Another Dream of Californication

Source: Supplemental Nutrition Assistance Program, Census

When we are on the road for research trips, we usually try to check the economic pulse. Last week, Shinya spent a week in San Francisco to attend an annual investor’s meeting of our managers. As a tech-savvy business traveler, we frequently use AirBnB which offers more than 50% discount to equivalent hotel prices (even after the additional state tax!). Shinya stayed at one of the Airbnb apartments in The Mission and explored the neighborhood. Over the last few years, Shinya noticed a worrying increase in the number of ‘bums’ (a colloquial term for the homeless). Interestingly, San Francisco’s unemployment rate is among the lowest for the U.S. major cities. After peaking at 9.2% in June 2009, the city now enjoys a 3.2% unemployment rate as of September 2016. Quite strangely, during the same time period, the number of households receiving food stamps (officially known as the Supplemental Nutrition Assistance Program) increased from 1 million in 2008 to 2 million in 2016. Today, 16.3% of households in California receive governmental nutrition assistance—almost twice the 8.1% figure in December 2008. As we know it, the most-cited unemployment statistic is based on surveying and estimates, and thus conveniently excludes those who have ceased seeking jobs. The figure tracking those on food stamps, however, is more immune to this sort of self-selection.

Observing many ordering a venti Frappuccino but perhaps had not taken a bath for weeks, Shinya felt something is wrong—although he was not sure if it was the unemployment rate or the food stamp system.

Shinya also visited a nearby Whole Foods store to check the inventory of Just Mayo. This is a synthetic mayonnaise designed and manufactured by Hampton Creek. We reviewed the initial origination of the brand in which Hampton Creek raised capital from various prominent investors. As part of the due diligence almost two years ago, Shinya visited the Whole Foods store in Noe Valley in San Francisco and found there were only a few Just Mayo jars on a shelf although he thought he could see shelves after shelves filled with Just Mayo labels but with different products in their place. So we decided to pass on the opportunity then. This year, we found a several interesting stories on Bloomberg, covering Hampton Creek’s very unique sales promotion strategy. Read: How Hampton Creek Sold Silicon Valley on A Fake-Mayo Miracle.

Just Mayo drew a lot of investors’ attention because of the unexpected shortage of eggs in 2014-2015, partly due to the bird flu in Midwest (egg is a major ingredient for mayonnaise). According to the U.S. Bureau of Labor Statistics, the egg price increased almost 50% from 2009 to 2015, however, thanks to the increased production, it fell more than 30% since the beginning of this year. Some report shows that the egg price fell as much as 75%.

Source: U.S. Bureau of Labor Statistics

We were not sure about the accuracy of the articles, so Shinya visited another Whole Foods store at a different location this weekend. Here again, he couldn’t find a single product of Just Mayo. Well, it was just another Dream of Californication…

Another Dream of Californication

Source: Star Magnolia Capital, taken around 8pm on Thursday, October 20th

Califonication (2000)

is the Red Hot Chili Peppers' fourth single and sixth track from their 1999 seventh studio album, Californication. Released as a single in 2000, the song reached number 69 on the Billboard Hot 100 in the US, number 16 on the UK Singles Chart, and hit number 1 on both the US Mainstream Rock Tracks for 2 weeks and US Modern Rock Tracks for 1 week. "Californication" has remained one of the band's most popular and most performed live songs appearing in almost every setlist since its live debut making it the band's third most performed song with over 500 performances. (Source: Wikipedia)