In this episode of Industry Focus: Wildcard, Nick Sciple chats with Motley Fool analysts Emily Flippen and Dylan Lewis about how people around the world are adapting to living in quarantine. Discover how the pandemic is bringing changes in government policies, work-at-home culture, shopping, homebuying and much more.
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This video was recorded on May 13, 2020.
Nick Sciple: Welcome to Industry Focus. I'm your host Nick Sciple. All our lives have changed over the last few months, as people around the world have adapted to living in quarantine or shopping online, having Zoom happy hours and streaming TV more than ever before, if you can believe that. How many of these changes are permanent and how many are just temporary adaptations to endure this pandemic, though, that'll be our topic for today.
Joining me to break it down are my fellow Industry Focus hosts Emily Flippen and Dylan Lewis. Welcome to the show, guys.
Dylan Lewis: [laughs] Hey, Nick.
Emily Flippen: Hey!
Sciple: Yeah, we were just talking, before we hopped on, I haven't seen you all since before all this craziness hit, both of you were on worldly adventures away from the office before everything got shut down. So, how have you all's lives changed since this whole thing began? Emily, you go first.
Flippen: Yeah, it's definitely taken a hit, I will say. I left a very perfectly normal world, I mean, admittedly there is this weird virus in China. And then left to climb Mount Kilimanjaro for two weeks or so. I got off the mountain and the first piece of news I had was every flight from Europe, which is where I was connecting back from, had been theoretically canceled, nobody was getting back into the states. So, there was a day or two of panic there, but I did make it back and things have not been the same since.
Lewis: Yeah. And, kind of, on the same note, I mean, I haven't been to Fool HQ since late-February, because I left, I think it was February 29th, maybe, that I left to go to the Grand Canyon for a three-week rafting trip. And I came out of the Grand Canyon and there was no office to return to, we were at, you know, stay-at-home orders and we were doing our best -- I think we were, kind of, ahead of the curve a little bit with most companies in terms of deciding to be at home. But I haven't seen my desk or my running shoes [laughs] in quite some time, because they're over there. So, certainly an adjustment coming back over here, as well.
Sciple: Right. To go from these adventures all over the country and around the world to now, to Emily's point, flights grounded. Things have changed really quickly and that's what we're going to talk about today. So, I asked you all to bring three examples of one thing that we think is going to permanently change, one thing that we think was already going to change that COVID-19 has accelerated, and then one thing that's going to go back to normal. And we're going to break down, discuss all those today.
First, let's start off with something we think will permanently change as a result of COVID-19. So, something that wasn't going to happen, but because this pandemic has taken place, the world has changed permanently as a result. So, Dylan, I'll let you go first on this one. What do you think has changed the world as a result of COVID-19?
Lewis: So, I think something that will change as a result of this, this is how I interpreted your question for this one, Nick, is that, the U.S. might decide to reemphasize some of the critical manufacturing that is a part of this response. And this is probably my hottest take of the takes that [laughs] I'm going to throw out there.
But, you know, we've seen over the last two decades, really, a lot of offshoring or sending work, especially stuff that is written and can be pretty easily done overseas. We've seen a lot of manufacturing stuff wind up going overseas. And I think that what we have seen over the last couple of months is that, there are probably some things that, as a matter of national security, probably need to be here. And we need to be able to manage a certain stockpile of things, like, ventilators, like, masks, like, all these healthcare pieces of equipment. And I could see a strong case for the government deciding that to encourage that it might be worth subsidizing some of those industries and operations.
Sciple: Absolutely. I think this week, we've seen discussions from the administration about how we can get semiconductor manufacturing coming to the U.S. A lot of that is domiciled in Taiwan, maybe some of it in China as well, and that's an important infrastructure for us as a country. And this is a trend, you know, we've seen some pushing toward, maybe bringing more manufacturing home.
But when you see the supply chains of a lot of these industries really break as a result of this pandemic, you know, it really ups that emphasis that was already, kind of, bubbling up.
