Coca-Cola’s recent announcement that it will discontinue its Honest Tea brand at the end of 2022 sent shockwaves through the food & beverage industry. Honest Tea was a beloved brand that pioneered the organic, low sugar beverage movement in the early 2000s, and founder Seth Goldman is an industry icon who lives the values of the brand. After Coke acquired Honest in 2011, the brand grew to $500 million of revenue by 2018. At that time, Coke executives predicted that Honest would be a “billion dollar brand” within a few years. Instead of achieving this goal, Honest Tea will be phased out by the end of the year. The Honest Kids beverage brand will remain in Coke’s portfolio.
The discontinuation of Honest Tea is reflective of a trend at Big Food to pare down brand portfolios. Coke is in the process of streamlining its portfolio from 400 to 200 master brands. Consumer favorites Tab soft drinks, Odwalla juice and Zico coconut water were among the early casualties of this portfolio optimization.
Coke is not the only Big Food company selling off smaller, non-strategic brands. The last few weeks have seen Mondelez announce the planned divestiture of its Trident and Dentyne gum businesses as well its Halls cough drop brand. General Mills is selling its Hamburger Helper and Suddenly Salad brands to a PE-backed food company. Even Bantam Bagels, of Shark Tank fame, is being discontinued by parent company Lancaster Colony, who cited “no foreseeable path to profitability” as the reason for exiting the bagel brand.
The last five years have seen a dramatic increase in M&A in Big Food. In 2020 and 2021, food industry M&A totaled $100 billion, according to research firm Global Data. During this period of increased M&A activity, virtually every Big Food company also established an in-house venture capital unit. These in-house venture firms were charged with making investments in early stage food & beverage businesses, with the ultimate goal of scaling some of these businesses to a size where they could be acquired by the parent company.
Smaller brands have benefited from Big Food M&A and investing strategies during this period. Many smaller brands were acquired under the premise that an innovative small brand that is “trend-right” with consumers could scale within platform of a large food company. The goal was to acquire brands that could generate $500 million plus in annual revenue.
Recent news like the Honest Tea discontinuation points to this cycle ending. Big Food is now looking for scale in its brand portfolio; prioritizing fewer, larger brands that can scale profitably. As a result, we can expect more news of brand divestitures and discontinuation this year, as Big Food continues to tighten brand portfolios.
The silver lining to this story for small brands is that there can be a second act following a divestiture by Big Food. Recently, brands such as Zico Coconut Water and Krave Jerky have found new homes in the hands of their original founders. It is fair to say that fans of Zico were thrilled to see Mark Rampolla back at the helm of Zico, and fans of Krave are happy to see the brand return to Jon Sebastiani. These brands are in good hands with their founders.
And if you are a fan of Honest Tea, there was good news this week. Founder Seth Goldman announced his plans to launch a new line of ready to drink tea that will have similar recipes to the original Honest Tea. Look for Honest Tea 2.0 to hit the grocery shelves in early 2023.
Headlines of the Week
Target moves to reduce inventory, taking markdowns and canceling orders
Just weeks after signaling it expected lower second-quarter profits, Target announced it was taking additional steps to pare down its inventory and would absorb an even bigger hit to profit margins. In a press release Tuesday, the retailer said it would take additional markdowns, along with removing excess inventory and canceling orders to rightsize its stock levels. Target also said it is making “rapid revisions to sales forecasts, promotional plans and cost expectations by category.” The company now forecasts a Q2 operating margin rate of around 2%, compared to previous guidance of within a “wide range” of 5.3%.
Inflation rose 8.6% in May, highest since 1981
Inflation accelerated further in May, with prices rising 8.6% from a year ago for the fastest increase since December 1981, the Bureau of Labor Statistics reported. The consumer price index, a wide-ranging measure of goods and services prices, increased even more than the 8.3% Dow Jones estimate. Excluding volatile food and energy prices, so-called core CPI was up 6%, slightly higher than the 5.9% estimate. On a monthly basis, headline CPI was up 1% while core rose 0.6%, compared with respective estimates of 0.7% and 0.5%. Surging shelter, gasoline and food prices all contributed to the increase. Energy prices broadly rose 3.9% from a month ago, bringing the annual gain to 34.6%. Within the category, fuel oil posted a 16.9% monthly gain, pushing the 12-month surge to 106.7%.
