Rundown: Gatorade expands healthy options, retail credit cards declining & Bark gets into pet air travel

0:06Hey, everyone. Welcome to the Modern Retail Rundown. It's our weekly news recap show.

0:24I'm will fit with the show, what we're talking about later on. But you also wrote just about this, which is how beverage brands are going back to basics. So they're not going to have like all of those insane ingredients and talk about being prebiotic or probiotic. They're just going to say like, we're a soda, but we're better or something like that. So like, what, like, do you have a certain favorite hydration type of drink? Or have you fallen prey to like these new $7 beverages that have these hard to pronounce ingredients. What are your thoughts? Hard to pronounce ingredients? No, not really.

1:01But I mean, I do love a little bit of a... I love a fizz. So I do drink all of those. Won't name any brands, but you could fill in the blanks there. But I think as far as actual hydration, I'm not super big on the hydration drinks, but I have gotten into the sugar-free liquid IV, the new one that they just came out with. Because my problem usually is like the sugar, right? It's you're hydrating, but you're drinking a ton of that. So that's been pretty good. What about you? What are you into? I've never been into like hydration. Like I, you know, talking, you know, this is going to be a hint of what we're about to talk about, but like I've never really drank that much Gatorade.

1:45And so I never would drink another hydration drink that's like competing with Gatorade. It's just not been something, unless I'm like sick, I guess. The only things that I've really messed with have been like energy drinks. So like, I'll name it, like I've drunk many a Celsius and I think they're very good. But I also think that that's a rare example of like making a new product that also tastes good and is an energy drink and isn't just like, I don't know, I've been impressed with that specific one, but I have not tried many of the others. But that's, you know, I'm also, I don't drink a lot of soda, so I'm not really the type of person.

2:20And if I am going to drink a seltzer, I drink a plain seltzer. I don't like flavored seltzer. So I have not gotten into a lot of the other things. Yeah. What's your favorite Celsius flavor? I'm still working this out. I've only, I mean, like, I don't have it that often. It's usually like, you know, if it's a weekend, a weekend afternoon, and I'm a little tired, I might drink a Celsius. I just had their cola flavored. And I will say it tasted like a Coca-Cola. It was very, very good. And I was quite impressed. So good job if you're listening, Celsius. I buy you from the bodega. Yeah, no, the cola.

2:56Yeah, I'm not a soda drinker. Now you have me intrigued. I'm going to go get some after. Yeah, excited. Well, we will let you guys know why we just gave you our takes on energy slash hydration drinks in a little bit. But today, we are going to be talking about Gatorade's portfolio that's expanding. It seems like we just can't have enough hydration SKUs for the brand. And then afterwards, we're going to talk about the credit cards and the way retailers have used them for years and years, you know, for revenue. I'm talking about store branded ones that are in trouble and could actually be more in trouble, even more so in a couple of months due to a new law.

3:45And lastly, I can't believe this is a real sentence, but BarkBox is getting into air travel. We will get into that. I think that's like, Kale, you're the correspondent on that later. Yeah, I forced this to be talked about because I'm so obsessed with it. It's so good. Yeah, I had to read the story multiple times, but I'm excited. Yeah, so let's start with the Gatorade. So essentially what happened is that Gatorade, which is owned by Pepsi, for those who don't know, has been just constantly expanding, you know, beyond those classic colorful bottles that we all saw growing up. And right now this month, they're rolling out drink mixes.

4:28So like those powdered packages, that packets, I should say, that look like liquid IV and they also have unflavored water uh zero calorie alkaline water which you know is yeah is just regular old water you could say but yeah these newest products are obviously you know leaning more towards healthy better for you options that uh this the brand has just been really leaning into the last couple of years and we will obviously talk about why that is and the trends around this. But yeah, what do you think about the look, Kale? Because I noticed it is, speaking of Liquid IV, we do have a little bit of a similarity that other publications also noted.

5:09Yeah. I mean, it seems like this is another example of an incumbent or a legacy player getting a run for its money from a lot of new upstarts like Liquid IV. And so the fact that they are changing their look, but they're also changing the way that they're talking about the product. So I think, you know, I can't, I don't have a timeline in my head of Gatorade's, you know, history. It's 60 years old. It's been around. Yeah. But I feel like Gatorade has offered the same value proposition for 55, 57 of those 60 years where, you know, it was used by athletes. It was a way to replenish your electrolytes.

