Starbucks Competitor Opens First US Stores & The Dollar Keeps Sliding

0:00The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen. And keep striving. Visit Strayer.edu slash Jack Welch MBA to learn more. Strayer University is certified to operate in Virginia by Shev and as many campuses, including at 2121 15th Street North in Arlington, Virginia. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, the coffee wars are heating up with Luckin coming for Starbucks on its home turf.

0:41Then first half of the year, report cards are in and stocks got a gold star while the U.S. dollar is in time out. It's Tuesday, July 1st. Let's ride.

0:54Good morning and happy Bobby Bonilla Day to all who celebrate. Have no idea what I'm talking about? Here is the gist. Every July 1st, retired all-star third baseman Bobby Bonilla receives a$1.2 million check from his former team, the New York Mets, even though he hasn't played in a baseball game for over 20 years. And that's because back in 2000, the Mets owed Bonilla$5.9 million. But instead of taking that cash up front, Bonilla requested a contract that spreads out$30 million in guaranteed payments through annual installments from 2011 through 2035. And so July 1st has become an annual celebration of Bonilla's forward-looking financial planning and an opportunity to make fun of the Mets for having to pay a 62-year-old retired player for another 10 years.

1:45our deferred income king. Here is the funniest part about this whole deal. It worked out really well for the Mets. They used the money saved on the Bonilla deal to bring in a pitcher who had a great year, then flipped him for a draft pick they used on David Wright, who by the time he retired was the Mets all-time leader in basically every offensive category. So yes, history actually shines brightly on the Bonilla deal, despite it being a very funny opportunity to make fun of the Mets, which thank you for taking advantage of. Now a word from our sponsor, Taco Bell. Excuse me, Neil. I need to refreshen up a bit.

2:19Refreshen? Yes. Taco Bell's new refrescas are refreshing, Neil. That's because these drinks are crafted to quench every craving for any mood or any meal. I'm partial to agua refrescas, a Taco Bell twist on the beloved Mexican beverage mixed with real freeze-dried fruit pieces and green tea. Sometimes I need the rock star energy refresca for a delicious boost of energy. I am fully team refresca freeze. It's basically PTO in a cup. Head to TacoBell.com slash morning dash brew to learn more. That's TacoBell.com slash morning dash brew. Legal disclaimer, at participating Taco Bell locations for a limited time only while supplies last, Agua refrescas are made with artificial colors and natural fruit flavoring and contain less than 1 % juice.

3:03Rockstar Energy refrescas contain 200 milligrams of caffeine and are not recommended for children, pregnant, or nursing women or persons sensitive to caffeine. The people of New York City don't exactly lack options when it comes to coffee, but a new chain has arrived from out of town, and it's hoping to shake up the morning brew pecking order in New York and across the U.S. Luckin Coffee of China opened its first two locations in the United States in Manhattan yesterday. In a high-stakes bet, it can replicate its stunning success in its native country on Starbucks' home turf. Luckin was founded in 2017 and needed no luck finding its niche catering to young people with app-based payments and cheap, wildly inventive drinks that blur the line between coffee and boba tea.

3:46By 2019, it overtook Starbucks in China by number of locations, and by 2023, it surpassed it in revenue. Luckin now has more than 22 ,000 locations in China, opening a new one every 90 minutes last year, and a few others in Singapore. But its road to the U.S. has been rocky. In 2020, after the company went public on the Nasdaq, It got caught up in an accounting scandal and admitted its earnings had been fabricated. Lunkin's chairman and CEO were both fired. It was delisted from the NASDAQ and hit with a$180 million fine by the SEC. Many analysts thought it was dunzo for Lunkin at the time, but it cleaned up its house, regrouped, and is back to plotting worldwide domination.

4:27Toby, as they say, if you can make it here, you can make it anywhere. You think Lunkin will find success in the crowded American coffee market? I think that Starbucks has to watch its back. All you have to do is look at the company's approaches to their apps to see how these two coffee houses differ. Customation is the name of the game at Starbucks. You can supercharge your customization on the Starbucks app. You can add any number of toppings, syrups, foams. And now baristas are being forced to make these complex streams that owners have just made up on the fly. That has led to these mosh pits during key commuting hours.

