Rundown: Gopuff's cash burn, Equinox's new membership & Sweetgreen beef

0:06Hey, everyone. Welcome to the Modern Retail Rundown, our weekly news recap show. This is senior reporter Gabby Barcoe here with editor in chief Kale Guthrie Weissman. Welcome back to the modern retail. hour drive to where I grew up in Massachusetts. So sorry, I couldn't drive and record at the same time, but I'm back in New York now and ready to talk retail. No, no, it's all good. You don't want to crash while recording a podcast. That would be very, yeah. Okay. Well, we have some fun topics to get through today. First, we're going to check in on GoPuff and look at just how expensive it is to operate a fast delivery platform.

1:02And speaking of expensive, we're going to talk about Equinox's new program. It's designed to help you live to 100. We will get into that later. And then Sweetgreen adds steak. This is a big one. It's shattering. Yeah, we'll talk about that. But yeah, first up, GoPuff. So for those of you who may not have heard of it, it is a quick delivery service that operates out of warehouses around major cities. And it's reportedly burning through a lot of cash. The information this week reported that GoPuff burned through about$400 million in 2023, and it's yet to start generating cash. So yeah, I mean, there's a lot going on here because we want to talk about also just the ultra quick delivery space and how GoPuff came to be sort of like the last man standing.

2:01But yeah, what are your thoughts to start with, Yeah, I mean, I think the last man standing is the correct way to describe it because there was, you know, for those who don't remember a huge influx of these platforms, like during the beginning of the pandemic, GoPuff was around pre-pandemic, it should be said, but it really got a boost then. But then there were all these other ones. A lot of them came from overseas, places like Turkey and Germany. There was Bike, spelled B-U-Y-K. I think it's pronounced Bike, though you can correct me if I'm wrong. Fridge No More, Gorillaz, Gettier, all of them raised a lot of capital.

2:43They had pretty wild valuations. And they all said that they were going to give the promise of, I want something and I want it now. And so you'll go to your phone, tap a few buttons, and then within 15 minutes, it'll be delivered to your door. Which is, I don't know. I have a lot of thoughts on the overall idea of it. It seems like it's a solution in need of a problem. I don't know. There are a lot of delivery platforms already, which we'll get into in a few minutes. True, they might not be 15 minutes or less, but they usually come within an hour, and people seem fine with that. I don't know. I've always been a little bit skeptical about the idea that there was really a need that everyone needed to have their stuff delivered now.

3:31And as both you and I know, it is really expensive to set up a logistics operation of quickish delivery, even if it's more than 15 minutes. And so to truncate that down to fewer than 15 minutes presents a host of problems. It gets really expensive. There's a lot of labor involved. There's a lot of back-end logistics involved. And so over the last two years, there's been a huge amount of consolidation and just complete closure. So 2022, both bike and fridge no more. They filed for bankruptcy entirely. That same year, Getter acquired Gorillaz for a$1.2 billion deal. So nothing to sneeze at there.

4:11Getter seemed to be, you know, GoPuff had been operating pretty consistently, kept a low profile. There had been, I think, about four-ish rounds of layoffs over the last few years, but But there were never any headlines that it was going kaput like these other companies. Gettyr was the one that was really trying to grow through scale. So late last year, it acquired FreshDirect, which everyone thought was kind of interesting because it was a fast delivery company getting into one of the most legacy grocery delivery companies. But then last week, so it announced that it was going to shut down all of its operations in the US, the UK and Europe and focus only on its home location of Turkey.

5:01So that left a lot of questions about what's going to happen with Fresh Direct, which is a US based organization. And then, you know, GoPuff hasn't had anything catastrophic like this happen. It's kind of been the last one standing. But there was an interesting thing in the information where it talked about valuations. GoPuff was once valued at$15 billion. There hasn't been an official valuation reported since then, but some in that report said it could be as low as$6.6 billion, which is, you know, half that at least. So all this to say is that there's been huge consolidation. Companies have been buying up other ones.

5:37Other ones have filed for bankruptcy. And it's left pretty much very few of the startups out there that had presented this original promise. And now we learn that GoPuff is still burning through an insane amount of cash, nearly half a billion dollars in 2023. So, you know, interesting competitive landscape right now. Yeah. And like you said, I think the bigger delivery or the more established ones, DoorDash, Uber Eats, they have also been able to kind of get close to that. I think DoorDash has like a 30-minute-ish delivery on a lot of its things. Also, you know, I thought partnerships like GoPuff on Uber Eats is kind of interesting.

