I've asked Devin LaSarre (Invariant) this question, but I'm curious to hear your perspective too:
I can't think of many other products which we buy repeatedly, with only small variations like flavour, where the standard way to buy is regular delivery from online. I guess coffee and razor blades are the two closest examples, but in both cases it's really a premium option. I can't think of a product where it's the cheapest option. That's because the supermarket model has proven itself to be by far the cheapest way of getting this type of good to the consumer. What makes the economics nicotine pouches SO different that they will be the only product of this sort where the cheapest way to buy is regular online deliveries?
Do you mind sharing where you are getting your data to support the sweeping assertion you are making re: price of good between online vs brick and mortar?
At best, you seem to be making some huge leaps to posit your opinions as facts. In my experience best prices for a lot of goods are found online. There are countless companies that exist solely online and offer some of the best prices in their product category. Chewy is a good example of a company that all but made me stop going into pet stores. I buy literally everything thru them unless they just don’t carry something I need. I have done a ton of price comparisons over the years (and continue to) but almost never find better prices anywhere else. Not only do I save money, I also save time driving to and from stores.
Same with coffee, which you used as an example of premium option. I buy online because it’s quite a bit cheaper than buying in a store. It’s even fresher (more recently roasted) compared to what’s at the store. Again, I save money and time.
It seems to me HYAPP offers the same sort of value to its customers.
Have you done any comparison between what HYAPP offers vs physical stores? If not, maybe you should start there, so you can analyze this company specific to nicotine pouch market rather than trying to apply a broad assumption about online vs physical retail.
I want to first clarify I’m not bearish on HAYPP. My investing process looks like me searching for every reason I can not to buy something, and right now this is the one that’s screaming at me. But don’t treat me like the enemy - I don’t have an agenda here.
It’s not online vs brick and mortar generally. I’m saying online vs supermarket for items that one buys regularly. My evidence of the fact that the supermarket model is fundamentally a cheaper way of getting these goods to the consumer is that virtually everything consumer product that I (and everyone I know) buy repeatedly, I buy from a supermarket. I don’t get my weetabix regularly shipped to my house from a weetabix distribution centre.
I’m interested by the exception of Chewy. I’m from the UK so haven’t ever looked at them, but are you saying a bag of pretty generic dog food is cheaper when you order it from Chewy than buying it from Walmart? If so that’s fascinating.
We do have coffee in the UK, though, and it’s a hell of a lot cheaper to buy it in supermarkets, assuming you’re buying a relatively cheap brand. I don’t doubt that online you can get better, fresher coffee more easily. But cheaper?
Ah I assumed you were from the US. Your earlier comment makes more sense now. My understanding is the UK has some of the most competitive supermarkets anywhere. While it is a competitive business in the US, it may not be as extreme. A lot of items at grocery stores here are marked up. Even Walmart can carry products that are marked up compared to online. Coincidentally, tobacco and nicotine products are examples of that. Perhaps, it’s a marked up for the convenience.
While researching nicotine pouches I visited a lot of message boards to get a sense of customer experiences using these online retailers. I was surprised to see a lot people from the UK ordering these pouches from HAYPP and their competitors. Apparently it’s a lot cheaper. This was also true for those in the US, with some ordering massive amounts as availability of certain brands and flavors can vary apparently.
Some reported issues with tariffs/taxes (especially in the UK) but sounded like they got their money back after proving that these are not tobacco products and therefore tobacco taxes don’t apply.
Anyway, my takeaway was that price competitiveness doesn’t seem to be an issue. Convenience could be. But with a little planning and patience customers can get these products cheaper online.
I still don’t think we’re getting to the bottom of anything here though. Yes, pouches are currently cheaper online than in stores. But as investors we care about the future, not just the present. The market is in its infancy, so the fact that it’s cheaper online is not a strong indicator that it will always be that way; and a comparison with other products in mature markets seems to suggest things of this nature tend to be cheaper in stores.
When I was asking about Chewy, it wasn’t rhetorical - is it really cheaper to order a bag online than to buy one in Walmart, assuming you’re buying mass market food, not premium stuff?
Similarly, is it really cheaper to order a bag of coffee online, or is it just better and fresher?
Once we’ve established answers to those, we can start discussing what they tell us about how the pricing of pouches is likely to look when the market matures.
I don’t think tobacco is a good comparable, as it has incredibly unique economics relating to the fact they can’t advertise.
Finally, I vehemently disagree with your last comment, that price competitiveness won’t be an issue. Pouches are expensive - price competition will be huge. Convenience matters too, but grabbing a pack from the store when you’re there anyway is hardly inconvenient - arguably this is much more convenient than ordering online and waiting several days. Lower prices than competition is the main reason Haypp has done so well, and will have to continue for them to continue doing well.
“Yeah the fact they have no patent protection for this, that it's not a particularly complicated technology, that we don't even know how the quantum enrichment process works... and yet this is all brushed off, and the company is called a no-brainer at a $200m valuation pre-revenue? Seems a wild thing to put other people's money into.”
Good, mature investors enjoy having their views challenged. There is nothing I would like more than to have people leave intelligent comments disagreeing with me on my posts. And yet both here and there, you seem to have instead taken it personally.
