Restaurants (Short Kitchens, Long Bikes)

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Options abound for food these days - particularly if you live in an urban area. You can get your food sent to you in kits (Hello Fresh and Blue Apron), as groceries (Amazon Fresh, Fresh Direct) or from restaurants via the gazillion delivery services that are duking it out with one another AND capitalizing upon the rise in co-cooking kitchens (Caviar, Postmates, Grubhub and UberEats). We could fill 6 minutes of a$$-kicking reading just by continuing the list.

Here's the thing: much like the consumer products e-commerce space - where shipping is cutting into retail margins bigly - food delivery is killing your favorite restaurant. Why? Well, Captain Obvious, there are too many hands in the pot. As The New Yorker highlights (must read), "over-all profit margin has shrunk by a third, and that the only obvious contributing factor is the shift toward delivery." Ruh roh.

The piece is shocking in how ignorant every seems to be about the effect of delivery services on restaurant margins. This bit also struck us, "It’s worth noting that, even while charging restaurants steep rates, most delivery platforms are not yet profitable, either. Their hope is that order volumes will one day become high enough—and couriers will deliver enough orders per hour—to push them into the black." The alleged answer? A kitchen within a kitchen. Uber "is nudging restaurants to embed “virtual restaurants” inside their kitchens—picture a burger joint housing, at Uber Eats’s behest, a cookie company that exists only as a menu on the delivery provider’s site. DoorDash, an Uber Eats competitor, has started to experiment with leasing remote kitchen space to restaurants so that they can expand their delivery radii. If such practices catch on, it’s easy to imagine a segment of the restaurant economy that looks a lot like, well, Uber, with an army of individual restaurants designed to serve the needs of middle-man platforms but struggling to make a living themselves." This is "progress" folks. 
 

Incredulous: Meal Kits as Savior for Grocers? C'mon.

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Are Meal Kits Kroger's Defense Against Amazon? 

This makes no sense: "to compete with Amazon, grocers could start purchasing meal kit companies" (CNBC). Wait. What? Right, because all of the meal kit companies have demonstrated sustainability and profitability. CNBC states, "Some meal kit companies seem receptive to the idea." Hahaha. Of course they are! CNBC neglects to highlight Blue Apron's ($APRN) post-IPO chart but, suffice it to say, it ain't exactly pretty. That said, when your numbers look like those put out by Kroger ($KR) this week, maybe desperate times call for desperate measures. 

Supervalu is Super F*&ked.

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The company approved a 1-for-7 reverse stock split to fortify its NYSE listing ($SVU) and give suckers...we mean, investors, the impression that the company is in better shape than it actually is. In its Q1 earnings report, the company highlighted a boost to its wholesale business (to be served, in part, by an acquisition made out of the Central Grocers bankruptcy); it also attempted to assuage any concerns arising out of the potential lost Marsh Supermarkets volume (even as it kept 15 stores of business with the new owner). The company is launching meal kits (how effed is Blue Apron?) and grab-and-go meals.

Casual Dining (Long the Bread Stick)

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The dominant narrative lately is that Quick Service Restaurants (formerly known as, cough, "fast food"), fast casual restaurants and fine dining establishments are, for the most part, doing well. Millennials love experiences and, judging from the volume of Instas featuring Avo Toast, food = experiences. Unless, that is, we're talking about "casual dining" establishments likeRuby Tuesday, Joe's Crab Shack, and others. Why eat subpar food and sit staring at your phone when you can subscribe to Blue Apron, make food at home, and sit staring at your phone? Well, throw in some bread sticks and you just may combat that narrative. So is the story with Olive Garden (owned by Darden Restaurants Inc. ($DRI)), apparently, as the chain reported same store sales growth of 4.4% and 4th straight quarter beat. Note, however, that profits fell on higher costs. With food prices lower, we wonder whether CACs have increased...? 

Grocery Meet Tech. Tech Meet Grocery. (Blue Apron & Flashfood)

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This is interesting and potentially game-changing in multiple respects. An app called Flashfood is gaining traction in Canadian grocers and we dig it. The app notifies customers when food is nearing its "best before" date and going on sale. Customers can pay for the food through the app and then pick the order up the same day in-store. The idea is to eliminate waste, beef up grocer sales, and unburden landfills. Query, however, what this means for food banks. Elsewhere in grocery and "tech," Blue Apron has released its financials and, annualized over '17, they show a $208mm loss on a $240mm marketing spend (maybe they'll advertise in PETITION?). Their CAC are through the roof ($94/per) and they're showing an uptick in subscribers but a downtick in value per order and orders per customer. So, retention and volume are issues. $960mm annualized revenue, though. May be time to try it before it goes public (or fails) and the $30 VC-subsidy disappears....