6:21So there's a lot of like cross-pollination of all the assortments. But one thing I want to mention is that the biggest thing about, you know, trying to service, for example, a city like New York, which a lot of people thought maybe is not a great fit, all logistics and politics aside, a lot of people can go outside and probably find a lot of the things. So the biggest thing that these platforms did, I reported a lot about it in 2021, is that they want to really differentiate the assortment. So they would have all these sort of cool brands, startup, better for you products, exclusives, hot food, all of that.

7:01And so, again, a lot of that is really expensive to do. And so that kind of brings us to right now with GoPuff having to really prove the model. But yeah, I mean, that's also changed a lot. Yeah, GoPuff has been around since 2013. So they've been doing this for a long time. And the model has changed a lot since then. Obviously, COVID really pushed things really quickly. but it was kind of known as this like late night college delivery app of snacks. To some extent, it still is. So what are your thoughts on like kind of having to constantly adapt as they expanded into new cities and like just geographically, all of these locations are so different.

7:46And so you need to set up logistics, you know, different ways. Well, I think there's been a few realizations on GoPuff's front over the last few years, which if you read in between the lines, you can kind of get, which is GoPuff is expanding, you know, has been trying to get into more cities. It's still not in every US city, I don't think. But it has been trying to build out its services that have a much better margin structure. So like over a year ago, it introduced its ad platform, which is not surprising. Pretty much every one of the platforms that are still around, Uber, DoorDash, etc., have been trying to build out the advertisement side of it so that brands would be able to have better placement, pay for that, and then the theory is they would get better sales.

8:35But also, GoPuff has been building out a technology suite and kind of a tech stack to present to brands. It just announced this a few weeks ago, actually, which we can get into a few minutes. But pretty much the way it's trying to differentiate itself is that it can be a quick delivery service specifically for brands and white label that. And so it has the first iteration of this. They actually announced it at our Modern Retail Commerce Summit, which was in April. But it was the idea that a brand could build out a marketplace page or like a checkout page where for, say, Oreos, you would just go to that page and I just want to go to Oreos, it's, you know, with the Oreos, Oreos.com, etc.

9:23And click it and then it would get delivered. They've tested it out with brands like Ben & Jerry's, etc. They said that the overall hope is that it'll become an entire sort of Shopify-esque tech suite, where if you are a brand that wants to sell DTC, you can have a button on your page that just says, buy this now and get it delivered in 10 minutes. And so that's sort of the idea is that it'll focus more on the technology side, which I think it would still use GoPuff's overall logistics infrastructure, but like also bringing more bigger brands into the fold and hopefully helping that would increase its assortment and footprint.

10:05And just one other thing I think is also interesting is that you mentioned how a lot of the quick delivery services have focused on differentiating their assortments with interesting brands, new types of food. But I think where the ones that seem to be more successful, i.e. DoorDash, have really done well is that they've been trying to go beyond just being a grocery and restaurant and food delivery. They've been partnering with brands and retailers to try and get these sort of non-perishable, probably higher ticket items delivered. And I think that that is a way to show that, you know, the margins of grocery or food delivery just in general are pretty bad.

10:47And it's really hard to make that business work. And so the way to try and overcome that is to expand to new verticals, especially ones that probably have a little bit of a higher ticket value or have a little bit more cultural cachet, that type of thing. And so I think that's where a lot of these companies, at least on the consumer-facing side, have been going. Yeah. And so for GoPuff, kind of going in this advertising and co-branded direction is interesting at this time because it is trying to build all these new revenue streams, but that does take time and hence the cash burn, right? But likely to keep the lights on.

11:27GoPuff has gone about some cost-cutting measures. We talked about layoffs, probably some other things they're doing behind the scenes. But yeah, it'll be interesting to see what else they come up with. Yeah, it'll be something to keep an eye on. And, you know, we'll see if they'll be able to cut that cost burn in 2024. I imagine that is something they are actively working toward. well we didn't think it was possible but equinox is getting even more premium this week they announced a new program called optimized by equinox that cost three thousand dollars a month and promises to just improve your overall health longevity all of that uh it's personalized there's personal training, nutrition, sleep coaching, massage therapy.

12:17So it's like very holistic and goes beyond training. But that price tag is really what's getting the headlines. So, Kel, let's talk about Equinox. How did we get here? I mean, how did we get here? I mean, I think Equinox has always tried to position itself as a very, very premium player. And so now that it is launching a service that will cost nearly $40 ,000 a year, just proves that that is the strategy that it's going for. I think there are some interesting things here, which is for one, the monthly fee for this new service does not include an Equinox gym membership. So you still have to add the what,$200,$300 a month to that.