5:50It was very much, it was performance driven, but it now seems like Gatorade is trying to shift the narrative and talk about sort of open up that umbrella a little bit more. And I think it's because you're seeing all of these other startups come into play. And so it seems like it's a dual strategic change where it's not only the fact that it's changing the way it looks, it's changing the packaging, the fact that it's going into these powders. But it's also, you know, it has electrolyte water, unflavored water. I think that like that, that I think is super interesting and sort of admitting that it needs to change the way it talks about this line of products.

6:28Yeah, I think you, you know, you touched on it, which is that they want to have, you know, the opportunity to hydrate you all day long, not just when you're working out, which, you know, everybody wants to hydrate. It's important these days. So things like on the go products are really taken off. And this has started, I mean, you know, the last few years, they've released sort of similar items, which is why, you know, the line is getting kind of blurry, you know, between the sort of low sugar, zero calorie Gatorade fit. This is their take on just like an electrolyte strength that has less sodium, less sugar, less carbs than their regular Gatorade.

7:08And then, of course, they have great Gatorade Zero. That's the zero calorie and the zero sugar one. So there's a lot of options. it's not as you know streamlined as maybe some of the other brands but that actually brings me to my next point which is that pepsi has um just been kind of overhauling the gatorade uh or it's this portfolio this portion of its uh companies uh under gatorade so brands like propel the water and muscle milk are all under this uh portfolio so you can kind of see you know the themes here that they're trying to connect. Yeah, and it, I mean, it definitely seems like a big top-down PepsiCo strategic play to sort of figure out exactly what the competitive positioning is for all of these different brands and lines.

7:57Yeah, I don't know. I do, just like parenthetically, I think it's kind of funny that Gatorade has a product called Gatorade Fit when like, isn't Gatorade already tailored towards fit people? Like the entire point is that it's an athletic drink, but that's just an aside. Yeah. And I mean, there's a reason they really want to maintain their market share because Gatorade accounted for 63.5 % of US sports drink sales in 2023. That's a big chunk. And so now that you have, you know, Prime, Logan Paul's brand and these other companies coming in and are actually there is evidence that they are taking away some of their sales.

8:42You know, they do see the writing on the wall and hence, you know, they really are doubling down on these products to have a Gatorade for all your needs, you know, whoever you are. It's not just Gatorade or Pepsi that's doing this. it's clear that there is sort of a mad dash to be the leader in this space on the shelf. Coke acquired Body Armor in 2021 for$5.6 billion. It just seems like all of these major companies are really trying to master this category and get the branding right and get the assortment right. And so interesting to watch. Yeah. And I think the consolidation aspect is really interesting.

9:24We're seeing all the big conglomerates buy up, I think, hydration. I know we're talking about energy and hydration in one, but we can talk about how the line has blurred a lot of those. Well, that's the thing. And that's another, like, I think we were talking about this earlier, but like, or before we were recording, but, you know, it used to be pretty clear cut what different products were and how they fit on the spectrum where there are pure energy drinks, and then there are pure sort of health or electrolyte or fitness oriented, like going towards hydration. I drink Gatorade because I'm getting electrolytes.

9:56And then with all of these different startups that sort of do a lot of these things, but also blend them, not to mention my favorite drink, but I think Celsius is a really interesting way to position it because it is technically an energy drink, but it has no sugar, I'm pretty sure, like very little sugar at the very least. And it talks about getting energy in a much more health-conscious, better-for-you way. And I think that that has changed the spectrum of these products where they have to sort of provide all of these different things, not just do one thing, not just be a juice-flavored water that will keep you hydrated when you're running a marathon, but also has low sugar, is good for you, will have benefits for you all day.

10:44And the same can be said about energy drinks when before it was a Red Bull, you would be in college and it just kept you up at night. Now that doesn't fly anymore. You have to be doing something else. Yeah. And we're seeing, obviously, like Emma was mentioning before, we have these big companies getting into the game or expanding into this too. Unilever acquired Liquid IV in 2021 and Nestle bought Noon, which is also the little hydration tablets that same year, 2021. So So it shows that I think these big companies obviously know that they do have to continuously modernize to be able to compete here.

