Paging Dr Pepper

Quote of the Day

I secretly hope that twitter keeps extending the character limit as a social experiment, slowly conditioning our attention spans until we’re able to read actual books again.”

Market Snapshot

• VMWare shares fell 16.6% after reports of a Dell reverse merger.
• Wynn shares fell 19% over two days of trading.
• The Dow and S&P had their worst day of 2018.
• U.S. Treasury yields hit their highest level in nearly four years.

Keurig Pays Hefty Price for Dr Pepper

1. Make your selection: Dr Pepper Snapple
2. Insert $18.7 billion
3. Enjoy the largest soft-drink deal ever

Keurig Green Mountain (KGM) is taking over the soda giant for the equivalent of 1.8 million 6-packs (we regrettably did the math). Shareholders of the soft drink company will retain 13% of the combined company, while KGM investors will own 87% of the renamed Keurig Dr Pepper.

It’s the latest expansion for investment firm—and Keurig’s parent company—JAB Holding’s food-and-beverage empire.

The deal’s fizzy details

JAB is no stranger to Big Beverage acquisitions. In 2015, the holding company bought KGM for $13.9 billion. Now, KGM and Dr Pepper are combining and the new company—to be headed by Keurig CEO Bob Gamgort—is valued at about $33 billion, with an estimated annual revenue of $11 billion.

But we’ll do you one better.

Mixing the hot and cold drink companies propels JAB into the stratosphere of liquid purveyors like Coca-Cola and PepsiCo. Now, Dr Pepper’s 7UP and A&W will compete to win their respective taste tests against the Sprites and Barq’s root beers of the world.

How does it plan to do that?

Keurig is the fourth-largest coffee seller in the U.S. with 7.4% market share and Dr Pepper Snapple holds 8.5% of its respective market as the third-largest carbonator. The move will hopefully boost each. Especially as the bev-vendor plans to use Dr Pepper’s convenience/drug store connections and Keurig’s e-commerce connections (like Amazon) to build an unrivaled distribution network.

And with consumers trending away from sugary colas, Keurig Dr Pepper is poised to serve up some stiff competition in the fastest-growing aisle: juices, sparkling water, coffee, and tea. Dr Pepper acquired antioxidant-upstart Bai Brands for $1.7 billion in 2016.

Honestly, we can’t wait for Snapple Facts on our K-Cups.

Your Tax Dollars at Work: A Federal Plan to Take Over the 5G Network

It could go down as the most interesting PowerPoint ever—a leaked slideshow outlining preliminary plans by the Trump administration to have the government build the country’s 5G networks.

Should it happen (which, officials stressed, it probably won’t), the move would be a major shakeup, considering wireless infrastructure has long been the domain of private companies like AT&T and Verizon.

So why is the government considering taking over the role?

China

Perhaps the U.S.’ No. 1 geopolitical foe, China is sprinting ahead in the race to build next-gen wireless networks, while also seeking to meddle in the U.S.’ system. So in order to protect against Chinese cyber threats, the U.S. could take it upon itself to create a bulwark: a comprehensive, standardized network. Think Eisenhower’s interstate highway system, but with less concrete.

So what is 5G? Featuring lighting quick data delivery, 5G (or fifth-gen wireless networks) is the key that opens the door to the newest wave of tech innovation: IoT, self-driving cars, and virtual reality, to a name a few.

LA Times Looks for a New Editor

The trials and tribulations of The LA Times continue—this time, media vet Lewis D’Vorkin is being replaced as editor-in-chief by the former editor of The Chicago Sun-Times, Jim Kirk.

D’Vorkin isn’t out. Instead, he’ll take over as Chief Content Officer of Tronc, the media conglomerate watching over The LA Times, The Baltimore Sun, and The Chicago Tribune (among others).

Now, back to the Times

* In January, Tronc sidelined the paper’s publisher and CEO Ross Levinsohn after two past sexual harassment lawsuits surfaced. On the same day, journalists announced plans to unionize after disagreements with management.
* These disagreements stem from an investigative piece that portrayed Disney in an unfriendly light. D’Vorkin rejected publishing the story, leading many to believe he was pro keeping big advertisers of the Times happy and anti honest reporting.
* Tensions rose—eventually some employees began accusing Tronc and the Times’ execs of monitoring cell phones and computers.