12:57It's all about coaching, training, and longevity, which is a very, very popular thing right now. You see headlines about all of those life hackers, people who are trying to live as long that treat aging and all those things like they are illnesses, even though they're natural parts of life and have been since the beginning of time. But it's interesting just because it shows that instead of going sort of trying to make its offerings more towards the middle, Equinox is going the exact opposite way. And it's a growing trend where we're seeing a lot of people try to go the super luxury, super nice side of things.

13:43So I don't know. I think that for Equinox, it'll be interesting to see if this actually does help in its financial situation. A few numbers is that it just raised a$1.8 billion round that included refinancing its$1.2 billion in existing debt. But it has been regaining foot traffic according to some metrics, and it's opening some new clubs to this year in Philadelphia and LA. And then it said 27 new openings are in the pipeline. So, you know, I think it's interesting just to see a high-end player really, really double down on being that premium thing for something that most other people cannot attain.

14:26There is a six-month commitment, and you do have to also put in like 16 hours of monthly coaching and training. So this is something that, yes, you are paying a lot for, but hopefully you're getting a lot out of. But like we said at the beginning, this sort of holistic service or approaches to wellness has been just gaining popularity among the uber wealthy and Silicon Valley, sort of like the biohacking types. So it makes sense that Equinox is moving in that direction. Although, like you said, it's kind of like we've gone beyond the health club model that they've kind of become known for, which is just luxury classes, workouts, pools, saunas, really nice showers, all of that.

15:20And it's also going towards this kind of, this is not a new thing. This has been going on for years, but it's the idea of your health and wellness regimen being part of your entire being and that being a higher end premium, almost cult-like experience. I can think of a lot of fitness people who have been getting a lot of traction these days have been selling monthly memberships, but they also sell products that are like$5 ,000, like proprietary fitness products, but they fit into their entire aesthetics as a fitness guru, wellness guru. And higher income people will pay for that because they're buying into that entire lifestyle.

16:03So it's very much a way of branding yourself as a lifestyle brand specifically for a certain echelon of society. And Equinox, it makes sense for Equinox, if you ask me, because they already have that kind of cultural cachet. People already think of them as something that is pretty hard to reach for most people. But to double down on that in such an insane way is pretty interesting. I don't know. It's kind of mind-boggling. But I bet you some people will definitely buy into it. And maybe that'll help their financial situation. I mean, how many do you need in order for this to really help the bottom line, I wonder?

16:40Yeah, well, you know, I don't know if it's going to bring in 1.2 billion in debt. But yeah, I mean, who knows? This is kind of starting out as a pilot program. So we'll see how far it'll go. But, you know, post-COVID, a lot of gyms have been really trying to recover at least foot traffic and with new offerings. So it makes sense that it wants to diversify that too. Absolutely. Well, speaking of health and wellness, it's been a big week for Sweetgreen. First, Kale, we saw that some eagle-eyed TikTokers reported that Sweetgreen took away arugula. Took away is kind of a dramatic way of putting it, but they did quietly take it off the menu and there's other greens available still.

17:32But that was interesting because it came in the same week that Sweetgreen also introduced steak as an add-on or as part of upcoming dishes. This headline in the New York Times that reads, Sweetgreen is introducing steak. What about its climate goals? So we will get into that because there are some mixed messages going on here, at least according to everybody who saw this news coming out. And I want to add one funny parenthetical, which is after the TikTok arugula fiasco, if you want to call it that. It was really just they stopped serving arugula. But other salad chains, and I can't remember which one, it might have been just salad, started sending marketing emails to customers saying, we have arugula.

18:19So, like, there's an arugula war, you know, a couple of marketing missteps potentially from Sweetgreen because of this in one week. But anyway, let's go into steak. Arugula wars? I love it. I mean, there was a petition and everything. So, you know, hopefully it gets heated. But yeah, I mean, they did sort of explain why the move to red meat specifically. So Sweetgreen's founder said, we could have had steak earlier, but we launched without it and our business did really well. But as more people are eating more meat, pause there. I think that's an interesting way of putting it. We see that an opportunity to add and really be a change agent and catalyst in the supply chain.

19:01So the whole thing is that they want to do meat right, which is interesting because a lot of – I think at a time when a lot of restaurants are going the other way into plant-based, I mean, not just restaurants, kind of food industry in general, Sweetgreen thinks that it can do, what is it? Caramelized garlic steak really well and in a sustainable way. But they do also have these sustainability goals that they're trying to hit at the same time. So it's kind of an interesting intersection they're at. Yeah. And they talk a lot about sustainability goals. The New York Times asked them a bunch of questions about the sourcing.