I've asked Devin LaSarre (Invariant) this question, but I'm curious to hear your perspective too:
I can't think of many other products which we buy repeatedly, with only small variations like flavour, where the standard way to buy is regular delivery from online. I guess coffee and razor blades are the two closest examples, but in both cases it's really a premium option. I can't think of a product where it's the cheapest option. That's because the supermarket model has proven itself to be by far the cheapest way of getting this type of good to the consumer. What makes the economics nicotine pouches SO different that they will be the only product of this sort where the cheapest way to buy is regular online deliveries?
Do you mind sharing where you are getting your data to support the sweeping assertion you are making re: price of good between online vs brick and mortar?
At best, you seem to be making some huge leaps to posit your opinions as facts. In my experience best prices for a lot of goods are found online. There are countless companies that exist solely online and offer some of the best prices in their product category. Chewy is a good example of a company that all but made me stop going into pet stores. I buy literally everything thru them unless they just don’t carry something I need. I have done a ton of price comparisons over the years (and continue to) but almost never find better prices anywhere else. Not only do I save money, I also save time driving to and from stores.
Same with coffee, which you used as an example of premium option. I buy online because it’s quite a bit cheaper than buying in a store. It’s even fresher (more recently roasted) compared to what’s at the store. Again, I save money and time.
It seems to me HYAPP offers the same sort of value to its customers.
Have you done any comparison between what HYAPP offers vs physical stores? If not, maybe you should start there, so you can analyze this company specific to nicotine pouch market rather than trying to apply a broad assumption about online vs physical retail.
I want to first clarify I’m not bearish on HAYPP. My investing process looks like me searching for every reason I can not to buy something, and right now this is the one that’s screaming at me. But don’t treat me like the enemy - I don’t have an agenda here.
It’s not online vs brick and mortar generally. I’m saying online vs supermarket for items that one buys regularly. My evidence of the fact that the supermarket model is fundamentally a cheaper way of getting these goods to the consumer is that virtually everything consumer product that I (and everyone I know) buy repeatedly, I buy from a supermarket. I don’t get my weetabix regularly shipped to my house from a weetabix distribution centre.
I’m interested by the exception of Chewy. I’m from the UK so haven’t ever looked at them, but are you saying a bag of pretty generic dog food is cheaper when you order it from Chewy than buying it from Walmart? If so that’s fascinating.
We do have coffee in the UK, though, and it’s a hell of a lot cheaper to buy it in supermarkets, assuming you’re buying a relatively cheap brand. I don’t doubt that online you can get better, fresher coffee more easily. But cheaper?
Ah I assumed you were from the US. Your earlier comment makes more sense now. My understanding is the UK has some of the most competitive supermarkets anywhere. While it is a competitive business in the US, it may not be as extreme. A lot of items at grocery stores here are marked up. Even Walmart can carry products that are marked up compared to online. Coincidentally, tobacco and nicotine products are examples of that. Perhaps, it’s a marked up for the convenience.
While researching nicotine pouches I visited a lot of message boards to get a sense of customer experiences using these online retailers. I was surprised to see a lot people from the UK ordering these pouches from HAYPP and their competitors. Apparently it’s a lot cheaper. This was also true for those in the US, with some ordering massive amounts as availability of certain brands and flavors can vary apparently.
Some reported issues with tariffs/taxes (especially in the UK) but sounded like they got their money back after proving that these are not tobacco products and therefore tobacco taxes don’t apply.
Anyway, my takeaway was that price competitiveness doesn’t seem to be an issue. Convenience could be. But with a little planning and patience customers can get these products cheaper online.
I still don’t think we’re getting to the bottom of anything here though. Yes, pouches are currently cheaper online than in stores. But as investors we care about the future, not just the present. The market is in its infancy, so the fact that it’s cheaper online is not a strong indicator that it will always be that way; and a comparison with other products in mature markets seems to suggest things of this nature tend to be cheaper in stores.
When I was asking about Chewy, it wasn’t rhetorical - is it really cheaper to order a bag online than to buy one in Walmart, assuming you’re buying mass market food, not premium stuff?
Similarly, is it really cheaper to order a bag of coffee online, or is it just better and fresher?
Once we’ve established answers to those, we can start discussing what they tell us about how the pricing of pouches is likely to look when the market matures.
I don’t think tobacco is a good comparable, as it has incredibly unique economics relating to the fact they can’t advertise.
Finally, I vehemently disagree with your last comment, that price competitiveness won’t be an issue. Pouches are expensive - price competition will be huge. Convenience matters too, but grabbing a pack from the store when you’re there anyway is hardly inconvenient - arguably this is much more convenient than ordering online and waiting several days. Lower prices than competition is the main reason Haypp has done so well, and will have to continue for them to continue doing well.
I’d help answer your question but was this you?
“Yeah the fact they have no patent protection for this, that it's not a particularly complicated technology, that we don't even know how the quantum enrichment process works... and yet this is all brushed off, and the company is called a no-brainer at a $200m valuation pre-revenue? Seems a wild thing to put other people's money into.”
Good, mature investors enjoy having their views challenged. There is nothing I would like more than to have people leave intelligent comments disagreeing with me on my posts. And yet both here and there, you seem to have instead taken it personally.