5:02Then you look at Luckin. Luckin has no problem with digital ordering. In fact, you can only make orders via its app, and they don't have these crazy lines or crazy mosh pits that Starbucks has because the customization is a lot more basic. All you can do is simple things like optimize for the level of sweetness, but you can't add foams and syrups and whatnot galore. So it's a very interesting approach. Luckin's is a lot more scaled down, a lot less custom-focused compared to Starbucks, which is you can do all sorts of bells and whistles. But Luckin can afford to do that because it has so many different kinds of coffee that it offers.

5:38I mean, this company launched 119 different items in 2024 alone. The coffee market in China is so cutthroat. Luckin is not the only game in town. It's also going against another chain that's growing like a weed, Cody Coffee. And they're releasing new products, nearly one every two day. Things like mango-based drinks or green grape-based drinks. Starbucks is also getting in on the game in China with a salty and sweet pork-flavored latte. So you have this wildly inventive market in China. We'll see whether the American tastes are more attuned to that. We're more used to just black coffee or espresso drinks or coffee with milk and sugar here in the United States.

6:19We'll see whether consumers will go for that mix of boba tea, fruity coffee that Luckin has been so successful with in China. Yeah, and Luckin doesn't necessarily expand its menu. What it does is periodically introduce limited-time menu items, which gets people out in droves. Because, again, they're catering to the same kind of social media-obsessed youth that Starbucks is trying to capture as well. Yeah, last summer it took advantage of Milk Tea Craze. They sold more than 44 million cups of jasmine tea in the first month that they released this new limited-time option. And then also we have to talk about value for money here.

6:55In the U.S., the average order at Starbucks costs 51 % more than it did pre-pandemic. At Luckin, a latte costs just$2. So Starbucks is going to have to compete not just on variety but also on price. So, yeah, I do think that they have their work cut out for them. And then you also mentioned that the placement of these two locations was very wise for Luckin, too. Yeah, they're going after tourists and they're going after Chinese college students. So what they did for their first two locations is put them in those areas. One of the locations is in Greenwich Village right next to NYU. And we'll see how it works out for them.

7:33Cody, that rival that I talked about, is already in the United States. It has a few locations in New York. It has a few locations in California. It will be very interesting to see these two very different strategies from Starbucks and Luckin work out. because right now the new CEO of Starbucks, Brian Nickel, is doing the exact opposite of what Luckin's value prop is. He's streamlining Starbucks' menu and very much enhancing the in-store experience. He wants people to linger into Starbucks. I went into a Starbucks the other day and there was a lot more seating than had been in the past few years.

8:07It reminded me of the Starbucks of old, which is exactly what Brian Nickel is trying to do. It may just come down to price. As you mentioned, Starbucks is very expensive. They're leaning into premiumization and Luckin is going. We'll see how much these coffees actually cost in the United States, but they're going for two to three dollars. Then again, Starbucks has a big advantage. Obviously, it's been here for 50 years. Luckin has two stores as of yesterday. We are nearly 50 percent through 2025, which means it's time for a halfway check in on the markets. The starting five of stocks, bonds, cryptocurrencies, and my sanity have all had varying levels of success and failure so far, but no one has put in a shift quite as putrid as the U.S.

8:49dollar. The good old greenback is off to its worst first half of the year since 1973, as Trump's economic agenda has global investors rethinking their exposure to the world's reserve currency. The potent mix of stop-start tariffs, a big beautiful bill that would add$3.2 trillion in debt and doubts about Fed independence have all sapped the currency's safe haven appeal and caused the dollar index to fall more than 10 % so far. Meanwhile, stocks are doing just fine after suffering their largest two-day loss in history post-Liberation Day. Expectations of future rate cuts cheered on by Trump have powered U.S.

9:25stocks to record highs again in both of the last two trading days. But again, the weaker dollar means the S &P 500 still trails European in stocks on a currency-adjusted basis. In fact, despite the S &P 500 inching up 5 % so far this year, your portfolio could very well be down when adjusted for currency value. Cryptocurrencies, meanwhile, have fallen somewhere in the middle, with Bitcoin thriving under the crypto-friendly administration. But most of the rest of the industry struggling, more than$300 billion in market value has been wiped out from altcoins so far this year. So overall, Neil, six months into 2025, we have a sinking dollar, whipsawing U.S.