19:41I thought this was kind of funny, but they were like, yeah, it's really sustainably sourced. We've been working on this really hard. They are sourced in Australia and New Zealand. And so they probably are very well sourced. The cows are hopefully treated very, very well. But also that's on the other side of the world. And so you talk about sustainability goals, but then you're air freighting steak to the US so that they could get it. I don't know. So I know that a lot of it comes from overseas, but it's interesting to me that talking about a sustainability part of it, but then not thinking about the logistics side and how that also contributes to climate change is an interesting way.

20:21But just one man's thought who's not an expert. Yeah, I mean, you know, they have this, they want to be carbon neutral by 2027. but the I think beef interesting like you said specifically is it is known to be a pretty significant factor in climate change and so it's one of the reasons why all of these plant-based products you know propose to be more sustainable I think the other thing is that like if you read between the lines is that they need to appeal to people outside of the you know that lunchtime crowd,$16 salad with either tofu or chicken is really what's available right now. And so this is kind of their way.

21:08And also, you know, dinner time is another foot traffic problem area that they want to fix. So it makes sense why steak is here. Yeah. And no, it's definitely two things happening at once that are conflicting, which is I think Sweetgreen needs to bring in more customers and it needs to cater to them in different ways and probably more expensive ways so that they can upsell items. And so in that sense, it makes a lot of sense why Sweetgreen would go into the stake area. But as you said, if you are wanting to be climate neutral and then you're adding a product that is pretty much the number one contributor to a lot of the climate issues we have right now, that's a big messaging hurdle to overcome.

21:56But if this can help Sweetgreen increase the people who go to it for dinner or gets more people who thought of it just as a hip salad chain and they wouldn't have gone there, but now they're like, oh, I can get some strip steak on top. I guess those pros outweighed the marketing cons. But it's definitely an interesting choice. And I bet you Sweetgreen was not thrilled when, in the introduction to this, the New York Times headline was literally questioning its climate goals. So yeah, super interesting. Right. And one of the, actually, what they said was an important reason why they haven't done it yet outside of sustainability is that it's really hard to prepare steak in a really fast, if you've ever been into a sweet green, it's mayhem usually.

22:45And so I can understand why there's a lot of pressure to do it and do it well, because the expectations are high for that price point. And so that's interesting. But I guess where does this leave sweet green in this like fast casual space right now? Because we're seeing, you know, it had these competitors that were seen on the lower end, like chopped and just salad that actually, if you go in right now, they do look like sweet green copycats in a way. And so they've caught up and modernized their menus and their look. And then you have others like Chipotle that have kind of also been able to do this sort of made-to-order bowls thing, work with digital orders.

23:30I mean, they have just been growing and growing. It doesn't seem to be stopping post-COVID with their digital business. Yeah, I think Chipotle is a really interesting case study because it focused specifically on growing digital orders as its vehicle for growth. And also, just the general customers that it appealed to seems like a much wider swath than what Sweetgreen originally did. You know, Sweetgreen was originally about being sort of a higher-end salad chain specifically for upwardly mobile millennials working in Manhattan or some parts of Brooklyn. And Chipotle has been plainly for everyone.

24:08And, like, you can go high, you can go low. Everyone likes Chipotle. And so it really, the fact that Chipotle has been able to keep consistent with that, you know, increased its prices and no one seemed to care, but focused on making it so that people could order more quickly and get their items, you know, in a digital fashion. And that seems to be what has really made Chipotle work. And we're really reading between the lines, and I might be completely off base. But in a certain sense, adding steak to Sweetgreen is a way to try and not rebrand, but reposition itself as something that is not similar to a Chipotle, but for more people, a more egalitarian, fast -casual chain than just what it was before where you could get a crunchy tahini salad.

24:58Yeah, and then actually just one last thing on the digital front. Sweetgreen has also really been pushing its app that it launched. And, you know, it's like monthly premium pass that it's trying to create loyalty with. We're not sure. I don't think that's taken off too much yet. But it's all part of this move towards, yeah, a more, I guess, accessible restaurant chain, if you will. Well, that is a wrap for us this week. you can rate and give us a review anywhere you get your podcasts. Please follow us on social at Modern Retail to read our coverage. And Thursdays, you can listen to Kale interviewing executives.

25:41Those are always fun. Kale, who do you have on next week? Next week, I have the founder of Cargo Crew, which is a workwear company that's been around for decades. It's based in Australia, but they have recently had some pretty big wins thanks to Gwyneth Paltrow, Paris Hilton, other people. And they've been, as much as they are a work uniform company, they've been doing a lot more on the DTC front and they're just fascinating business. It was a really fun conversation. Definitely check it out. All right. And thank you as always for listening. We hope you'll come back next week.