11:24But I guess as far as also just to touch on body armor a little bit, I was reading earlier that this was a really huge acquisition. They had been already investing in them leading up to it. But there's kind of a little bit of maybe some confusion or tension where Coke doesn't really know how to position body armor. I don't know if you've seen it. I didn't realize that was what it was when I looked at the photos. You probably have seen it in a fridge at the store, but it's a little, it's very loud and a little confusing. So I'm not sure what they're going to do with that. But yeah, just because you acquired a startup doesn't necessarily mean it's going to suddenly take off.

12:05So I think they're still trying to figure that out. Yeah, I really would not be able to pick out Body Armor, though maybe if I see it in the grocery store, I will recognize it. But also, I think that that's also a big thing here where we're seeing a lot of the bigger players try to scoop up startups in the hope that it will revolutionize the assortment. But also, there needs to be some interplay and the bigger company like Coke or Pepsi or whoever, they need to be able to take lessons and actually help these companies do strategically what they need to do, which historically sometimes doesn't happen.

12:39So this will be interesting to watch just this overall Gatorade move into different areas, new form factors, new non-existent flavors. Super fascinating. Water. Water. Yeah, I mean, I think Prime Energy is a perfect example. I feel like everyone's always mentioning it. as the latest buzzy brand. I'm sure it's only a matter of time before they get acquired by someone. But yeah, I think it's no longer Gatorade or Powerade. We should mention Powerade. It's the code. It's the also-ran usually. But yeah, these are all the fridge section of this category is getting very crowded, so I'm sure we're going to start to see more consolidation on that front.

13:33So now let's move on to store branded credit cards. I think we're all familiar with what these are. You go to checkout at any, pretty much any retailer, and they ask you if you'd like to open a credit card for, I don't know, 15 % off your purchase. I personally always say no. I don't know about you, Kale. I'm not. I mean, we'll get into it, but these cards notoriously have really high interest rates. I grew up in a family that said yes. So I don't personally have one, but many of my family members do. And it was a very big cultural thing. Like, I don't think we'll necessarily get into it. But I think it was, I was part of a Macy's family and we always had a Macy's card.

14:18And so that was sort of, there was a big cultural aspect with the also racking up insane amounts of debts at terrible rates. Yeah. And like we will touch on in the sense that this is that shift away from that culture, I guess we can say, has impacted, you know, the big retailers, Macy's, Nordstrom, Kohl's, like these, they really do rely on these carts for, I mean, not rely, but they bring in a decent amount of revenue from them. So there's this new rule by the Consumer Financial Protection Bureau where it will cap late payments on credit cards for fees for$8. The average in the industry is around$32.

15:01So if you've ever gotten those late fees, they're very painful. And so$8, I mean, that's a pretty big difference. But again, companies do make a lot of money off of those late fees and high interest rates. So this will go into effect May 14. But we'll see if it has any sort of legal resistance by any other parties. But the policy is, of course, good for consumers. But many retailers that offer these cards will probably be impacted. Maybe not so much smaller, you know, Gap, J.Crew, just because they don't really have huge programs. But I mentioned department stores will be. And so we can talk about why it particularly matters for department stores.

15:49It's almost like they can't catch a break, right? Yeah, I mean, department stores are having a difficult time as is. I will say I was doing some research about this before. And I remember that in 2019, I wrote a story about just what was going on with retail store credit cards. And there was this statistic that just blew me away, which is that in 2016, so, you know, not that long ago, but still eight years ago or whatever, 39 % of Macy's 2016 profits came from its branded credit card. I don't think that it's that way anymore, but also these were huge cash centers for a lot of these companies. And I think they've been less popular as years have gone on.

16:30Department stores in general haven't been as popular with shoppers. But also, I'm sure the department stores are unhappy that they are unable to have these huge fees, which also made them even more successful cash centers. So, you know, it's just another hit for them. But as you said, good for the consumer. Like these were not very good programs. Yeah, it's a little predatory, if I say so. So, yeah, in 2023, the Macy's credit card revenue totaled$619 million and Nordstrom's was$475 million. Like, you know, it's not nothing. Like they are making a decent amount from it. So if that drops, that will just eat further into their margins.

