Why Struggling Fast-Food Brands Are Turning to AI

Morning Brew Daily

2 May 202427:17

TLDRIn the latest episode of the Morning Brew Daily Show, hosts Neal Freyman and Toby Howell discuss various economic and business topics. They begin with the stock market's reaction to Starbucks' performance and the introduction of LinkedIn games to boost engagement. The show highlights a new partnership between Wendy's and Cinnabon, creating a convenient and enjoyable treat. The Federal Reserve's decision to maintain interest rates is covered, with insights into the effects of inflation and economic strength. The hosts delve into fast food brands' struggles and their increasing reliance on AI to understand consumer behavior and preferences. They also touch on Elon Musk's decision to fire Tesla's electric vehicle charging team, suggesting a shift in focus towards autonomous driving. The episode concludes with discussions on the crypto market, digital camera sales, myopia rates, movie lengths, and LinkedIn's new gaming feature.

Takeaways

📉 Starbucks faced a significant drop in the stock market, which the hosts attribute to cautious consumer spending.
🎮 LinkedIn is introducing games to its platform to increase user engagement, following the trend set by successful gaming apps like The New York Times games.
🍩 Wendy's has partnered with Cinnabon to offer a new breakfast item, the Cinnabon pull apart, which is a warm cinnamon sugar rolled dough with cream cheese frosting.
💰 Jerome Powell, the Federal Reserve Chairman, indicated that interest rates will remain elevated due to persistent inflation above target levels.
📈 Despite high inflation and interest rates, the economy and hiring have remained strong, with wealthier individuals continuing to spend without being significantly impacted by the rates.
🍔 Fast food brands like McDonald's and Starbucks are reporting a shift in consumer behavior towards more prudent spending, affecting their earnings.
📊 There is a notable bifurcation in consumer spending habits; while higher-income individuals continue to spend, middle and lower-income groups are more sensitive to prices and are cutting back.
👍 Wingstop is an outlier in the fast-food industry, with sales up 21.6% and its stock price increasing by 90% over the past year, focusing on value and digital transactions.
🚗 Elon Musk's decision to fire the entire team running Tesla's electric vehicle charging business was met with confusion and surprise, as charging infrastructure is crucial for EV adoption.
📈 The stock market reacted positively to Jerome Powell's announcement that there would be no interest rate hike, with the S&P index increasing by 1%.
🤔 There is a growing trend of using AI and digital platforms in the fast-food industry, with brands like KFC and Pizza Hut experimenting with generative AI applications.

Q & A

Why did Starbucks' stock get slammed on the market?
-Starbucks' stock got slammed on the market due to its first quarterly sales decline since the pandemic in 2020, which the CEO attributed to a more cautious consumer approach to spending.
What is LinkedIn launching that is aimed at increasing engagement on their platform?
-LinkedIn is launching games, which include a Sudoku-like game, a word association game, and a trivia word play hybrid, to increase user engagement and the time spent on the platform.
What is the significance of the Wendy's Cinnabon pull apart in the context of the discussion?
-The Wendy's Cinnabon pull apart is highlighted as an example of a product that offers joy and convenience to consumers, emphasizing the importance of easy-to-eat options and focusing on the middle part of the cinnamon roll, which is considered the best by some.
Why did the Federal Reserve not change interest rates during their recent meeting?
-The Federal Reserve did not change interest rates because inflation has not yet returned to its target levels. Jerome Powell, the Fed Chairman, indicated a need for greater confidence that price growth was moderating before considering lowering borrowing costs.
What is the current state of inflation in the United States as discussed in the transcript?
-Inflation in the United States has remained high and stopped falling, leveling off above the Federal Reserve's target levels. Despite expectations for a decline, inflation has stayed elevated due to continued spending by consumers, particularly those less affected by higher interest rates.
How is the economic resilience observed in the United States attributed to certain demographic groups?
-The economic resilience is attributed to older Americans, particularly boomers, who are less affected by higher interest rates due to their existing favorable housing deals and increased wealth from a consistently elevated stock market.
What is the current trend in consumer spending habits at fast food restaurants?
-Consumers are becoming more price-conscious and are pulling back on spending at fast food restaurants. There is a shift from dining out to shopping at grocery stores, indicating a preference for affordability and value.
Which fast food brand is mentioned as defying the overall stagnation of the sector?
-Wingstop is mentioned as defying the overall stagnation of the fast food sector, with sales up 21.6% in the last quarter and its stock skyrocketing 90% over the past year.
What is Elon Musk's recent decision regarding Tesla's electric vehicle charging business?
-Elon Musk decided to abruptly fire the 500-person team running Tesla's electric vehicle charging business. This move is seen as baffling since the lack of charging infrastructure is a significant hurdle to widespread EV adoption.
What is the reason behind the rise in nearsightedness or myopia among the global population?
-The rise in nearsightedness or myopia is associated with looking at close objects for many hours, such as staring at phones, computers, or reading books at close range. However, spending time outside and getting sunlight can help prevent or reduce the effects of myopia.
What is the ideal movie length according to a poll of 2000 American audience members?
-According to the poll, the ideal movie length is 92 minutes, with only 15% of people wanting to sit through a movie that is two hours or longer.

