Rundown: Keurig Dr Pepper acquires Ghost, Tupperware sold to lenders and Peloton partners with Costco

0:04Hello and welcome back to the Modern Retail Rundown. I am senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Catherick-Weissman this week. Hey, Kale, how are you? I'm doing well. How are you, Gabby? I'm doing well. We have some fun stories this week. I'm excited. Yeah, they're good. A lot of different topics. Meaty stuff. We love meaty stuff here. Yes, we do. Okay, well, let's start out by talking about there's energy drink M &A that's happening. So that's still a really hot category where Keurig Dr. Pepper acquired Ghost, which is a fairly young energy drink maker. We'll talk about that first.

0:45Then we're going to talk about Tupperware basically being resurrected after filing for bankruptcy. One of its lenders just bought it out. So we'll get into what that will mean for the company. And finally, this holiday season, you'll be able to buy a Peloton at Costco of all places, just yet another retailer where you can find Peloton. So we'll check in on Peloton there at the end. Let's start out with this Keurig Dr. Pepper acquisition of Ghost. So the deal is that the company is buying a 60 % stake in Ghost for$990 million, not a billion. I thought that was kind of interesting, with plans to buy the rest in 2028.

1:32And so this is basically going to expand Kirk Dr. Pepper's portfolio, I guess, you know, within the refreshment segment, which is something that they're really trying to overhaul and refresh, I guess, no pun intended there. But there's been a lot of M &A in energy and I've written personally about energy drinks a lot, especially on the sort of startup, better for you, like disruptor players. So this doesn't come as a surprise, but these numbers, they're pretty big for a company founded in 2016. Yeah, no, it's not surprising, but it's a big, big number, especially since when all is said and done, if Keurig Dr.

2:12Pepper does buy the rest of it in 2028, it'll be over a billion dollars for this company. But it's definitely Ghost is part of sort of this onslaught of new types of energy drinks that have grown in popularity. We could point to C4, which Keurig Dr. Pepper also has acquired a 30 % stake. I think about two years ago, the company paid$863 million for 30 % of it. There's also Celsius, which has really exploded in popularity. We've talked about Celsius before. They've been on the podcast. It just shows that the major players are paying attention to these somewhat newer entrants. You know, Celsius isn't brand new, but it's definitely not as well known as, say, a Rockstar or a Red Bull.

2:57And then, of course, we could talk about how there are all of these other players, Gabby, that you've written about that are even younger than this latest generation who are also trying to get into shelves and probably are definitely catching the eyes of players like Coca-Cola and Keurig Dr. Pepper. And so this is, again, I would say it's a big number. It's pretty eye-popping, nearly a billion dollars or when all is said and done, over a billion dollars. But also, it shows that this is one of the areas of CPG that is currently doing well, and there's a lot of interest. And it's really going with the trends of what people are talking about, you know, energy that is different and competing with the legacy players.

3:36Yeah, I mean, Keurig's CEO, Tim Cofer, even said it in the release. He said energy remains one of the fastest growing scaled categories in beverage. And there's just significant had room for household penetration to grow. So I feel like energy is very synonymous with young people and actually male specifically, at least it had been historically. And that's changing gradually. Like you said, there's also these newer, like I think of as an aside, like Gorgie, which is, you know, it's not necessarily female geared, but it's a little bit less masculine branding. I think something about C4 and Celsius and these sort of a little bit less aggressive branding, I guess, goes to some extent, too, is in comparison to things like, you know, Monster and Rockstar is a little bit more approachable.

4:26And that's, you know, where this sort of refreshing of the portfolio is coming about. But, yeah, I guess the booming energy drink market, you mentioned a couple of different recent acquisitions. Like in 2022, PepsiCo paid$550 million for an 8.5 % stake in Celsius. That's a lot of money for 8.5%. And then PepsiCo had actually acquired Rockstar in 2020 also. So, you know, they're just kind of across the board. They're not just going for the sort of young better for you. And then, you know, we could talk about maybe KDP, you know, Keurig, Dr. Pepper's own portfolio. And, you know, they kind of play in this sort of soda, juice, water, and then coffee.

