| Hey Insiders, Happy Friday! Today's newsletter covers: - PepsiCo's Q2 earning report
- Breakdown of retailers raising the bar for free delivery as shipping costs soar
- Round-up of big deals that happened this week in the business world
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Shriram
p/Shriram | |
| 1 | | With earnings per share of $2.09, over the projected $1.96, PepsiCo outperformed expectations in the second quarter. The corporation raised its full-year projection with a projected 10% organic sales increase in 2023 due to its quarterly revenue exceeding expectations, reaching $22.32B versus the anticipated $21.73B. More: - The company's net income during the second quarter of 2017 increased from $1.43B to $2.75B.
- The company's volume decreased due to lower demand and improved pricing, with a 3% decline in the food sector and a 1% decline in beverages.
- Despite difficulties, PepsiCo's volume decline was not as severe as anticipated because of the low unemployment rate around the world.
- While Frito-Lay North America witnessed a 1% volume rise, Quaker Foods North America suffered a 5% drop.
- During the quarter, PepsiCo's spending on advertising and marketing grew by double digits.
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| 2 | | 
What the numbers say: The cost of shipping a 10-pound package from New York to Chicago via UPS Ground, including surcharges, increased from $8.71 in 2018 to $13.79 this year, based on ShipMatrix data. The typical minimum order quantity to qualify for free shipping increased from $52 (2019) to $64 (2023). As opposed to 2-3% when delivering goods to physical stores, shipping costs account for 10-15% of e-commerce firms' revenues, according to 47% of retailers, who allocate over 10% of an order's total value to shipping costs. Relevance: To combat rising shipping costs, major shops like Macy's, Saks Fifth Avenue, Neiman Marcus, and Abercrombie & Fitch are raising the minimum spending threshold for free shipping. As retailers review their logistics strategy to maintain profitability, this change signals a shift away from prior campaigns intended to drive online sales through low or free shipping. More data: Amazon's introduction of free shipping through its Prime membership in 2005 set a benchmark for online customers, with 62% of respondents saying they would only purchase from a merchant with this option. Retailers like Macy's, Abercrombie & Fitch, and Saks Fifth Avenue boosted their free shipping thresholds to $49, $99, and $100, respectively, as a result of recent pricing increases by UPS and FedEx of 5.9% and 6.9%. | | | |
| 3 | | Amazon's Prime Day event was a record-breaker, with U.S. shoppers spending $12.7B during the two-day sale event, a 6.1% increase in sales year-over-year. Shoppers purchased more than 375 million items during the sale. More: - The average order size was $54.05.
- Amazon's shares rose as much as 2.1% in pre-market trading on Thursday.
- The first day of Amazon's Prime Day event saw U.S. sales rise nearly 6% year-over-year to $6.4B.
- Consumers spent $6.3B on the second day of the Prime Day event, up 6.4% year-over-year.
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| 4 | | Big Deal Round-Up In the second week of July, the M&A market witnessed significant deals, as Exxon acquired Denbury for $4.9B and Kering, the parent company of Gucci, purchased Creed fragrance for $3.9B. Additionally, Qatar acquired a 5% stake in the Washington Wizards in the private equity sector. Notably, ground-breaking Domino's-Uber and Shutterstock-OpenAI partnerships contributed to the surge in shares of Domino's and Shutterstock. This week also saw various noteworthy developments. M&A: - Exxon is set to acquire Denbury for $4.9B, making a significant investment in carbon storage.
- In a strategic step into the competitive high-end beauty sector, Kering, the luxury company that owns Gucci, paid $3.93B for the fragrance brand Creed.
Private Equity: - The Qatar Investment Authority has invested $200M, acquiring a 5% stake in Monumental Sports, the owner of the Washington Wizards.
- In a $1.04B cash and equity deal, TransAlta Corp intends to purchase all of TransAlta Renewables Inc.
- The Rothschild family acquired 8.2 million shares of a Paris-based investment bank.
- Private equity corporation KKR successfully negotiates a company's $1.6B purchase by offering less and emphasizing the financing and rivalry risks.
Partnerships: - Shutterstock and OpenAI have announced an expanded six-year agreement; Shutterstock will grant access to its video, image, and audio libraries to supply superior training data for ChatGPT.
- Domino's has announced a global agreement with Uber Eats, making it their exclusive third-party platform in the U.S. until 2024.
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| 5 | | Rising inflation is prompting U.S. consumers to tighten their belts, including on food. Sean Connolly, CEO of Conagra Brands, noted that Americans are "hunkering down" and buying less food but not eating less. More: - Inflation reached a 40-year high of 8.6% in May 2022, but it has come down slightly to 8.5% as of July 2023.
- The cost of food increased by 10.1% in the past year, reaching a 42-year high of 10.4% this month.
- Sales at grocery stores have declined for 15 consecutive months, falling 1.3% in May 2022 and 2.2% as of this month.
- The average household is spending an additional $460 per month on food due to inflation.
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| 6 | | Farmers Insurance, one of the largest home insurers in the United States, is withdrawing from Florida after 70 years. Insurers in Florida have been struggling with the rising costs of covering damage from hurricanes and other natural disasters. The company will stop renewing about 300,000 policies in the state, affecting about 1 million customers. More: - The Florida homeowners insurance market is facing a $35B shortfall.
- The average cost of homeowners insurance in Florida is $2,385 per year, 31% higher than the national average of $1,820 per year.
- State Farm pulled out of the Florida home insurance market in 2009, though it returned in 2014 and told Fox Business this week that it is sticking with the Florida market.
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| 7 | | Quick Hits: - Combine traditional project management with your docs, knowledge base, and AI.*
- Exxon Mobil Corp. plans to acquire Denbury Inc. for $4.9B to include an established carbon dioxide sequestration business in its energy transition efforts and speed up the process.
- Disney is looking for a new partner for ESPN and is thinking about selling or dividing its cable networks from its broadcast network. CEO Bob Iger has also hinted that ESPN may eventually switch to a direct-to-consumer business model without providing a timetable.
- Alphabet Inc., the parent company of Google, saw a 4.9% increase in shares after announcing the extension of Bard, its AI chatbot, across Europe and Brazil, allaying fears about potential regulatory issues on a global scale.
- The first over-the-counter birth control pill (Opill) has received FDA approval, enabling women and girls to prevent unintended pregnancies without a prescription; it will be sold without age limits in stores and online by the beginning of 2024.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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