Outlines

00:00

📉 Starbucks Stock & Corporate America's Competitive Edge

Neal Freyman and Toby Howell discuss Starbucks' stock performance and the increasing competition in corporate America. They also touch on LinkedIn's venture into gaming. The hosts promote a new Morning Brew Daily mug and discuss Wendy's partnership with Cinnabon, introducing a new product. Jerome Powell's stance on interest rates is covered, explaining the Federal Reserve's decision not to change rates due to persistent inflation. The discussion also covers the economic resilience despite high interest rates, the impact on different income groups, and the challenges faced by lower-income individuals.

05:01

🍔 Fast Food Earnings & Consumer Spending Trends

The hosts analyze the earnings of fast food giants like McDonald's, Starbucks, Domino's, and Burger King's parent company, Restaurant Brands International. They note that consumers are becoming more cautious with their spending, leading to a decline in sales for these companies. The discussion highlights the need for these businesses to focus on affordability and the strategy of targeting occasional consumers. Wingstop's success is contrasted against the general trend, with its sales up 21.6% and stock price skyrocketing. The segment also explores the digital strategies employed by these companies.

10:01

🚗 Tesla's Supercharger Team Dismissal & Digital Business Focus

Elon Musk's decision to fire the 500-person team running Tesla's electric vehicle charging business is discussed as a baffling move considering the importance of charging infrastructure for EV adoption. The hosts speculate on the reasons behind this decision, including potential cash flow issues at Tesla and a strategic shift towards autonomous driving. The conversation also touches on the rivalry between Changpeng Zhao ( CZ ) of Binance and Sam Bankman-Fried ( SBF ) of FTX, following their respective legal troubles and contrasting approaches to dealing with authorities.

15:06

📈 Crypto Net Worth, Digital Camera Sales, & Myopia Concerns

The segment covers the net worth of Changpeng Zhao, the founder of Binance, who has been sentenced to four months in prison. It contrasts his situation with that of Sam Bankman-Fried, emphasizing their different approaches to allegations against them. The discussion then shifts to a resurgence in digital camera sales in Japan and the potential reasons behind it. Lastly, the hosts address the growing prevalence of myopia (nearsightedness) and the importance of outdoor activity in preventing it.

20:06

🎬 Ideal Movie Length & LinkedIn's Foray into Gaming

The hosts discuss the ideal length for a movie, citing a poll that suggests 92 minutes is the preferred duration for viewers. They also touch on the trend of longer movies and the controversy surrounding Martin Scorsese's film, 'Killers of the Flower Moon'. The segment concludes with a discussion on LinkedIn's new offering of games on its platform, aiming to increase user engagement and time spent on the site. The hosts share their initial impressions of the games and the potential effectiveness of LinkedIn's strategy.

25:08

🎉 Wrapping Up & Show Credits

The hosts wrap up the show by thanking the audience for tuning in and inviting feedback. They remind listeners about the availability of Morning Brew Daily mugs and provide email contact information for any comments or suggestions. The show credits are rolled, acknowledging the production team behind the episode.

Mindmap

Keywords

💡Fast-Food Brands

Fast-food brands refer to businesses that serve food quickly and typically at a low cost. In the context of the video, these brands are facing challenges and are increasingly turning to AI to improve their operations. The script mentions that fast-food earnings are indicating that consumers are spending less, which is prompting these brands to focus on affordability and value.