10:03stocks, a suddenly resurgent Europe, and a middling crypto market. And it's only July. This dollar sinking has been a dark cloud over what had been a remarkable recovery by stocks. In practical terms, what does a 10 % weaker dollar mean for you? It is more expensive for you as an American now to travel abroad. It's less attractive for foreigners to invest in the United States because their currencies are stronger. On the flip side, the weaker dollar should help U.S. exporters. If you make a good here, if you're a manufacturer here, it is now cheaper for you to sell it abroad and your exports become more attractive.

10:41It does make imports more expensive for us. So there are all these tradeoffs going on when the U.S. dollar gets weaker. I should mention the U.S. dollar is still very strong. It came from a position of huge strength to start the year, and it was expected to only increase because Trump's tariffs were expected to hurt other countries more so than the United States. As the year has progressed, as we've gone on for these past six months, that has not turned out to be true. U.S. economic growth is seen to have faltered more than all the countries were putting tariffs against. And that's why you're seeing one of the reasons that the dollar has had such a putrid start to the year.

11:17And then one more aspect of this dangerous game of devaluing the dollar is that the U.S. does depend on foreign investors to kind of buy its debt and fuel this monstrous debt pile that we've accumulated. And a weaker dollar erodes the return on those bonds. So that is one aspect of this. If the dollar gets too weak, maybe there's less demand for these long-term treasuries that we've talked about, actually, and less foreign investors are piling into those specific vehicles. So that is one potential danger of the dollar getting too weak. Let's also just zoom out to the market as a whole this year.

11:54We've talked about it a lot, but let's just give you the high-level winners of losers. The best-performing stock in S &P 500 is Palantir. It's up 80 % already this year as kind of ongoing geopolitical conflict has made this company even more central to shaping AI-driven warfare. On the flip side, Decker's is actually the worst-performing stock. so far this year is down nearly 50 % as it just hasn't. What does Decker's make? Yeah, Decker's makes shoes, makes brands like Hoka, and it just hasn't competed very well with Adidas and the like. And then also, yeah, crypto has been all right. The IPO pipeline is something that we have to shout out as well because a lot of people going in thought maybe there'd be an IPO boom.

12:36It didn't look like it for a little bit. But now all of a sudden we have CoreWeave, Chime, and eToro and Circle who have all had these massive IPOs and done very well. So kind of a mixed bag overall, but definitely some spots of highlights. We'll give it a B or a B minus, I think. OK, moving on. Dear people of Philadelphia, are you, like me, fed up with rooting for a basketball team that underachieves every year? Would you like to break out of a cycle of endless mediocrity? Do you want a fresh start? Well, it's on the way. Philadelphia, along with Cleveland and Detroit, are getting WNBA expansion teams in the next few years, the league announced yesterday as it tries to seize on its booming popularity by adding new franchises in new markets.

13:19Combined with the Golden State Valkyries, a new team that debuted this season, and two other expansion teams at Portland and Toronto on deck, the WNBA will grow to a league-record 18 franchises, two more than the previous peak of 16 teams in 2022. While Philadelphia will be getting its first WNBA franchise, Detroit and Cleveland have been here before. The Cleveland Rockers hooped it up from 1997 to 2003, but folded after ranking 10 out of 14 in attendance and never turning a profit in seven seasons. The Detroit Shock played in the WNBA from 1998 to 2009, won three championships and set records for attendance, but moved to Tulsa in 2010.

13:57One sign of how far the WNBA has come from then, the expansion fee. The new team owners paid the league a reported$250 million fee, roughly five times what the Golden State Valkyries paid just two years ago. Toby, with Kaitlin Clark in Indiana and new teams coming to Cleveland and Detroit, is the WNBA single-handedly revitalizing the Rust Belt? Yeah, it absolutely is. And I will say it's coming at a great time for the league. I mean, it just came off record viewership, record attendance, record merchandise sale. Everywhere you look, things are on the come up. And that expansion fee is crazy because, I mean, you mentioned just a few years ago what the Golden State Valkyries paid.