5:10They have the coffee, which is the Keurig portion of the company. So it's a little bit across the board, but it seems like they really are betting on the refreshment, which, you know, is sort of the first category I mentioned for growth, because that is actually what's doing well right now. Yeah. So the refreshment segment of Keurig Doctor Pepper's overall revenue, it represents 60 % of the company's total sales, which is not surprising, but definitely, you know, you got to take stock like they're trying to make sure that that portfolio is good and interesting and resonating with shoppers. A few of its more recent deals in July of 2023, it invested$300 million in cash and helped with a retail distribution deal with La Cologne, the coffee company.

5:54It's really interesting because La Cologne, I know too much about these companies, as you know, that was a coffee shop. But now the real growth engine for La Cologne isn't being a coffee shop, but being a ready-to-drink player. And so my bodega has La Cologne cans of coffee that you can buy. It's really going after what Starbucks has been doing with like its bottled frappuccinos and all those things. And Keurig Dr. Pepper is really helping grow that. Even though coffee has been a major part of Keurig Dr. Pepper, we should say that late last year, December 2023, Chobadi acquired La Cologne for$900 million.

6:30That left Keurig Dr. Pepper as a minority stakeholder. So still, clearly, coffee is a major point. But now I think the company is looking into other non-coffee, more soft drink players like Ghost as real engines to change and drive its portfolio. So it's interesting to see. I believe that we'll probably see more M &A in this space, maybe not at the scale as what we're seeing with this Ghost. But there are so many energy drinks out there, so many startups. And a lot of the older players are trying to figure out ways to make their portfolios a little more interesting. And just parenthetically, I think Ghost is a really interesting company.

7:06Have you ever had a Ghost, Gabby? Yeah, I was going to say we didn't really talk to Ghost too much in this segment, but it was like I said, it was founded in 2016. It's kind of, you know, they describe themselves as a lifestyle sports nutrition brand. So a little bit different than other energy drinks. But yeah, I have had it. What are your thoughts on it? So they also have candy ones with like Starburst and Sour Patch and Warheads. it's clear that it's trying to make a niche that's different from the other players a little bit, you know, still a lifestyle brand, as we could say, but also a little bit more playful and going after.

7:42I would be interested to know exactly what demographic it's going after, because that's, you know, I bought those kind of as a joke, like, what does a Starburst energy drink taste like or a Sour Patch Kid energy drink taste like? And so it's interesting that Keurig Dr. Pepper is going after this one, which is definitely has a niche, but it's different from, say, the very, very performance focused players like Celsius. It's definitely playing a different role in that aisle, I would say. Yeah, to me, I'm like, you know, it feels like a Gen Z play. But I guess I associate all of those bright neon colors with Gen Z branding.

8:17But that's not necessarily the case. But again, they're very young. And so they're going to be transitioning their distribution under Dr. Pepper in the next few months by 2025. So, you know, I'm sure we're going to start to see them at even more point of sales soon. Yeah. And I've seen them around me. And so I can only imagine that, you know, for a company that's already pretty readily available, it'll be just ubiquitous, I guess. Mm hmm. Yeah. So I think we're probably going to see a lot more M &A in this space. I mean, you know, some some companies are just kind of moving from one conglomerate to another and then you have these young guys that are being very closely watched because it just seems like sort of the sky's the limit for energy.

9:03I've only really I mean, I know, you know, Kale, you like energy. I was never really an energy drink person. And I've become one this past year somehow. It's like you've been a bit of red filled by you. Yeah, no, it's and it's really this is new for me. I need I talk about how I drink energy drinks. I really don't. I drink mostly coffee. But like, because there are so many new ones that have like like tout all these things, I always want to try them. And I don't drink them during the day. I usually drink them like, after work as like, this is kind of a silly thing. And like, hope I'm able to go to bed.

9:35I'm not the usual energy drink person. I just think they're kind of funny. And I should try them because we talk about them so often. Yeah, yeah, no, for sure. Me too. I guess my it's more of like an afternoon thing, because I'm trying to, you know, come back on coffee. Although, what does that actually say? It's still caffeine. But yeah, and obviously, you know, young people should be careful that they're getting a lot of, you know, pushback about all the caffeine content in these drinks. So, but yeah, from Energy Drinks, let's move on to Tupperware. Sure. Hill, you've covered this bankruptcy, I think, pretty extensively recently, or at least as part of our staff's coverage.