17:18And, you know, of course, a lot of these cards promise perks like discounts and exclusives and all of that. So that's kind of how they get people. And then, yeah, you become sort of like, well, I think about Macy's every time I open my wallet because I have a Macy's card in there. That's sort of that whole thought process behind it. But, you know, as we've said, younger shoppers, not only are they not really shopping department stores to some extent, but they're also moving away from these types of cards, whether it's buy now, pay later, as we've written about and read a lot about in the last few years has also been, you know, they've been opting for that.

17:59And then they also, people are really being more thoughtful and preferring travel rewards or cashback rewards as opposed to just one brand type of cards, you know. Yeah. I mean, I think that there are a few things at play, which is the reason why branded credit cards worked so well is that department stores at their apex were all about loyalty. Like, as I said, I was a Macy's family. And so that meant that whenever I was buying clothes, my family would go to Macy's. And I think that that type of loyalty doesn't exist in the same way it did. And so it's a very hard pitch to say that every shopper should have a branded credit card for every retailer they go to when everyone's shopping around, they're going online, they're going on Amazon, and they're probably buying fewer things at Macy's or Nordstrom than they were in the past.

18:53And so I think that it's just indicative of a shift in the way people are shopping, which, you know, there are things swooping in that provide similar services, like buy now, pay later, like things like that. And so I think it's just a – while we're seeing branded credit cards wane, it's showing that there is a different way that many people are shopping compared to a decade or so ago. Yeah, for sure. I mean, if you zoom out a little bit more, you'll see that not only is maybe Gen Z and millennials to some extent wary of opening a bunch of cards, but at the same time, though, the card -to-card debt is at an all-time high right now.

19:40But that's more indicative of the economy and the fact that we can't stop buying stuff no matter what happens, which is a big part of our coverage, obviously. But yeah, we will see what happens with these. I wonder if they'll like rejig some of these programs or some of these cards to, you know, keep up with the times. We'll see. Yeah, I do think that they are ripe for a refresh in some way. I don't know what it could look like. And, you know, in some ways you'd be like, maybe they'll join forces and they will have like a co-branded department store credit card. But I don't know. I don't. Who knows if that'll actually happen?

20:16from there let's look into bark's latest pivot um bark the company formerly known as bark box uh sells you know pet accessories uh boxes that's what they're known for uh is getting into a new business air travel kill take it away yeah i had to like triple check this wasn't an april fool's joke, I'm going to be honest, but it's not. It's real. So this is from a Washington Post article earlier this week. Bark is launching its own pet-friendly charter flight service called Bark Air. Bark Air, that's what it's called. It'll start next month. So far, they will have two flights. The first one to launch will go from Westchester to Los Angeles.

21:03And the second one, which will launch, I believe, maybe in June or a few, maybe a month or so after this first one launches. It'll go from Westchester, so New York is the home base, to London. And I should say, and you'll appreciate this, Gabby, it's London Stansted, which, you know, is not really London, if you ask me. It's quite far away. I've taken many a Ryanair flight to London Stansted and was trapped. I'm so sorry. You know, a lot of interesting things here. The costs are pretty interesting to me for the LA flight. And so pretty much how it works is you are one passenger and one dog. The idea is that instead of being put on a crate and stowed underneath, which is very stressful for animals, you'll be in the flights.

21:52And as long as you're well-behaved, everyone will be happy about it. So for LA flights, it'll cost$6 ,000 for a dog owner and pet to go. For the London one, it is$8 ,000. So a lot of interesting things here. Not the pivot that I thought, the revenue change that I thought Bark would go into, but super interesting. Yeah. I mean, you know, these prices. So is the idea, are you going to be with other dog owners and their dogs? Okay. I see. And I believe, um, so that, you know, as with any of these types of new business, it's not like Bark bought a plane. I believe that they are working with an existing private charter company that owns a plane or two that then they're slapping their branding onto.