14:38But Mark Davis bought the Las Vegas Aces for$2 million in 2021. That team is now worth nearly$300 million. And then the New York Liberty was bought from James Dolan for$10 million in 2019. Now the New York Liberty are worth$420 million. So insane valuations that we're seeing here. And a lot of league sources are saying when you factor in all the equipment and expansion or facility fees, the real fee is closer to$300 million. So clearly the demand is there. Clearly the valuations are spiking enough to justify those franchise fees. So things are on the up and up for the W. Yeah, valuations have absolutely exploded.

15:15And that's due to viewership increases. Viewership of WNBA games on ESPN networks were up 170 % last season to an average of 1.2 million. And that has led to surging valuations. The current 13 franchises that make up the league, they jumped in value by an average of 180 % over the last year. The teams are collectively worth$3.5 billion worth now. And each franchise is worth, on average,$269 million. dollars compared to 2024 each franchise was worth 96 million dollars this league has a lot of momentum we haven't I have spoken her name Caitlin Clark is a big reason why it wants to continue reloading with talent and uh we'll see what happens when it brings uh it brings these teams to Detroit Cleveland and Philadelphia I know Philadelphia for one is an is absolutely desperate for a basketball team it can root for and be proud I'm I'm so happy for you because you have suffered so much as a 76ers fan over the last few years.

16:15So hopefully, you know, this 76ers equivalent will be better in the WNBA. Up next, we got Toby's Trends. This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app. It's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there. Does it ever feel like you're a marketing professional just speaking into the void?

16:55But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them, in fact. You can even target buyers by job title, industry, company, seniority, skills, and did I say job title? See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at linkedin.com slash campaign. Terms and conditions apply. Are you a man who likes to read a good book? Is that good book a work of fiction? If you answered yes to the above, then you might be a rare unicorn in today's literary landscape, a unicorn that we are going to try and pin down on today's edition of Toby's Trends.

17:35A lot of ink has been spilled asking the question, are men reading enough fiction? The New York Times just published a piece titled, Why Did the Novel Reading Man Disappear? But did he actually disappear at all? Granted, the book industry skews female with a 2023 study from Lee and Lo finding that 71 % of publishing's workforce are women. There's also the infamous stat cited in many an op-ed and industry report that men account for only 20 % of the fiction market compared to 80 % for women. But it turns Turns out that stat is basically made up, according to Vox, and the gap is not nearly as yawning as you might think.

18:11The closest thing they could find was a 2017 study from the UK that found UK women bought 63 % of fiction while men bought 37%. It's hardly the Grand Canyon in terms of readership. And while celebrity book club culture and book talk are mostly geared towards women, men have their fair share of literary role models making books for them. In fact, men won the National Book Award for fiction in four of the last five years. So the reality is women probably do read a little more than men and probably read more fiction due to how the industry is set up. But Neil, this is one of my murkier trends, the great case of the mysterious novel reading men.

18:49And I can't wait to talk to a novel reading man about it. I mean, I do read fiction. I almost exclusively read fiction, but at least anecdotally, when I read these headlines saying men read fiction a lot less than women do, that certainly speaks to my experience. Just talking among my friend group and whether that's bad or good or something to be alarmed about is a question we can explore maybe in another Toby trend. But certainly my experience that men do read less fiction. The architecture of book discovery right now is certainly set up for women. There's a lot more women at the highest levels of publishing.

19:25Perhaps there is a supply shortage of stories that are told that speak to the male experience. And some would say, hey, this is a long time coming. Thank goodness that the power structures have been inverted because for the 20th century, there was, you know, this this world was dominated by male literary figures. Philip Roth, Jonathan Franzen, Kurt Vonnegut. You could go down the line. And everyone, every guy had infinite jest on his bookshelf. And the fact that women are getting their chance to shine here and are dominating this industry is perhaps welcome. So I would say the numbers back it up.

20:01I know you're saying it's not 80-20 as popular cited, but 63-37 is a big gap. Yeah, but one thing that we do have to say, too, is that American adults in general just don't read that many books. According to Pew Research from 2011 to 2021, the average American read 14 books per year. And you're probably thinking 14 books a year. That is a lot of books, but those numbers are skewed by the power readers. I mean, we all have the friends who have just bookshelves on bookshelf work of books. If you go to the median number, that is the number drops to just five. So you see how on average, five is still a little bit higher than I was expecting, but the book industry as a whole are saying that we're not actually competing with other publishers at this point.

