Malt Liquidity 29
Money Stuff but for stuff about Money
Unoriginality but for food
A banker, a social worker, and a code bootcamper walk into a bar. The bartender asks, what are you guys having?
The banker says, I’ll have a vodka martini but with gin, with a twist.
The social worker says I’ll have a Gibson, but instead of pickled onions, with a twist.
The code bootcamper says, I’ll have a dirty martini, but with a twist instead of anything olive.
The bartender says, so 3 martinis, got it.
Repackaging comes to food packaging in this particularly hilarious piece that highlights that the “x app but for y” ecosystem is still kicking:
Already offering fare from 32 independent chefs working out of shared kitchens, CookUnity aims to be for food what Spotify is to music—offering an infinite selection of meals from an unlimited number of culinary artists.
I suppose the application process does not involve getting approved or rejected, but “right swiped” (that’s the good one, right?) and “left swiped”.
CookUnity provides chefs with the kitchen, ingredients and support services such as dish washing and delivery; chefs get a 20%-25% cut of every meal purchase.
“I can cook what I want, and when I want,” says Mr. Ratel, who has worked at Sardi’s, Lundy’s and Grand Central Oyster Bar. “I can be my own boss.”
Wait… I thought “be your own boss” and “work your own hours” was Uber’s whole No on Prop 22 argument, not Spotify’s motto? Now I’m confused.
In all seriousness, as much as I will make fun of companies like DoorDash for pitching food delivery as innovation, I think there is a pretty interesting gambit being taken here where the long thesis is that consumer habits have noticeably changed towards ordering food even when restaurants open once again. As much as we want to assume things will return to normal after the pandemic, there really isn’t a long case on the commercial real estate supply glut other than “people will want to go do the normal thing again”, and this is what people have been saying since oil fell to $50 a barrel all those years ago: “it has to come back”. My question when I read these type of middlemen/subscription models is always “why the subscription, and how does it help your creators?” While the product is actually being made here - this isn’t a Juicero situation after all - I have a hard time believing that the foodservices industry, even when not having to splurge for hot neighborhood locations or fancy decor, can really show margins at $10-13 a meal that offset the cost of paying the chefs, paying for the cost of the ingredients and packaging, the renovated retail space and maintenance costs (which are in no way trivial - why do you think the explosion of juice bars and poke places happened? A standard convection oven and ventilation system is far more expensive than a fridge to keep raw fish cold and a few ice cream scoops, or a single industrial juice presser) on top of the delivery cost. As evidenced by GrubHub, UberEats, etc. the delivery business alone cuts prohibitively into restaurant margins.
The problem is that as long as money is so cheap, you can sort of operate these businesses at a loss to try and gain market share and scare a competitor. After all, isn’t this business model just Blue Apron but the food is cooked beforehand? And this model adds timing into the mix as well, as I don’t want to keep a pre-cooked steak in my fridge all day long if it’s a “cheat meal" - I want it fresh. Just this morning, Uber acquired Drizly, and much like their Postmates acquisition, I am pretty sure that it’s just cheaper for them to continuously buy out competitors who have some sizeable market share than to try and undercut the competitor’s subsidized rates to protect their own market share.
That being said, this is far less risky in my eyes compared to the debt and costs that come with opening a restaurant - who knows what government action will eviscerate restaurants next time? Honestly, I don’t blame them for longing the top of the pandemic food habit market, as it might be the lowest risk option in the foodservices industry.
Amazon Lockers but for Restaurants
After a couple decades of running a successful chain, I suppose even the wheel needs a reintroduction:
But as much as Chipotle’s digital innovations have helped set it apart from rivals and drive gains, its future success may depend on something decidedly more old-school: the drive-through.
What’s particularly hilarious to me is that I think this is brilliant - I remember from an earnings report a couple quarters ago that the massive revenue increase in Chipotle delivery over the pandemic actually decreased their profitability as they were charging underneath cost to run meals to people, to the point where the CEO had to express a desire that people stop ordering delivery on the earnings call. In the very first Malt Liquidity, I also highlighted how DoorDash’s IPO and earnings projections could be thought of as a “large scale bet that humans will continue to grow increasingly lazy over time”. A drive-thru is the perfect middle ground - it enables people to be lazy and stay in their car to order food while also enabling people to be cheap that want to sit in a chair and not cook food but don’t want to pay delivery costs. In short - it’s the perfect restaurant construction hedge. And if it doesn’t pan out, well, they can open some delivery only Chipotles - the CookUnity of Mexican fast-casual.
A quick note on short selling
A few people have assumed that I am short GME after I posted a thought on Monday about how I thought “GME would trade down to the 40s” because of how I interpreted some order flow. To be clear, unless I am trading options, the last thing I would ever do is try and call a top and bet on the downside.
1. GME options are completely messed up - the vol is ridiculously off the charts, delta hedging really isn’t possible because the borrow cost is so high, and the stock is still moving around enough to be halted multiple times a day. I wouldn’t touch the downside through options right now at all.
2. Remember how everyone made fun of you for thinking a $5/share stock is cheap and a $500/share stock is expensive based off of the share price? The same thing applies to shorting a stock - if you are not trading derivatives with strike prices, the price doesn’t matter - the percentage move does. A move from 300 to 100 is the same as 60 to 20. Shorting 5 shares * $40 profit a share = 1 share * $200 profit a share on the same initial $300 outlay.
3. However, the risk of getting blown out from shorting at 300 is way higher! Look at the sell-off today - after every un-halt there is a massive sell order (I think the highest I saw was something like 89k shares sold in one order at like 110). People will panic! Why wouldn’t you short after everyone is wary of buying in instead of trying to call the top on a stock that is still surging if you still think the stock is going to 0? Again, if I catch a 75% down move either way, I want to do it when the borrow cost is cheap and the odds the trade moves against me significantly are far lower.
4. But calling tops is admittedly cool if you get it right. So I do it on Twitter - nothing is trade advice. So if you’re going to call a risky top, it only makes sense to me to trade it with options, not shorting stock.
On that note…