Apparel & Footwear
Go Global Retail announced it has acquired Brums Milano, a leader in premium children’s fashion with more than 150 corporate and franchise store locations in Italy, as well as strong online presence, offering apparel, footwear and accessories. Brums is also sold at La Rinascente and via 300 independent wholesale locations across Italy. Brums Milano will continue to be based in Greater Milano. As a portfolio brand on the Janie and Jack platform, Brums Milano will initially focus on its core customers in Italy, with their modern take on children’s fashion, and a commitment to sustainable product development and designs. Go Global previously acquired Janie and Jack from Gap Inc. in April of 2021. Janie and Jack has over 110 retail stores in the United States, a robust online flagship store and is also sold at Saks Fifth Avenue and other leading independent wholesale locations across the US.
Authentic Brands Group backs out of Ted Baker deal
The future ownership of Ted Baker is under a cloud after the preferred bidder – Authentic Brands Group – withdrew its offer. On May 23, Ted Baker’s board choose ABG for the next round of exclusive negotiations. US-headquartered ABG was founded by billionaire Jamie Salter and owns Reebok, Aeropostale, Brooks Brothers, Forever 21, Nine West and Everlast, among others. UK media have reported ABG had lodged an indicative offer of about £300 million for the Ted Baker business. However, the brand aggregator advised Ted Baker’s board on Monday night that it did not wish to proceed with a final formal offer. In a statement, Ted Baker’s board said the withdrawal “was not linked to its due diligence review of the company”.
Marc Fisher Footwear Company Licenses Earth Shoes
The Marc Fisher Footwear Company entered into a multi-year agreement to license the Earth shoe brand for men’s and women’s footwear. Starting November 1, 2022, Marc Fisher Footwear will design, produce, market, and distribute Earth-branded footwear. With the acquisition, the company will also take over Earth shoe’s website operations, including operating its customer acquisition, digital marketing, and customer service. Marc Fisher currently operates three other websites in the Marc Fisher Footwear portfolio and will platform the website on Shopify. “Earth is an authentic comfort footwear brand, and we are excited about the opportunity to build a thoughtfully designed and innovative collection of sustainable shoes with eco-friendly materials and expand the product assortment to an even broader consumer market,” Marc Fisher’s CEO, said.
Athletic & Sporting Goods
TRX Files For Bankruptcy, Pursues Sale
TRX, the maker of functional training products and training content, has voluntarily filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Central District of California, Santa Ana Division in order to pursue a sale. The company, based in San Francisco, will continue to operate in the ordinary course of business, fulfilling its commitments to employees, customers, vendors, and other partners. Since its founding in 2004, TRX is known for its patented, flagship product, the Suspension Trainer. TRX also offers education and training solutions. To meet the demand for virtual and hybrid training solutions, the company, in 2021, launched a digital subscription-based platform, the TRX Training Club, combining programming and training through live and -on-demand video classes. Over the past year, the company has invested in, streamlined, and enhanced its e-commerce platform and added management to support growth.
Gathr Outdoors Acquires WaterPORT
Gathr Outdoors, a family of outdoor, camp and recreation brands committed to celebrating shared outdoor experiences, announced its acquisition of Vista, Calif.-based WaterPORT, a maker of on-the-go, self-pressurized water tanks for outdoor adventures. WaterPORT’s innovative collection of tanks, high-pressure nozzles, various vehicle mounting options and accessories help outdoor adventurers enjoy the convenience of a hose away from home. From rinsing off camp dishes, to spraying down gear or even taking a shower before zipping up the tent at night, WaterPORT helps users spend more time enjoying shared outdoor activities, and less time dealing with the corresponding clean up. Gathr Outdoors’ acquisition of WaterPORT is its fifth in the last year, following acquisitions of Klymit, Cascadia Vehicle Tents, Rightline Gear and GCI Outdoor. ORCA Coolers and PrideSports round out the family of brands.