10:11So it seems like Tupperware, just like the namesake of the containers we all use day to day, did file for bankruptcy, but it is kind of emerging, I guess, from that. Now, do you want to tell us about this new deal that they have? Sure. So this is going to get complicated, and I'm going to try and make this as easy to explain as possible. But pretty much right now, what's happening is Tupperware has announced that it's going to sell itself to its lenders, which will end the bankruptcy proceedings. It has been fighting with its lenders for a really long time now. And so this is according to a bunch of outlets.

10:48This one is the Wall Street Journal. I'm quoting the documents and talking to people. It said Tupperware's lenders would pay around$23.5 million in cash, in addition to$63.8 million in secured claims they own for parts of the company and its brand name. All of this, we should say, is subject to court approval. I believe the hearing is going to happen next week. So that's when we'll know for sure if this is going to go through. But this is the latest part of a saga that's been going on for years. So I'm going to try and break this down as easy as possible. But pretty much, it's been fighting with its lenders.

11:25The company has not been doing well. But it tried to sell itself. Tupperware, the company, tried to sell itself in early 2023. But it could not find bidders that were going to pay for it high enough that the lenders would sign off. Essentially, no bidder would be able to pay off the amount of debt that Tupperware had, and lenders were like, we're not going to do this. So that didn't happen. It tried a sale process again a few months later, and then that fell apart this past summer. I believe it was 4th of July weekend, if I'm not mistaken. Then a little bit later, it once again tried to sell itself, extending a forbearance agreement that allowed existing investors to sell their debt.

12:04this had some movement, and it allegedly brought in lenders Stonehill and Alden, who agreed to provide an$8 million bridge loan to fund this sale that was going to happen. But then at the 11th hour, these two lenders went back, and that's what led to Tupperware ultimately filing for bankruptcy last month. The lenders were not happy about this, so pretty much Tupperware has been trying to pursue an all-cash bidding process. The lenders wanted a sale to use their debt and dismissal of the case. Pretty much what it is is that Tupperware did not want to sell to its lenders because it is fearful that it would only take some of its assets.

12:43It would break apart the brand. It would be really messy, and it would not be the company that it has been for the last, whatever, 70 years. And so right now, there have been this fight over, if the lenders get it, what will the Tupperware brand be? Right now, it seems they have reached an accord. And it looks like the sale to them is very likely, of course, it remains to be seen. So that's where we're at right now. You know, I think for those of you who don't know, we can get a little bit into the Tupperware history. It's been around since 1946. And we've all heard about the Tupperware parties, right?

13:17That was sort of their main channel that they were selling out. But more recently, I think the last, you know, maybe decade or two, it's been mostly sold through wholesale, you know, retail and all of that. So but it just hasn't really been doing well, I guess, you know, it's probably a combination of more competition, just more, you know, there's other brands with, I guess, maybe a little bit more advanced or innovation going on in the food storage space. But over the years, it just accrued a lot of debt, which is what led to the bankruptcy filing, I think I had$812 million in debt as of the bankruptcy filing last year.

13:55Yeah. And it did try some wholesale. I think it was in Target. It tested out Amazon. But the company, for a really long time, held on to direct selling. And I was listening, I think it was to NPR a few weeks ago when the bankruptcy was announced, and they interviewed people who were Tupperware sellers, who still had Tupperware parties, who were pretty set. And it's just interesting that there was this culture that still existed, that people still tried to sell this very antiquated way, but the company did not move fast enough to create a digital strategy. And there were some stats that I thought were pretty interesting, which is that supposedly there are hundreds of thousands of searches for Tupperware on amazon.com.

14:37And even though Tupperware has some of its products on Amazon, the other players have just been able to really grow on that SEO front. And so Tupperware got hardly any of those sales. And then Tupperware also had its own website. But the company admitted, I think in its bankruptcy filing, that only 13 % of its products were available for sale on its website. So pretty much this was just a failed digital strategy. It just didn't work out. The company did not evolve the way it should have. And now it has a lot of debt and is selling itself to its lenders. Yeah, I feel like all the ingredients to pivot to a direct-to-consumer brand were right there, it feels like.

