🥜 Smucker’s $5.6B Twinkie bet

1. PB&J icon Smucker buys Hostess for $5.6B as the snackification of America intensifies

’90s-lunchbox nostalgia… Yesterday, Jif-peanut-butter maker and Uncrustables legend J.M. Smucker said it would buy ~100-year-old Twinkie parent Hostess for $5.6B. Hostess is famous for wrapped snack cakes like Donettes and Ding Dongs. While its profits have jumped thanks to price hikes, sales volumes have slipped and it’s carrying $900M in debt. 

• Zinger: Smucker’s cash-and-stock deal is a 54% premium over Hostess’ stock price last month (when it was first reportedly looking to sell).

• Sugar high: Hostess shares surged 19% on the news, while Smucker fell 7%. It’s not the only Big Foodie trying to grow its pantry portfolio.

Snack-quisitions on the rise… Nearly half of US consumers eat three or more snacks a day. This year, snack sales are projected to grow up to 9.5%, versus 5.5% for the food-and-drink industry. While food giants have made more $$ by hiking prices, consumers are cutting back on extras. Now big brands are consolidating pantry faves to stay ahead.

• Big food, small brands: Oreo maker Mondelez bought Clif Bar last year for $2.9B, and Tate’s cookies back in 2018. Ice-cream titan Unilever recently snapped up frozen-yogurt brand Yasso. 

• New shelf: Cereal staple Kellogg is spinning out its snack brands (like Cheez-Its and Pringles) into a separate publicly traded company called Kellanova.

THE TAKEAWAY

Classics can get in on new hits… Legacy brands like Smucker and Hostess are household names, but they need to innovate to stay relevant. Smucker has found success in fresh twists on classics, like new varieties of Uncrustables — which it soon expects will become a $1B/year brand. Smucker can use Hostess’ portfolio to feed America’s snack appetite with fresh creations. PB&J Twinkies, anyone?

2. BMW ends its heated-seats subscription as carmakers embrace the monthly model

Butt-warmer activated… just in time for winter. Since last year, BMW has charged drivers in countries like the UK, South Korea, and Germany $18/month to unlock access to factory-installed heated seats and steering wheels. After considerable backlash, the seat-warming sub has been axed after just one winter.

• Tough brake: BMW said it’ll instead focus on paid software services, like its $20/month driving-assist subscription. Seat-heat tech = hardware.

• Rearview regret: In 2019 BMW said owners would be charged $80/year to use Apple CarPlay — but reversed course within months.

Subscription overdrive... As cars become increasingly connected to the internet (where the sub model reigns) automakers are going into Netflix mode. Ford’s hands-free driving tech is $75/month while GM’s is $25 (after ~$2.2K up front). Tesla drivers can pay $200/month for access to its full self-driving software. For $8/month, Toyota owners can remote-start their cars. It’s not just driving features either: 

• Carmakers have been testing rental-style subscriptions, where drivers pay a monthly fee and get a car (often with insurance and maintenance included). 

• Hyundai’s $700+/month EV sub can be canceled whenever. BMW tried out a $2K/month car-sub service in 2018, but ended it after about two years.

THE TAKEAWAY

If you paywall it, they will pay… Despite some initial backlash-inciting failures, the auto industry sees software subscriptions (like: parking assist, hands-free driving) as a road worth traveling. GM is hoping to 10X its subs revenue to $25B by the end of the decade. Meanwhile, it’s phasing out support for CarPlay and Android Auto to lean into its own proprietary platform, potentially letting it charge for common mirroring services like GPS and collect more data.

3. Heard on the Block: “phishing”

🪴 Like a financial Venus flytrap snapping up your crypto…

Hackers took over ethereum cofounder Vitalik Buterin’s X (fka Twitter) account and on Saturday posted a “phishing” link promising free NFTs. When unsuspecting folks clicked and connected their crypto wallets, the thieves swiped nearly $700K worth of victims’ digital assets (like: NFTs, tokens). In the first half of this year, scammers stole at least $108M in phishing attacks.

What else we’re Snackin’

• MojoDojo: Tesla rose 10% yesterday after Morgan Stanley said its Dojo supercomputer could add $500B to the EV biz. Dojo, which Tesla started operating in July, will train AI models used by self-driving cars. 

• Punt: Disney and Spectrum parent Charter reached a deal that would restore Disney networks like ESPN to Charter, ending the blackout over negotiation disputes. Just in time for “Monday Night Football.” 

• iOhNo: Apple released an emergency iOS update last week after discovering major security vulnerabilities. Spyware allowed hackers to take over iPhones by sending iMessage attachments — no click required.

• NoYield: The United Auto Workers’ contract with Ford, GM, and Stellantis expires Thursday night, when the union could strike without a new deal. The UAW said negotiations have been “very slow.”

• 3Llamas: Meta is said to be creating a third large language model (the engine that powers AI), after releasing Llama 2 in July. It’s said it’ll be as powerful as rival OpenAI’s GPT-4 and free to use.

Snack Fact of the Day

Tuesday

• Apple’s iPhone event 

Authors of this Snacks own ethereum and shares of: Apple, Disney, GM, and Tesla