Numlock News: November 11, 2020 • Pizza, Ant, Coffee
By Walt Hickey
South Korea’s rollout of 5G technology has suffered a number of missteps, so much so that a report indicated 562,656 people have downgraded their service from 5G to LTE, which represents as much as 6.5 percent of the 5G subscribers at the three major mobile carriers at the end of August. South Korea rolled out 5G in April 2019, but customers haven’t been happy with the shorter battery life and less-than-promised speeds, which were supposed to be 20 times faster than LTE but instead have been found to average out to four times faster. The reason for the issues is that the local carriers have adopted the 3.5 gigahertz band to transmit the signal for cost reasons, leaving them at 1.9 gigabits per second, and in order to get the 20 gigabit per second speed promised they’d need 28 gigahertz.
Sales of coffee makers are up 28 percent since March, for reasons that are probably pretty obvious. Retail coffee sales are up 10 percent, which beats the 2 percent sales increase notched typically, and the chains are suffering. Last quarter, Starbucks ate a 9 percent decrease in comparable store sales, and Dunkin’ had to close hundreds of locations. Meanwhile, Keurig Dr Pepper said that shipments of their machines were up 34 percent, and they will be in 3 million new households this year, up a million from the usual 2 million. Smucker, which sells Folgers and makes Dunkin’ branded coffee, saw retail coffee sales rise 23 percent to $571 million. Between the mediocre coffee, the spotty Wi-Fi, the intuitive feeling that most surfaces are gross, the fact that you’re consistently out of milk, the line for the bathroom, the stale pre-frozen baked goods and the fact that the music selection in the space is completely out of your control, the only thing truly standing between your pandemic-era apartment and the True Starbucks Experience is someone getting mad at you on the internet because your cups are not overtly religious enough during the holidays.
Nielsen ratings are the yardstick against which all television programming is judged, and they’re reticent to mess with the sauce lest they arbitrarily mess with the industry’s understanding of who’s watching what. In 2007, they upgraded their system to measure the commercial breaks, and who was skipping past the ads on DVRs, a problem that now, in the era of streaming, is somewhat vestigial. Now the problem they seek to solve is streaming video, and in early 2021 Nielsen will roll out new data incorporating information from DirecTV, Dish set-top boxes and Vizio Smart TVs to determine who’s streaming what. The company estimates that 77 percent of homes in the U.S. have a device that can stream, and 25 percent of TV usage in those homes is streamed. Moreover, that’s where some of the $70 billion spent on television ads is seen to be shifting: eMarketer projects that money spent on connected-TV streams and live feeds will increase 75 percent from the level in August 2020 to hit $3.6 billion in 2022.
Pizza vs. Salad
As the ongoing pandemic changes the way we eat, there are winners and there are losers. Perhaps the most illustrative contrast in the restaurant scene comes when stacking up two go-to bites against one another: pizza, which is great, and salad, which is available. Independent pizzerias on the app Slice saw sales grow 60 percent since March, the once moribund Pizza Hut saw a 9 percent and earnings exceeded expectations by a factor of eight, and Domino’s saw a 16 percent increase in same-store sales in the second quarter. Meanwhile, salad joints are in disarray: most of them are private so the hard numbers are tough to come by, but Sweetgreen sales fell 60 percent in the eight weeks following shutdowns, and the only publicly traded chain in salad, Freshii, saw a 51.4 percent decrease in Q2 sales.
In 2007, Cal Fire made the most recent map identifying areas of severe fire risk, and within those bounds were 2.2 million homes. However, the fire situation in California is now very different, and an update to those maps would involve substantially more homes drawn into the danger zone. The proof is on the balance sheets: from 1964 to 1990 the average annual payout from insurers to property owners who suffered fire damage was $100 million. From 1991 to 2010, that annual average rose to $600 million. But from 2011 to 2018, the annual average was $3.7 billion, with the 2018 Camp Fire alone causing $18 billion in property damage, of which just $9 billion was insured.
The voters of the city of Austin, Texas approved two ballot measures that raised property taxes to fund a $7.1 billion mass transit investment in a new rail system, a bus fleet and improvements in bike lanes, sidewalks, and trails. It’s an ambitious plan that will, over the next eight to 10 years, build the kind of infrastructure that is projected to eliminate 250,000 daily car trips. With the city ponying up the initial investment in the project, now local leaders are angling to score some more from the Federal Transit Authority Capital Investment Grants program.
Last week, Ant Financial was poised to go public in what would have been the largest IPO ever. China’s regulators pumped the brakes at the last minute, and as a result, the offering is off for now. The regulations being considered would have serious implications for the company’s microlending business that drives 40 percent of Ant’s revenue and 48 percent of their profits. Right now, their Huabei and Jiebei products manage 2.15 trillion yuan of outstanding loans, and analysts estimate that the leverage ratio of Ant’s online lending business is 60 times net assets, far higher than the leverage ratio limit for regional and provincial microlenders of 16 times net assets. The new rules would cut Ant’s profits on its credit businesses from 10 billion yuan to something more like 4 billion yuan, and would slash that 2 trillion yuan valuation down to 1.5 trillion yuan.
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