15:15And yeah, it just didn't work or didn't happen. Like you said, they just didn't move quick enough. But yeah, I think the sort of the Amazon keyword, you know, whenever we talk to brands, they're like, if I'm if my customers are searching for me on Amazon, I'm not available there. That's not good. And then something like Tupperware, where like, obviously, we use the name, you know, sort of like searching for Kleenex or, you know, whatever it is. And so people are probably just searching for food storage. But if the actual Tupperware brand is not available, obviously, they're buying other ones. So that, yeah, I do wonder whether they're going to be trying to do something because they have the brand name and the assets, but otherwise the products themselves, I don't know if there's much value there.

15:55And I really think a lot of it will hinge on if they're going to be able to, like, I think Amazon is kind of the number one thing that, you know, yeah, you want to be in stores like grocery, Walmart, Target. But I think people, myself included, are like, I need food storage. I will get this on Amazon. And so if Tupperware, whoever has that name in the end, is not able to capitalize on those assets and actually grow a real e-commerce business that relies on that channel, it's going to be a difficult hill to climb. Yeah. All right. Well, speaking of wholesale, we can talk about Peloton now. So, you know, as many probably already know, Peloton has been going through this transitional period in the last couple of years, including, you know, selling more through wholesale versus direct to consumer, which is pretty much what it did about four or five years ago exclusively.

16:43But yeah, this new deal is interesting. I thought, you know, selling at Costco, at least it's Bike Plus, which is sort of the flagship indoor cycling gear at stores and online between November 1st and February 15th. So if you can guess why that window, it's because it's trying to cover, you know, like the sort of holiday shopping all the way through the New Year wellness goals that everybody tries to, you know, do. So, you know, I think trying to kind of capitalize on that. There will also be a little bit of a deal. Obviously, if you want to be at Costco, you have to provide some value. So Costco is offering the Bike Plus in 300 of its U.S.

17:25stores for$19.99. And then on Costco.com, it will cost$21.99. So it is a little bit of a discount because the package, this bundle usually costs$24.95 everywhere else, I think. There's also an extended warranty. You get like 48 months as opposed to the typical 12 months that Peloton offers. I just kind of ran through the deal. But Costco being this next partner after a few other pretty high profile ones doesn't surprise me. but we can get into what Peloton is up to and why they're going in this direction. Clearly, Peloton is trying to find different wholesale partners. It is the latest DTC company that realizes that you can't rely on selling on your website alone.

18:11Peloton has learned this the hard way, as we've seen in the fluctuations of its stock price and many executive shuffles. I actually thought about this a lot this morning. I think the Costco thing kind of makes sense. Yes, Costco isn't a place where you're necessarily seeking out fitness equipment, but it is a place where I know families that are like, we are going to spend$1 ,000 on a new TV and they go to Costco for that. You know what I mean? And it is a place where you can get a big and bulky thing and that's sort of the mindset. And so I kind of understand this. And they also think about holiday shopping.

18:43And so I don't know, after a bunch of deliberation, I feel like this is one where it could make sense in terms of the type of shopper and they're trying to expand their appeal to different types of people. And I think Costco is a great way to do that. So that's my completely uneducated two cents. And I think there are some numbers to back that up. Gen Z and millennials are having families. And I think Peloton is definitely a millennial focused one. But also, I imagine these families are probably going to Costco. And 36 % of Costco's customers have a household income of more than$125 ,000. So they can throw down$2 ,000 for a bike.

19:22So interesting things there. Just a few thoughts on my end. Yeah, I think the affluent higher income households who tend to shop at Costco seem to be a really big focus for them, for Peloton, I should say. And then, you know, Costco just has really loyal shoppers. We know how much they love the Kirkland brand. And oftentimes, you know, you want to kind of make the most out of that membership. So Peloton's, I thought this was an interesting title, Chief Emerging Business Officer, Dion Camp Sanders, he told CNBC about the announcement. He said, we've been able to architect a deal with Costco that meets our needs with regard to profitable, sustainable unit economics.

20:04So basically, he's talking about acquiring customers in a profitable way. That's kind of like the new hip thing to say. But he did say, you know, many of Costco's members are affluent, and they often have larger homes in the suburbs and life situations where Peloton is a good fit, as opposed to maybe like the urban millennials that maybe they were targeting or were more focused on a few years ago. So we both live in apartments. I don't have room for a Peloton. I, you know, even though, I mean, okay, can we talk a little bit about how this is great and everything? I mean, you're getting a bundle, but I don't think, I think there's a glaring issue right now where Pelotons are just basically being given away for free.