Turtle Fur Sells Majority Stake to Private Equity Firm
Richard Sontag may not be old, but he recognizes his limitations. That’s why the owner of Turtle Fur, the Vermont-based cold-weather accessories brand targeted to the outdoor and snow sports markets, opted to sell a majority ownership stake in the business to a private equity firm. Sontag, a longtime apparel industry executive, finalized a deal earlier this week to sell a two-thirds interest in the company to Minneapolis-based Camano Capital. Terms were not disclosed. At the same time, Turtle Fur has completed its transition into a B Corp company, as it focuses on transforming itself into a brand-focused, sustainable business operator that gives back to those in need and makes the outdoors inclusive to all. Under the terms of the deal, Sontag will remain as chief executive officer “as long as I’m relevant,” he said, and will retain a seat on the board.
Compass Diversified Holdings to Acquire PrimaLoft
PrimaLoft, the outdoor ingredient brand whose synthetic insulation is used across the industry by companies like Patagonia and The North Face, will have a new owner as of July. Compass Diversified Holdings has agreed to buy the brand from Victor Capital Partners for an estimated $530 million. PrimaLoft will join several other outdoor companies in Compass Diversified’s portfolio, including BOA Technology and the hunting brand Velocity Outdoor. “PrimaLoft has all the attributes we look for in an acquisition and once closed, will add to [our] track record of acquiring industry-leading, innovative businesses with strong competitive advantages,” said Elias Sabo, CEO of Compass Diversified, in a release today. Sabo added that PrimaLoft was particularly attractive for its “significant intellectual property” and operations in a “large, growing addressable market” with a high free cash flow. The company also owns about 90 global patents.
Cosmetics & Pharmacy
Q1 2022 UK Prestige Beauty Sales Report Double-Digit Growth
As the retail landscape continues to evolve as consumers adapt to a hybrid work model, their beauty-buying habits are changing too, according to the NPD Group. Fragrance remains the star performer of the prestige beauty market, with larger sizes, stronger concentrations, and the growth of niche fragrances all being contributing factors. Fragrance sales in the first quarter of 2022 were £263MM, an increase of 6% on the same time in 2019. Emma Fishwick, Account Manager, NPD UK Beauty, explains that, “Consumers continue their love affair with fragrance, and this remains the key driver of the prestige beauty market. It is interesting to see the new stars emerging as consumers opt for lip products with benefits to hydrate and protect their lips. More broadly, skincare continues to be a popular part of consumer’s beauty regimes, especially with the growth of face and body supplements.”
Tina Craig’s U Beauty Lands Investment
UBeauty, a science-driven luxury brand that strikes a chord with consumers looking for simplified and sustainable skin care, has secured a strategic investment from Sandbridge Capital. Sandbridge represents U Beauty’s first institutional capital deal and the funds will be used to accelerate the brand’s multi-channel, cross-category global growth. Since its founding in 2019 by influencer Tina Craig and Katie Borghese, U Beauty has been on a growth trajectory—especially during the pandemic when many consumers discovered the brand. The streamlined, tightly edited range is in tune with a consumer-driven shift in skin care that eliminates the need for a multitude of ancillary products, yet minimizes irritation, time, and waste, the company said in a statement. Sandbridge is no stranger to the beauty industry. The consumer-focused private investment firm currently counts Peach & Lily and Madison Reed in its portfolio and had invested in Youth to the People and Ilia before those brands fetched attractive acquisition deals.
