Austin’s May Outlook: “The Next Coke”
May 22, 2020
I love the story of Quincy becoming a town of secret Coca-Cola Millionaires for a few reasons. Mainly because I’m from Florida…go Florida! On a slightly more serious note, the story highlights on of our 7investing principles “Time is on your side”. The people that held their shares for decades, through all the ups and downs, ended up growing tremendous wealth. That’s a lesson I love to remind myself of, especially during turbulent times like these past few months.
When I think about finding the “next Coca Cola”, I immediately think about the differences between the time period when Coke rose to become a dominant, household brand and now. When Coke was “growing up” the name of the game was retail placement and physical distribution. By having the distribution capacity, Coke could fill stores with shelves and eventually entire aisles of product. When grocery shoppers walked down an aisle and all they saw was Coke product, they made the easiest choice and bought Coke!
The world and consumer preferences have changed. The most valuable “real estate” for consumer brands has evolved from shelf space in grocery store aisles to having their app be on the home screens of mobile devices.
Peloton and Zoom are two consumer must-haves of the future because they are taking advantage of the digital revolution.
Peloton is creating the future of fitness. Peloton sells expensive stationary bikes and treadmills which has drawn criticism to the company’s business model. However, I believe Peloton’s beautiful, easy to use application, community interaction, and subscription membership model will make the company a dominant luxury consumer brand for many years. Customers don’t have to pay for those expensive devices up front. Instead, they can finance them and roll the costs into a monthly subscription for around $100 per month which also gives them access to fitness classes and community features where they can connect and compete with friends.
Once the equipment is paid off, customers continue paying Peloton for access to their classes. During the company’s most recent quarter, Peloton nearly doubled their Connected Fitness Subscribers year-over-year to 886,100. Those subscribers averaged 17.7 workouts a month for a total of 44.2 million workouts in the quarter.
Health and fitness will always be a popular trend and Peloton is positioned as a brand with staying power as consumers adapt to “the new normal” after COVID-19.
Zoom has managed to make video meetings cool. The company has seen a nearly 30x increase in usage over the last three months as everyone has adapted their personal and professional lives to quarantine. We will eventually move back to some version of life in between our current “shelter in place” way of life and our previous ways of interacting and doing business. However, the ability to connect through video with friends or for work remotely is here to stay. Zoom has managed to make their product easy enough for people to use for personal meetings, but secure and advanced enough for some of the largest organizations in the world to use for critical business functions.
The Zoom Meeting app has managed to move into the #1 spot on both the Apple and Google app stores which is an indicator of just how popular it has become with users. Although video has become an ultra competitive industry, Zoom’s early lead in market and mindshare combined with their fanatical approach to research & development has made Zoom into a consumer must-have of the future.