💡Artificial Intelligence (AI)

Artificial Intelligence (AI) is the simulation of human intelligence processes by machines, especially computer systems. It includes learning, reasoning, problem-solving, perception, and language understanding. In the video, AI is discussed as a solution for struggling fast-food brands, with examples given of how brands like KFC and Pizza Hut are experimenting with generative AI to enhance customer service.

💡Consumer Spending

Consumer spending refers to the amount of money consumers collectively spend on goods and services. The script notes that fast-food earnings are down, indicating that consumers are not spending as freely as before, which is causing fast-food brands to adapt their strategies to attract customers.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. The video discusses how inflation has remained high despite expectations for it to fall, which has influenced consumer behavior and the Federal Reserve's decisions on interest rates.

💡Interest Rates

Interest rates are the percentage at which interest is added to the principal sum of money that banks charge to customers. In the script, it's mentioned that the Federal Reserve has kept interest rates elevated to combat inflation, which has affected consumer spending habits and the economy as a whole.

💡Starbucks

Starbucks is a multinational coffeehouse chain that is often used as a benchmark for the fast-food and casual dining industry. The video script highlights Starbucks' first quarterly sales decline since the pandemic, which is attributed to more cautious consumer spending.

💡Wingstop

Wingstop is a fast-food chain known for its chicken wings. The script points out that Wingstop is an outlier in the fast-food industry's trend, with sales up 21.6% and its stock price increasing significantly. The brand's focus on value, quality, and digital transactions is credited for its success.

💡Digital Transactions

Digital transactions refer to the exchange of goods or services through electronic means. The video discusses how Wingstop is aiming to digitize 100% of its transactions, leveraging customer data to improve its business model and customer experience.

💡Economic Indicators

Economic indicators are statistics that inform the state of the economy. In the video, fast-food earnings and interest rates are mentioned as indicators that reflect the health of consumers and the overall economy.

💡Tesla

Tesla is an electric vehicle and clean energy company. The video script discusses a surprising move by Tesla's CEO, Elon Musk, to fire the team running its electric vehicle charging business, which is typically seen as a critical infrastructure for EV adoption.

💡LinkedIn

LinkedIn is a professional networking platform. The video mentions LinkedIn's launch of games as a strategy to increase user engagement and time spent on the platform, following trends set by other media companies like The New York Times.

Highlights

Starbucks faced a significant market downturn, with its stock experiencing a notable decline.

LinkedIn is introducing games to increase corporate America's competitive landscape.

The Morning Brew Daily mug was launched, featuring the catchphrase 'Let's ride, Neal'.

Wendy's and Cinnabon have partnered to create a new product, the Cinnabon pull apart, which is easy to eat and focuses on the best part of a cinnamon roll.

The Federal Reserve did not change interest rates and indicated they will remain high until inflation returns to target levels.

Inflation has stopped falling and has leveled off above the Federal Reserve's desired rate, contrary to investor expectations for 2024.

The economy and hiring have remained strong despite high interest rates, reducing urgency for the Fed to make changes.

Older Americans, who are significant spenders, are less affected by higher interest rates due to their established financial situations.

Fast food earnings suggest consumers are spending less, with brands like McDonald's and Starbucks reporting cautious consumer behavior.

Fast food brands are focusing on affordability and promotions to attract consumers, with an emphasis on value.

Wingstop is defying the trend with a 21.6% increase in sales, possibly due to its good value and indulgent quality offering.

Wingstop has leaned into digital business, aiming to digitize 100% of its transactions and leveraging customer data.

Elon Musk's decision to fire the 500-person team running Tesla's EV charging business was seen as baffling, given the importance of charging infrastructure for EV adoption.

Tesla may be reallocating resources from the supercharger network to its AI and robotaxi ambitions due to a cash crunch.

Changpeng Zhao, the founder of Binance, has been sentenced to four months in prison but remains extremely wealthy.

Digital camera sales volumes in Japan rose for the first time since 2010, possibly due to a retro trend and influencer popularity.

Researchers estimate that by 2050, 50% of the global population will need corrective lenses for nearsightedness if current rates continue.

Spending time outside is an effective way to prevent nearsightedness, with each hour spent outside reducing the odds of developing myopia.

LinkedIn has introduced games to its platform to increase user engagement and time spent on the site, following the trend set by The New York Times' successful games app.

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