey that they treat differently. It goes into a different selling division or a different class. I think Diageo can do that too. I don’t think it’s a huge advantage. I think it’s pretty few and far between and the fact that they can just do it better and more efficiently and maybe it doesn’t have the same romantic aspect of this is the whiskey maker, John Burton … You might not have some of that, but I don’t think it’s a disadvantage for Diageo.

Vice President, Beam Suntory (Prior)

A former BUD director has seen growing innovation on behalf of smaller companies – and those that haven’t been acquired by bigger fish – as a factor gnawing at the bigger players’ profit margins. 

According to the expert, core brands like Miller Lite, Coors Lite and Bud Light reached a peak in the late 2000s, before the craft brewers came onto the scene followed by the explosion of seltzer brands. Ever since, these brands have seen their market share dwindle. 

“I think you’re just seeing the continued fall of some of those core brands that just aren’t selling as much. Part of that is the growth of crafts and these new innovations, seltzers, and all that. 

I don’t know if it’ll ever be good again [for core brands like in 2008]. Yeah, I think [core brands are] trying to counter those trends through innovation where they can. I also think that they are, while they might not be able to recapture the share in terms of volume, they are trying to make up for it in pricing and margin growth and trading consumers up from those segments to more premium segments [or spirit-based seltzers] like we talked about earlier with Michelob ULTRA or [a Budweiser] or whatever the equivalent will be across other suppliers where those are more profitable on that margin basis.

Vice President, BUD (Prior)

A former BUD director says that the battle to acquire smaller companies at a premium has been part of a larger trend of players trying to touch upon all corners of the alcohol market. Spirit companies are about to become a huge problem for beer companies, the expert argues, as ready-to-drink alcoholic beverages are the fastest-growing category, specifically those based on tequila.

“I think tequila is the fastest growing and most popular spirits segment. I think over the next year or two, you’re going to see tequila-based seltzer or RTD (ready-to-drink) drinks take off. [frst] in the tequila-based RTD segment and then potentially gin to follow.

I’d say the last piece is on the spirits’ equalization thing that we were talking about earlier. I think it’s not a matter of if, it’s when. I think that’s going to shift the playing field dynamic in a big way for the spirits companies. They’re going to have an opportunity to either make a lot more money or drop their price and threaten the big beer brands in a much bigger way than they are today.

I think it’s also from the supplier perspective where they’re testing a lot of new things across total alc-bev. Whether it’s wine-based or spirits-based or malt based or non-alc, you see all of these suppliers trying to have a presence in all of those categories.

Vice President, BUD (Prior)

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