Discounters & Department Stores
Credit analysts put Kohl’s on notice amid takeover talks
Echoing other analyst concerns about a Franchise Group takeover of Kohl’s, S&P Global Ratings on Tuesday flagged the retailer for a possible downgrade, reflecting “the potential that we could lower our ratings on Kohl’s by several notches if the acquisition is consummated,” per an emailed press release. The firm, pegging Kohl’s equity at about $8 billion, cited Franchise Group’s plans to leverage the retailer’s real estate to finance most of the deal, warning that “would leave Kohl’s more leveraged with less asset protection from its valuable real estate.” The firm noted swings in Kohl’s performance during the pandemic and its guidance cut this year “as high inflation continues to crimp consumer demand and complexities in managing inventory levels across the sector affects operating margins.”
Top Walmart executives talk inflation, labor and supply chain challenges
After a tough first quarter where sales growth slowed and its U.S. operating income took a $1 billion hit, Walmart is facing some difficult questions over how to stabilize the business. Last Friday, a panel of top company executives, including President and CEO Doug McMillon and John Furner, who leads the U.S. business, addressed some of those questions from the investor community following its Associate Celebration in Fayetteville, Arkansas. They gave an update on how Walmart is grappling with inflation, labor challenges and more — including what company leaders are doing to grow its Walmart+ subscription service.
Dollar General upgrades retail media network, emphasizing rural customers
Dollar General is upgrading its retail media network, called DGMN, to attract more spending from brands interested in engaging a rural customer base, per a news release. The discount chain has operated a media network since 2018 and previously worked with LiveRamp on the business, a spokesperson said. Now, it’s expanding its partnerships to include demand-side platform The Trade Desk, Google Ad Manager and ad agency Goodway Group, leveraging the latter’s expertise in media strategy, planning and buying. DGMN is also adding 21 new advertising partners, including brands owned by Unilever, General Mills, Hershey’s and Colgate-Palmolive. Unilever has a relationship with DGMN dating back to 2018. Dollar General’s move to evolve its media network comes as rivals are ramping up efforts to sell advertising, which could create fresh pressure to innovate.
Emerging Consumer Companies
Allbirds partners with Dicks and Nordstrom
Allbirds, the environmentally-friendly footwear and apparel brand, has opened third-party distribution for the first time. The first wholesale partners in the U.S. will be Nordstrom and Public Lands, Dick’s Sporting Goods’ new outdoors-themed banner, and in Europe, Zalando. Known for its commitment to sustainably sourced materials and ingredients, Allbirds has a “vertically-led omnichannel strategy,” said Joey Zwillinger, co-founder and co-CEO, on Allbirds’ first-quarter analyst call. The brand first began selling online in 2016 and has 39 stores.
Let’s Do This, an endurance events marketplace, raises $60 million
The appropriately named endurance (running, triathlon, cycling, etc.) events marketplace Let’s Do This appeared a couple of years ago listing all kinds of endurance activities globally and attracting the backing of stars such as Usain Bolt and Serena Williams, alongside more standard venture investors such as EQT. Founded by Alex Rose and Sam Browne, both endurance runners and cyclists themselves, the startup has now raised a $60 million Series B round led by Craft Ventures and Headline. Also participating in the round were existing investors EQT, NFX and Y Combinator, as well as newcomer Morpheus Ventures. The celebrity backers include Serena Williams, Usain Bolt and U.K. gold-medal runner Paula Radcliffe. Angels include the founder of Gmail Paul Buchheit, as well as Ian Hogarth, founder of Songkick.
Food & Beverage
Poultry Processor Foster Farms acquired by PE firm Atlas Holdings
Atlas Holdings has acquired Foster Farms, a poultry processor based in Livingston, Calif., that generates approximately $3 billion in annual sales. Terms of the acquisition were not disclosed. Foster Farms has 13 processing facilities in California, Washington, Louisiana, Oregon and Alabama, and employs approximately 10,000. The company is a processor of commodity and value-added chicken and turkey. Donnie Smith, the former chief executive officer of Tyson Foods, Inc., Springdale, Ark., has been named chairman of the board and CEO of Foster Farms.