22:39But should be said, these are pretty small. I believe that the max number of people Bark is allowing on these flights is 10. So it's almost like a private jet, um, you know, you know, except for you're with some strangers. But still,$6 ,000 to go to LA, that's a pretty penny. Yeah. I mean, we can get into this being sort of the latest offering that Bark has come up with. But a lot of it maybe, well, it's hard to tell how much this is going to be actually impacting their business, but they are not doing that well currently. So maybe some kind of excitement is the way to go, you know, by announcing these types of programs.

23:27Yeah. And just to give some numbers to what you were saying about them not doing well, like they're a public company, they've reported their earnings. In their most recent earnings, quarterly revenue fell 6.9 % year over year to$125.1 million. The total orders that they saw fell. It was around$3 ,500 they saw this last quarter compared to$3 ,700 a year ago. And it still is unprofitable. It reported a net loss of$10.1 million this past quarter, which I will say is better than the$21.3 million loss it reported last year, but is still a loss nonetheless. And launching flights for 10 people that are pretty expensive, I don't know, So I don't know if that's going to make up for all of the lost profits that it has.

24:20So it'll be interesting to see. I think that you're right that this is probably a way to, you know, get a little bit of have a new branding, have people think about you a certain way. But it's definitely a type of service that only a certain type of person can afford and do. Like, I don't think, you know, there are a lot of dog owners out there, but there aren't a lot of dog owners who want to shell out, you know, over$5 ,000 to take their dog with them to California. Yeah. And, you know, I think with this Bark, it was kind of known for this subscription box that you get every month that has like accessories and treats.

24:57But they have been also pushing further into wholesale. Like, for example, they have a treats line at Target that they say is doing pretty well. So kind of, you know, moving further and further away from that original offering. but sorry now I just can't stop thinking about like a dog with like a face mask and a glass of champagne and yeah exactly yeah in first class on a little private plane um it's it's funny it's you know what influencers might be good content I have to say oh I'm sure it'll be great content but how many influencers are there and like add to that how many influencers are making enough money to do it though oh I meant like I think they're gonna like you know hire them and do promos with them, but who knows?

25:44I'm just prophetizing. Okay. So Bark CEO, Matt Meeker said the idea of Bark Air came from his own difficulties flying with his dog. You sort of mentioned this earlier. It's weirdly, really hard to do, especially, you know, I think transatlantic probably even more so. So this idea that, you know, there's going to just be like a more luxury way to travel with your dog. I'm sure it's pretty popular, but it's hard to tell how much you can actually make off of it. Yeah. And just like one thing that I just thought was so funny about this article is that it described Meeker, the CEO of Bark, packing himself into a crate and being pushed on the tarmac and then loaded onto a plane so that he himself could experience how difficult it is for a dog to fly.

26:35And so because he experienced that and was like, no dog should do it, he decided to launch BarkAir, according to the article. Interesting. Okay. And I should also say Bark is not the only company that has done a pet focused charter. Before me researching this, I tried to go deep into the financials of charter airlines. And it's hard. There aren't many public ones, so it's really difficult to see how well they do or what their actual revenue is. But there are a lot. And there's this one called K9 Jets, which like Bark goes New Jersey to LA for$6 ,650. Interesting one about this one is they do not...

27:19If the flight is not 75 % full, then they cancel it. And then Bark in the story pretty much told Washington Post, true, but we see a lot of demand for this. But just to go back to what I was talking about earlier, like, will this be a viable revenue stream for Bark? I don't think that they probably think it will. But also, you do see a lot of airlines, especially charter airlines, rise and fall. And so I think it might be a pretty difficult business to master. And I think that there are people who have done it probably for decades who understand the economics of owning a plane or leasing a plane and figuring out how much to pay people or what this works.

27:59And I just do think it will be difficult for a company that is known for being a subscription service for dog owners to really figure out the nuances of chartering flights, but I might be wrong. I don't know. Yeah. And I mean, the risk of having it canceled, I feel like that's, I don't know, just creating a bigger nightmare, right? At the end of the day, but who knows? People do love their dogs though, and they'll do anything for them. So maybe we're just going to ride out the the emotions. Yeah, maybe. And maybe it'll, because right now these flights, I believe, are weekly. And so maybe they'll do a test run for six months and it'll be really great.