20:41We're competing with screen time. We're competing with Netflix. There are so many things pulling your attention away from reading right now. So in general, are men reading less? Probably. But a lot of people and a lot of adults in general are reading less. So maybe that's the real story here is the great case of the mysterious novel reading people that are just are falling to the wayside. All right. For all the dudes who are listening to this, who are here, you know, the stats that they're not reading as much fiction as women and want to start on their novel reading journey. Let's give them some some recommendations.

21:13Toby, what is a good novel you've read? I mean, I just read Project Hail Mary, which they're coming out with a movie, too, which I probably shouldn't say because we're gassing up books right now. But one of my favorite reading experiences, it's science fiction, but still fiction. A great time. Neil, I know you have one as well. Yeah, whenever whenever guys come to me and they're like, I want to start reading fiction, I always tell them one book, which is Pillars of the Earth by Ken Follett. You will never look at a 12th century cathedral the same way. And I have a bunch of other recommendations.

21:38If you just hit me up, I'll help you. All right. Let's sprint to the finish with some final headlines. Microsoft thinks it can out doctor your doctor. It announced yesterday that it built an AI medical tool that claims it's four times more successful than human MDs when it comes to diagnosing complex ailments. Called the Microsoft AI Diagnostic Orchestrator, it works as a symphony of five AI agents all acting as separate quote doctors. Together, they team up to come up with hypotheses, debate and run tests to eventually choose the best course of action. As a test, this AI doctor Hivebrain was fed 304 complex medical studies from a peer-reviewed journal.

22:19It correctly solved 85 % of them compared to just 20 % for human doctors. Neil, we'll have to see how its handwriting is, but for now, researchers are calling the AI orchestrator a landmark step towards medical superintelligence that could help ease staffing shortages slash costs and upend traditional diagnostics. I mean, holy cow, this is crazy. And it speaks to the AI talent wars that we've been talking about over the last few weeks with Zuckerberg going after these, you know, very important AI researchers, because the guy who did this, Mustafa Suleiman, was the co-founder of DeepMind, which Google bought.

22:59And then he left DeepMind and is now at Microsoft. And he is, you know, sort of spearheading these initiatives for Microsoft. One part of this, which I think is maybe under discussed, is the cost. Because when you're trying to figure out a very tough diagnosis, you often have to run so many tests. And that can add up to hundreds of thousands of dollars. In some cases, by sticking the AI on this, it might take a lot fewer studies because it was programmed to be more cost conscious than human doctors. Really cool initiative. Very excited to see where this goes. Among the stocks hitting record highs yesterday was Robinhood, which soared 13 percent after announcing its biggest push yet into crypto with a slew of new products.

23:43The highlight was its release of tokenized securities for private companies like OpenAI or SpaceX, which means that European users, sorry Americans, can trade tokens in fast-growing companies that aren't on the public markets yet. Tokenized securities, which are blockchain-traded assets whose value mirrors their underlying equity, give their owners similar benefits of owning a stock, including things like dividends, and could offer more transparency because their trade clears instantly. But to reiterate, this is only available to European users because of America's tighter restrictions on trading, and it will likely remain that way for the time being.

24:17You don't hear that a lot. The U.S. has tougher regulations than Europe. Still, investors clearly saw Robinhood's product launch as a sign it was on its way to becoming an all-inclusive financial services firm. Yeah, Robinhood is on a heater right now, and you are totally right. Vlad Tenev, the CEO of Robinhood, has this vision, and it wants to be the one-stop shop for your entire financial life. And to him, that means pushing much deeper into the crypto world and just basically expanding its market share on all levels of wherever you're investing or trading. So fascinating to see the turnaround that Robinhood's had.

24:50I mean, during the pandemic, it had this big surge in usage. It went public, got a gaudy valuation, lost a lot of that, and now is very much back to record highs. So they've been executing at a very high level on that vision. It looks like this is just one more step to total financial dominance. All right. Your cruise to Mexico is getting a little bit more expensive after the country imposed a new cruise tax. Starting today, cruise passengers will be assessed a$5 fee when their ship stops at a Mexican port, and that will eventually rise to$21 per passenger. It's part of the Mexican government's push to get more of the cut of the billions of dollars cruise operators are spending on creating private resorts in Mexico.