Fermented food brand Cleveland Kitchen announces $19 million funding; acquires Sonoma Brinery
Fermented foods company Cleveland Kitchen announced it has raised an additional $19 million, as well as completed the acquisition of Sonoma Brinery. The deals will allow the company to more aggressively pursue expansion into new products and manufacturing capabilities. The raise was co-led by Amberstone, a venture firm focused on the CPG space, along with Korea-based CJ Group, the world’s leading producer of kimchi. Existing investors Clover Vitality and Cabbage Inc, which is one of the country’s largest cabbage growers, also participated. The funding, which brings Cleveland Kitchen’s total capital raised to roughly $24 million, will be used to expand the company’s R&D, manufacturing, marketing, sales and hiring efforts. Cleveland Kitchen also acquired pickle and sauerkraut producer Sonoma Brinery, which sells its products in roughly 1,500 stores.
Andresssen Horowitz leads $22 million round in cultivated meet maker SCiFi Foods
Cultivated meat startup SCiFi Foods closed a $22 million Series A funding round led by Andreessen Horowitz. The company, which uses bioengineering technologies to grow meat from animal cells, aims to launch a burger combining plant-based meat and cultivated beef cells. The product is designed to more closely match the taste of conventional beef burgers at a lower cost than cultivated meat options. The funding will be used to advance SCiFi Foods’ research and development efforts, support new marketing strategies and expand the team. Additionally, Myra Pasek, general counsel at agriculture technology startup Iron Ox and former executive at Tesla and Impossible Foods, joins the company’s board. Since its founding, SCiFi Foods has raised a total of $29 million from investors including Valor Siren Ventures, BoxGroup, Entrée Capital, Prelude Ventures and more. “Cultivated meat will disrupt the trillion-dollar global market for meat products, with huge benefits to the planet,” said Vijay Pande, general partner at Andreessen Horowitz.
Jif recall may cost Smucker up to $125 million
The Jif peanut butter recall may cost J.M. Smucker $125 million in product recovery, manufacturing downtime and consumer refunds, the company estimated in its most recent quarterly earnings report. The company predicts the recall will subtract about 2% from total sales and eat up about 90 cents in earnings per share. In the most recent quarter, the recall erased 1% of the company’s increase in net sales — which was still up 6%, compared to the year ago period — and caused a 7% decrease in gross profit. This was down 9% compared to a year ago. After salmonella infections were linked to Jif peanut butter produced at the company’s Lexington, Kentucky, facility, Smucker issued a voluntary recall of 49 SKUs on May 20. Since then, several other companies that may have used the affected peanut butter as an ingredient have recalled their products.
Grocery & Restaurants
Stop & Shop steps up investment in New York City stores
Stop & Shop aims to make a bigger splash in the Big Apple. The Quincy, Mass.-based supermarket chain, part of Ahold Delhaize USA, said it plans a $140 million capital investment to upgrade its New York City stores, with a focus on enhancing the shopping experience and bolstering the product selection to cater to a diverse urban market. Operating in New York City for over two decades, Stop & Shop employs more than 3,300 associates and has 25 stores in the boroughs of the Bronx, Brooklyn, Queens and Staten Island. The retailer also offers home delivery in all five boroughs, including Manhattan. At the center of the store updates is a “significantly expanded assortment” that will add thousands of new items across departments, Stop & Shop noted. The store remodels will bring a “fresh new look and feel” plus a sharper focus on value, deploying more sale bins and serving up more special deals on relevant products spotlighted in an NYC-specific weekly circular ad, according to Stop & Shop.
Cardenas Markets to acquire Rio Ranch Market
Hispanic supermarket chain Cardenas Markets has entered an agreement to acquire fellow Latino grocer Rio Ranch Market. Financial terms of the transaction weren’t disclosed. Ontario, Calif.-based Cardenas said Thursday that its purchase of Rio Ranch Market’s six stores will expand its Southern California footprint. With headquarters in Fontana, Calif., Rio Ranch operates supermarkets in San Bernardino, Riverside, Chino, Perris, Banning and Fontana as well as a warehouse in San Bernardino. Overall, Cardenas Markets operates 59 stores under the Cardenas Markets (51 locations), Los Altos Ranch Markets (seven locations) and Cardenas Ranch Markets (one location) banners in California, Nevada and Arizona.