Now? Kirk is in and The LA Times is hoping for better...times.

Fitness App Strava Is in Hot Water With the U.S. Government

We’ve all been there: you go out for a morning jog and accidentally reveal the location of a top-secret U.S. military base. Especially if you’ve been using the fitness tracking app Strava, which in a matter of days has gone from triathlete-favorite to national security pariah.

The backstory: In November, Strava published a global “heat map” showing the running and cycling routes of its impressively toned users. But things went south several days ago, when an Australian student discovered that in certain remote regions—like Afghanistan and Syria—one could figure out sites of sensitive military installations by examining the jogging patterns of soldiers.

Sure, the whole situation seems absurd, but to national security officials, Strava’s map is no laughing matter. A military expert tweeted, Strava possesses data “most intelligence entities would literally kill to acquire.” And the app has even caught the attention of the White House, which considers the map a “security risk.”

We’ll keep all future exercise to ourselves

What Else Is Happening…

• Apple (-2.07%) might be working on three new Mac models to release before the end of the year.
• The U.S. is “progressing very slowly” in NAFTA talks.
• Exxon Mobil (-1.11%) plans to invest $50 billion in the U.S., made possible (partly) by the corporate tax cut.
• Boeing (-0.70%) is buying into efficient batteries with an investment in startup Cuberg.

Economic Calendar

• Monday     Earnings: Lockheed Martin (+)

                    Economic Events: Personal Income and Outlays (+)

• Tuesday    Earnings: AMD, Aetna, Electronic Arts, McDonald’s, Pfizer

                  Economic Events: Consumer Confidence

• Wednesday    Earnings: AT&T, Boeing, eBay, Facebook, Microsoft, Mondelez, Nasdaq, PayPal, Qualcomm, Textron, Xerox

                        Economic Events: Chicago PMI

• Thursday   Earnings: Alibaba, Alphabet, Amazon, Apple, DowDuPont, GoPro, Mattel, Royal Dutch Shell, Time Warner, Visa

                   Economic Events: Motor Vehicle Sales, PMI Mfg Index, ISM Mfg Index

• Friday       Earnings: Charter, Exxon, Merck, Sony, Sprint

                 Economic Events: Consumer Sentiment, Factory Orders

Venture This: The Alternative Milk of the Future

Nothing washes down a bowl of Frosted Flakes quite like pea milk. No, not the cruel prank your brother used to play on you, but the protein-based milk alternative, Ripple, made by Ripple Foods.

Goldman Sachs seems to be a supporter, plugging the two-year-old company with a $65 million investment.

What we like

Milk alternatives. The U.S. market for low-fat milk fell 5.5% in 2017, while plant-based milks are stealing the spotlight—U.S. sales are expected to grow 10% YoY until 2024. Meanwhile, on a global scale the market is on pace to top $16 billion this year, compared to $7.4 billion in 2010.

Then there’s the past success of Ripple Foods’ co-founders. Adam Lowry founded cleaning product company Method Products and Neil Renninger was a championship Blackjack player before founding Amyris—a do-it-all company that makes renewable fuel and malaria medication.

What’s got us stuck

It’s called pea milk. And the fact remains: getting consumers to buy into it will be difficult. It took a while before almond milk took off and even now people still ask, “You drink almond milk?”

What’s really got us stuck

How does one milk a pea?

Now it’s time to hear from you: would you invest in Ripple Foods (or even drink pea milk)? Yes or No.

The Breakroom

Question of the Day

How can you make the following equation correct without changing it at all? 8 + 8 = 91

(Answer located at the bottom of newsletter)

Business Trivia

Which ice cream brand nearly started out as a bagel company?

(Answer located at the bottom of newsletter)

Stat of the Day

$5 million—How much Elon Musk sold in flamethrowers in 24 hours. They’re melting off the shelves.

Breakroom Answers

Question of the Day: Look at it upside down. 16 = 8 + 8.

Business Trivia: Ben & Jerry’s