Morning Report

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Liquid Death, Kombucha Competition, and the Profit Motive

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PROFIT

We hear a lot about companies putting purpose before profits, but isn’t making a profit itself a pretty good purpose?In my view, organizations shouldn’t be shy about stating profit as its explicit and ultimate purpose. In fact, in addition to helping us earn a living, profit may be the best way to do good in the world.

“Economic growth, for example, is an effective way to reduce poverty–likely more so than aid–because it benefits the lowest income brackets in a country significantly. Moreover, increases in wages and wealth have been shown to have positive effects on other critical societal problems, such as crime, malnutrition, infant mortality, mental health, and general feelings of happiness. Hence, many of the most important social issues in our world are closely tied to economic wealth.

“For an individual firm striving to make more money, beating competitors, and driving them out of business may seem a far cry from doing good in the world. Yet, economic growth is the consequence of exactly that: firms trying to sell stuff and out-compete others. Making money may feel like a very indirect way of doing good, but it is a powerful one nonetheless.”

MARKETING

With Liquid Death, which is nothing more than water packaged in tallboy cans, former Netflix creative director Mike Cessario tests the limits of marketing: “The cans sell direct to consumer. You can order a pack of 12 for $1.83 a can by visiting the website, where you’ll be greeted by a banner reading ‘MURDER YOUR THIRST’ just to make sure you know how hardcore Liquid Death is. …

“‘Our proprietary Thirst Murdering™ process begins with Liquid Death forming a rope of veins that will wrap around your Thirst’s head and strangle it. Once Liquid Death reaches your Thirst’s brain, all of your Thirst’s memories will be replaced with repeating loops of its own head imploding. Which is exactly what happens next by it causing your Thirst’s head to implode and its brain to squirt out of its ears,’ the website explains. In total, [Cessario has] raised $2.25 million. Backers include Biz Stone of Twitter and founders of Dollar Shave Club and fancy-luggage start-up Away.”

Adidas sales are up 40 percent thanks to Instagram’s new checkout feature: “Unlike previous sales tools Adidas has tested on Instagram, the checkout feature means fans aren’t taken to a pop-up version of the brand’s site to complete the sale. Having the sale happen directly from inside the app is meant to inspire people to shop more and make them less likely to abandon products now they don’t have to leave one app for a separate site. As intuitive as the process is, it’s another potential hit for advertisers that are trying to regain ownership of their customer experience and data.

“While the likes of Adidas still get the purchase data from Instagram conversions, important behavioral data leading up to the sale will now remain within the walled garden. ‘Yes, there are other ways for the brand to access behavioral data, and, yes, a lot of platforms don’t offer this depth of data back,’ said Lawrence Dodds, communications and planning director at UM London. ‘But there are few other platforms that give brands access to the same target audience in quite the way that Instagram does; ultimately brands will have to judge whether the sacrifice is worth it.’”

MANAGEMENT

George Thomas Dave brought kombucha to the US, took no outside funding, and made a fortune; now he’s scrambling to fight off the competition that followed: “He was the first to put kombucha on store shelves, in the late 1990s, and GT’s is still the biggest manufacturer, owning 40 percent of the US market. His $3 to $4 bottles can be found at retailers like Walmart, Costco and Kroger. But the shelves are getting crowded. There are more than 350 kombucha makers in the world (most in the US), and they’ve slurped up roughly $340 million in funding from venture capital, private equity and big conglomerates like Coca-Cola and PepsiCo, which paid $260 million for GT’s biggest rival, Kevita, three years ago.

“These well-funded competitors are eating away at Dave’s first-mover advantage, putting him on his heels and prompting him to fire off defensive potshots. With the sanctimoniousness of a perturbed monk, he decries competitors who have ‘bastardized’ kombucha. He turns his ire on fast-growing rival Health-Ade, which now has $50 million in sales. ‘You know what they are? … Cherry-berry. Tropical punch. … [They] make it basic, make it mainstream.’ Health-Ade sells its drink in medicinal-looking

yellow-tinted bottles, which draw even more of his disdain. ‘If your claim to fame is that you’re in amber bottles, or you’re three cool hipsters behind this product, and that’s it? Your days are numbered, in my opinion.’”

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REGULATION

Companies that police themselves face far less regulation than those that don’t, according to a new Stanford study: “Firms may exceed regulation in order to reduce support for stricter regulations among key stakeholders, thereby forestalling future implementation of these regulations. … For instance, … JUUL’s aim in restricting the sale of sweet and fruity flavors is to prevent stronger regulations such as banning all in-store sales or banning all flavored products, including mint and menthol.”