Home & Road
Wayfair has eyes on the Windy City
Online home furnishings major Wayfair has big plans for a big store in Chicago. The Boston-based retailer has plans to open a 152,000-square-foot retail space in the Edens Plaza shopping center in Wilmette, Ill. This development would fill the vacant two-story building formerly home to Carson Pirie Scott, according to a press release issued by the Village of Wilmette. WS Development, a privately held developer based in Massachusetts, purchased Edens Plaza and has executed a lease with Wayfair. Longtime home furnishings journalist Warren Shoulberg reported that the plan received final approval from the Wilmette Village Board in March after being approved in February by the village’s Appearance and Review Commission. The Edens Plaza location will be the first to feature this brand-new retail concept for Wayfair, with plans for opening in mid-2023.
Mr. Christmas receives private investment from Sachs Capital to fund brand growth
Family-owned holiday décor manufacturer Mr. Christmas has received the final investment of Sachs Capital Fund II. Managed by Andrew Sachs, the investment provides “flexible, non-control, long-term capital to successful entrepreneurs and family-owned businesses,” according to a release from Mr. Christmas and Sachs Capital. “To continue to grow our business, develop innovative products and access a growing marketplace, we needed a partner who provided more than capital,” explained Leslie Hermanson, president of Mr. Christmas. “In Andrew Sachs and his team, we found an investment partner who understands the opportunities we face, and thanks to their experience, can help us with our path forward.” This is Mr. Christmas’ first outside capital investment since it was founded in 1933 by the Hermanson family. The terms of this deal have not been disclosed, but a release did note that Sachs Capital and operating partner Bernie Kropfelder will work day-to-day with My. Christmas, increasing its executive bandwidth as part of its mission to drive continued growth.
Jewelry & Luxury
The RealReal Founder, CEO Julie Wainwright Steps Down
Julie Wainwright, who in 2011 founded The RealReal, the now-public online marketplace for authenticated secondhand luxury goods, has resigned as CEO and chair after 11 years of leading the company. The RealReal is currently searching for a new CEO. During the transition, Rati Sahi Levesque, its president and chief operating officer, and Robert Julian, its chief financial officer, have been appointed co-interim CEOs. Both joined the company in 2021. The company gave no reason for Wainwright’s sudden resignation, but an SEC filing said that it was “not due to any disagreements with the company.” Analysts have long complained that the company, which went public in 2019, has been consistently unprofitable.
Report: Strong Demand, Less Supply To Boost Diamond Prices
The average price of natural diamonds may increase as much as 15% this year, as sanctions against Russia constrain supply, and consumer demand continues to be “buoyant,” according to a new report from Bank of America Global Research. While some have thought that, post-COVID-19, consumer discretionary spending will shift back to travel, the bank’s analysts predicted that jewelry spending will hold up. “[There] is a lack of substitutes for luxury spend amongst consumers, with tourism unlikely to rebound to pre-COVID levels [this year] amid ongoing travel restrictions,” the report said. “[D]iamond demand will remain buoyant. This appears to be coming through at auctions, with strong diamond tender prices reported by key players recently.”
Quality Gold Acquires IBGoodman
Quality Gold is acquiring IBGoodman Manufacturing Co., the 85-year-old company known for its men’s jewelry. No terms were provided. The acquisition will be completed by June 30. Quality Gold CEO Michael Langhammer tells JCK that the acquisition of the well-known brand will boost his company’s men’s offerings. “IBGoodman’s gents line is the premier gent’s line in the country,” he says. “There’s a gold mine of SKUs and designs.” Jonathan Goodman Cohen, IBGoodman’s president and CEO and the third generation of his family to head the company, says the deal “checked off a lot of boxes” for him, as it both continued the brand and took care of his employees.