20:46I know most of their revenue is actually, they count it, you know, from the subscriptions is really what they count on for the revenue. But it's just like the resale market is huge, which I know they're also trying to get in on. So it's interesting that they think, you know, maybe the Costco customer is bypassing all of that and just wants the convenience of taking one home or ordering it from Costco. And I would think, you know, I don't have any data to back this up, but I imagine the resale one. And there have been stories about how Facebook Marketplace is just replete with people being like, just take my Peloton.

21:20I think that's probably centralized in urban centers. A lot of people in cities bought Pelotons when it was hot, and then they realized that they're not using it. They had to downsize their apartment because rent prices increased. Costco is going more for the suburban shopper, who probably maybe isn't as much on Facebook Marketplace, or they're not as close to a city where they would be able to get one of those. So yeah, I think that this is a problem. Peloton's going to have to deal with that. And I think it'll be a few years until that supply and demand equals out because right now you can really, especially in New York City, get a Peloton for the cheap.

21:57But I bet you the Costco customer is a little bit different than what's going on in the urban metros right now. Yeah. And then we can, maybe we should mention Peloton's transition right now, where it is currently being led by two board members earlier this year. I'm sure many Remember, former CEO Barry McCarthy did step down, but the sales are still declining. So year over year sales declined 3.6 % to$2.7 billion this past year. They are shrinking their losses. You know, they are trying to just reduce costs, you know, trim the fat everywhere. So they shrunk it by 50 % also, but it is still not profitable.

22:40So I think that's this focus on profitability is there for a reason. And but yeah, I guess, you know, the Costco play is one of them. But wholesale and brand partnerships in general are a big part of this strategy just since, you know, the pandemic sales slowed down. The last couple of years, they launched on Amazon. We were just speaking about Amazon Dick's Sporting Goods. And then they also now have a partnership with Lululemon, which I thought was interesting because there's a little bit of tension there. But this is more of a content partnership. But it's just not the sort of that true D2C brand that it was in 2019 when they went public, which feels like yesterday.

23:21Yeah. Yeah. It feels like yesterday, but still feels very long ago. We were different people then. But like, yeah, I mean, it had to be this way. I don't think the company had to lose as much money or like go through all this turmoil. But really, there was no way it would be very difficult for it to be an only online company and be able to reach the scale that it needed to. And that's sort of the reality that many other brands in the space are realizing. Like there are very, very few pure direct to consumer brands. Nowadays, everyone says use DTC, but it's more of a moniker that they're digitally native.

23:57They have a nice looking website, but they're looking for wholesale partnerships that align with their branding whenever they can. And I think that this is the perfect example of that. So yeah, we'll see how this goes. I'll want to know their Q4 numbers. Like, it will be interesting to see, does Costco actually boost its holiday sales? It could. I don't know. But that's something that we'll watch out for. Q4 there, Q1. Yeah. And like, we should mention, I mean, they do and did have showrooms, right? Like, they do have physical direct-to-consumer, I guess, like, you know, a retail fleet. But, you know, remember, like, they invested so much in their supply chain because there was that weird window where people couldn't get a Peloton.

24:34They were going crazy for them. And so I think, you know, really overshooting the demand for them. That was the turning point and realizing people wanted to actually go back to the gym. I remember there was a lot of sort of uncertainty around that when we were covering it in like 2021. So, yeah, this is a new direction for sure. Yep. Okay. Well, I think that's a good note to end it on. So you can rate and review our show on Apple Podcasts or Spotify or wherever you're listening. And then on Thursdays, you can listen to the Modern Retail Interview show with Kale. Kale, do you have a preview for next week?

25:11I know you always like to give us a sneak peek. Sure. Yeah. I spoke with the brand Awe Inspired, which makes sort of pendant charm-like jewelry. We talked a lot about holiday strategies, what it's like being a higher-end jewelry brand preparing for the holidays, all that stuff. It was a really fun conversation. You should check it out. That sounds great. And then, of course, come back on Saturdays for the Modern Retail Rundown. And as always, thank you for listening.