M&A

Shaving startup Harry’s has been sold to the owner of Schick for $1.37 billion: “It is one of the largest recent examples an established business buying a younger, nimbler competitor born of the internet and predicated on reaching consumers in new ways. That has included deals like Unilever buying Dollar Shave Club, the other shaving start-up sensation, for $1 billion three years ago, as well as Walmart acquiring the online men’s wear purveyor Bonobos for about $310 million.

“Harry’s sells razors, face washes and lotions, as well as the Flamingo line of women’s razors and waxes, directly to consumers over the internet, offers subscriptions (a certain number of blades delivered to your home each month) and has struck a collaboration with the clothing retailer J. Crew. Based in New York, it owns the German factory that makes its blades and has invested in other businesses like Hims, a start-up that sells hair-loss prevention products.”

STARTUPS

Silicon Valley is flipping homes now: “Tech companies have begun to nibble away at the edges of the residential real estate industry, offering virtual open houses, digital closings and other services. Now they are coming straight for the real estate transaction itself through ‘instant buying,’ in which companies buy homes, perform some light maintenance and put them back on the market.

“Established companies like Zillow and venture-backed upstarts like Opendoor and Offerpad have raised billions of dollars on the promise that they can use sophisticated algorithms to predict the value of individual homes. They contend that those predictions, combined with old-fashioned economies of scale, will allow them to be far more efficient than traditional home flippers.”

NYU engineering students won $20,000 for launching a startup that connects musicians to playing venues. “On GigFinesse, musicians can create profiles that detail the genres of music they play, their availability and ratings from past venues. Venues are able to post time slots and types of artists they are looking for. [Founder Mir] Hwang believes that his platform can give aspiring musicians more autonomy. ‘Usually you have to go through booking agents, which act as gatekeepers in a way,’ Hwang said. ‘This removes the middle man and gives the power back to the musicians.’”  

FOOD

Beyond Meat’s IPO could start a veggie burger bubble but fake meat has gone mainstream: “Tyson Foods Inc. on Monday confirmed it will introduce a meatless protein product in coming months. Tyson, to underscore the announcement, is the biggest meat processor in the US. McDonald’s Corp. just began selling a veggie burger in Germany, Burger King said last week that its Impossible Whopper would go nationwide this year. …”

TECHNOLOGY

Companies like MobileIron are doing away with the hassle of passwords. It has “upgraded its suite of authentication products to allow IT managers to abolish the password, relying on mobile devices for what it calls “zero sign-on” access. The firm relies on security features in modern hardware coupled with other signals to make a no-password login as secure as one with a password. … 10 years of account breaches revealed that many companies of all sizes do a terrible job of securing passwords. It also showed that many users choose weak passwords, though we shouldn’t blame them, since a weak password is the best response to a badly designed system.”

HUMAN RESOURCES

A Pennsylvania mushroom farm would be booming if it could find anyone to pick the mushrooms: “‘There’s no one around,’ said Jim Angelucci, the farm’s general manager. ‘And it’s not just the mushroom industry. Everyone is struggling for workers.’ Amid renewed federal emphasis on immigration enforcement, farmers are experiencing a shortage of labor. It’s a problem for virtually all enterprises that rely on difficult manual work, but it’s especially pronounced in agriculture, where farmers rely largely on immigrants—some of them undocumented. …

“Some mushroom and dairy farmers desperate for labor have begun to turn to places they may not have once considered, such as inmate work-release programs, organizations that help the visually impaired find employment, and others that help veterans find work. While the programs have been met with mixed success, overall they aren’t ‘moving the needle,’ Klotzbach said.

“The job of a mushroom harvester is a ‘hard sell,’ said Stephanie Chapman, director of human resource management at Phillips Mushroom Farms. Full-time positions require workers to pick six days a week, including holidays. Days start early and the work can be difficult, as workers have to bend between narrow, dimly lit wooden mushroom beds, knife in hand, and delicately cut thousands of mushrooms piece by piece. Harvesters are rewarded with a bonus—an amount Chapman declined to disclose—for picking extra quickly.”

SPOTLIGHT

Loren’s guests on Mind Your Business today will be Carey Smith, who built and sold Big Ass Fans, and Jaime Schmidt, who built and sold Schmidt’s Naturals. Both are now looking for other entrepreneurs to back. Have your questions ready when the show airs at 1:00 p.m. ET on SiriusXM 132. Call 844-942-7866 with a question or comment.

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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