Lab-Grown Diamond Company Adamas One Files For IPO
On Tuesday, Adamas One, the lab-grown diamond manufacturer that acquired the remnants of former Scio Diamond Corp., filed a registration statement to go public. Renaissance Capital reported that the IPO hopes to raise up to $30 million. Adamas plans to be listed on NASDAQ under the stock ticker “JEWL.” In late 2018, Adamas One purchased all of the assets of Scio, which was formerly known as Apollo Diamond. Apollo’s origins date back to 1990, and it is considered one of the first companies in the lab-grown gem diamond space. Scio went public since 2011 in a reverse IPO, but ran out of cash to continue to fund its operations.
Office & Leisure
Hasbro Defeats Board Challenge From Activist Investor Alta Fox
Hasbro Inc defeated a board challenge from activist hedge fund Alta Fox with shareholders re-electing all of the company’s directors, the toymaker said on Wednesday, citing a preliminary tally of voting results. Alta Fox, which nominated one director to the company’s 13-member board, had pushed Hasbro to spin off its Wizards of the Coast and Digital Gaming unit and criticized how the company allocated its capital. Hasbro has said a spinoff of the profitable business, housing brands such as “Magic: The Gathering” and “Dungeons & Dragons, would be unlikely to create any value for the company. Alta Fox, which owns a 2.5% stake in Hasbro, said in a statement it was disappointed with Wednesday’s results but would remain a shareholder and seek to maintain talks with the board.
Tommy Hilfiger expands Roblox partnership
Joining other brands expanding in the metaverse, Tommy Hilfiger launched Tommy Play, a virtual community space to play and socialize, with Roblox. Tommy Hilfiger plans to make more announcements “in the coming months” regarding its digital and gaming experimentation. Tommy Play will have content updates, map expansions and product launches created with Roblox community creators and thought-leaders each month this summer. The space has mini-games and Tommy Coins that can be redeemed for upgrades or exchanged for items like helmets with superpowers, bikes, headphones and Tommy Jeans clothing and accessories. At its virtual BMX bike park, users can learn tricks, search the landscape for hidden items and compete in bike competitions to dominate the daily leader board.
Rainier Partners Invests in Pet Food Express, a Fast-Growing Omni-Channel Pet Retailer
Rainier Partners, a Seattle-based, lower-middle-market private equity firm, is pleased to announce its investment in Pet Food Express (“PFE”), a fast-growing, omnichannel pet retailer that sells healthy pet foods, goods, and services from over 60 retail locations throughout California. Rainier’s investment will support PFE in expanding its reach to help pets and their owners live happier, healthier lives together. Founded in 1980 by Michael Levy, PFE has helped lead the evolution of the pet industry through its unwavering dedication to offering the highest quality pet products and services, advising pet owners through its knowledgeable store team members, and supporting local pet shelters and charities. Rainier Partners is a private equity firm founded in 2020 and based in Seattle, WA, that invests in lower middle-market businesses.
Technology & Internet
Pinterest acquires AI-powered shopping startup The Yes, co-founded by former Stitch Fix exec
As Pinterest sets its eyes on improving the online shopping experience on its platform, the company announced it is acquiring the AI-powered shopping service for fashion known as The Yes, founded by e-commerce veteran and former Stitch Fix COO Julie Bornstein and technical co-founder, Amit Aggarwal. Deal terms were not disclosed, but the acquisition will help to establish a new strategic organization within Pinterest to help drive the company’s shopping efforts, including the development of features for both shoppers and retailers, the company says. The Yes arrives at a time when Pinterest is attempting to navigate a shift in how people shop online. While users once relied on Pinterest’s pinboard of images to find inspiration, today, they’re more drawn to creator content, video and highly personalized feeds. The Yes may be able to help with the latter, given the technology it runs under the hood. Founded in 2018, The Yes built a personalized daily shopping feed that learns a user’s style as they shop from across hundreds of fashion merchants. Primarily focused on women’s fashion — including apparel, handbags and accessories — the app was different from Bornstein’s earlier efforts at Stitch Fix, which had included human stylists picking out items to ship to more passive shoppers who wanted to be surprised by new finds in their monthly boxes. The Yes, on the other hand, catered to those who actually browse and shop online in a more active manner.
Apple expands fintech ambitions in iOS 16
Apple is turning into a fintech company. The company announced several new features for the iPhone’s Wallet app at its developers conference that directly compete with products from other fintech companies such as Affirm and PayPal. The big one: a buy now, pay later service called Apple Pay Later. Apple will also launch a new payments system later this month that lets you pay someone by tapping your iPhone against theirs. It’s a direct competitor to Block’s Square. All of this points to one of the most interesting corners of the Apple ecosystem — a growing suite of financial products within the Wallet app. Many of these features aren’t designed to make money for Apple directly, but they do make Apple Pay more attractive for people who haven’t tried it yet. (Apple takes a tiny percentage of every Apple Pay transaction, so the more people using it, the better it is for Apple.) Like most major new iOS features, it’s also another mechanism to keep customers locked into Apple’s ecosystem and upgrading to a new iPhone when they’re ready.
Finance & Economy
Housing wealth sets unprecedented gain, but there are early signs market is cooling
Homeowners are in the money, and it just keeps coming. Two years of rapidly rising home prices have pushed the nation’s collective home equity to new highs. The amount of money mortgage holders could pull out of their homes while still keeping a 20% equity cushion rose by an unprecedented $1.2 trillion in the first quarter of this year, according to a new analysis from Black Knight, a mortgage software and analytics firm. That is the largest quarterly increase since the company began tracking the figure in 2005. Mortgage holders’ so-called tappable equity was up 34%, or by $2.8 trillion, in April compared with a year ago. Total tappable equity stood at $11 trillion, or two times the previous peak in 2006. That works out to an average of about $207,000 per homeowner.
Wood Sees Huge Inventories as Evidence Inflation Will Ebb
Cathie Wood says the massive inventories now held by US companies suggest that inflation will die down. “I’ve never seen inventory surges like this in my career and I’ve been around for a long time,” the head of Ark Investment Management said in an interview with Bloomberg Television. “This inventory issue highlights the cyclical reason we’ve been saying we think inflation will unravel.” Major retailers that amassed stockpiles last year amid soaring consumer demand and supply chain bottlenecks are now struggling with bloated inventories. Target Corp. cut its profit outlook for the second time in three weeks on an inventory surge.
World Bank says recession will be ‘hard to avoid’ for many countries
You can add the World Bank to the growing chorus sounding recession alarm bells. In its latest outlook, World Bank president David Malpass said “for many countries, recession will be hard to avoid.” Malpass joins many others on Wall Street and at central banks around the globe who are starting to warn about a sharp economic downturn. JPMorgan Chase (JPM) CEO Jamie Dimon referred to an economic “hurricane” on the horizon last week while Tesla’s (TSLA) Elon Musk has said he has a “super bad feeling” about the economy. The reasons for the gloom? Malpass said in the World Bank’s latest outlook Tuesday that “the war in Ukraine, lockdowns in China, supply-chain disruptions and the risk of stagflation are hammering growth.”
Consumers changing eating, shopping habits as inflation pushes up prices
The highest inflation in roughly 40 years is prompting people to shift their shopping habits, especially at the grocery store. About 90% of Americans are concerned about food prices, according to a survey conducted by The Harris Poll on behalf of Alpha Foods. The online survey questioned more than 2,000 American adults about their inflation concerns and shopping habits in two waves, March 18 to 23 and again May 6 to 8. In that time, the cost of groceries also overtook gas prices as Americans’ top inflation concern. “Initially concern was highest around gas prices, followed by groceries and other forms of discretionary spending,” said Abbey Lunney, managing director at The Harris Poll. “But in the last couple of weeks groceries have become the No. 1 concern for Americans.”