Lewis: Yeah, and, I mean, there's some precedent for this too, like, we tend to think of the U.S. as being a place of free markets winning out, and that's not entirely true, and there are certain industries that we've decided are too critically important to the country for our own self-reliance that we are willing to subsidize them. And the easiest one that you can point to is farming. And for the most part, most Americans have grown up with the government subsidizing farming in one way or the other. And that was largely in response to the Great Depression and it was part of the new deal that was put forth, and pretty much ever since then there has been some government subsidy going to farming industries.
And it is not a small amount of money. You know, if you go to 2019, it was over $20 billion and a big chunk of that is related to trade war issues and some farm payments that are up related to trade-related aid, about $10 billion, I think, maybe $14 billion in 2019 was related to that. But my point is, there are certain industries that we've decided we're willing to protect and make sure that even if the pure economics of it don't make sense to have here, it still makes sense to be on American soil. I would not be shocked if we do something like that.
There are a lot of manufacturing operations that enjoy municipal and state tax subsidies, and so that's, kind of, where they wind up collecting a lot of the government benefit. But, you know, we could also see something down the road where we decide actual payments make sense as well.
Sciple: Yeah. I'd agree with that. Emily, do you have any thoughts on supply chain shifting or you're going to move on to your pick here?
Flippen: I mean, I want to move on to my pick, of course, but I think it's worthwhile noting that Dylan said that that's a hot take. I'm not sure if that is such a -- I mean it's a great take, but I'm not sure if it's so hot, as in to say that it's controversial.
You know, China has nationalized a lot of industries: telecom, utilities, communications, energy, all of these industries that they determined it's important to have very little international reliance for, just to maintain their own supply systems. And, yes, so many companies based out of the U.S. have had their supply chains broken because we are heavily reliant upon other countries. Now, that's not to say that's a bad thing. I mean, globalization has a lot of great benefits that go with it as well, but it does make, in extreme circumstances like a global pandemic, that much harder for these companies.
I think the easy answer for what will permanently change, is one that everyone is already thinking about, which is, remote-work. I mean, that has already started to happen. I see a lot of companies probably moving to a permanent shift in their workforce, but if that were to happen, that's not my hot take, I have my own hot take, Dylan. [laughs] If that were to happen, I think, there's a very real possibility that we see a permanent impact on the pet markets. People working from home are more likely to have pets, take care of their pets, spend more money on their pets. And this is a shift that I don't think was happening. I mean, people tend to spend money on pets regardless. But I think if this pandemic causes companies that were not permanently remote-work to become permanently remote-work. I mean, raise your hands here if you're getting a dog if you never have to go into an office again. I know, I'm probably on that list.
Sciple: No, I agree with that completely. Actually, the reason I got my dog when I did is because I knew I wouldn't have time to take care of a new puppy, so I got it when I was in law school, because I knew I wouldn't have time when I got into the workforce. I don't know if you've seen some of the anecdotes coming out around pet ownership trends during the pandemic, but there's been a massive upswing in adoptions of pets. There was one story in Bloomberg, I believe, where the pet adoption centers in New York City had literally run out of pets available to adopt because there had been so much demand for folks looking for a companion that sort of thing during the pandemic.
I agree with that completely, there's definitely been a step change increase in pet interest in the past month or so, just in my internal friend group and then you see these big macro stories as well.
Flippen: Yeah, it's always a minor concern there, because you'll see it during the holidays as well where animal shelters run out of pets because they're given as gifts to people who think that they want them, and then long-term, they don't have the ability to take care of them. And it will be concerning if people start to return pets if they were to return to a normal work/life balance or work/life shift where they're working out of an office permanently, but hopefully, people who take on the responsibility of pets either can meet those responsibilities or are maybe part of this group of people that are suddenly home way more often than they were before.
Sciple: Oh, yeah, exactly. It's a relationship, it's a commitment, it's like marrying somebody, you know, you're with them for life, for richer or for poorer, sickness and in health, all those sorts of things.
So, for my pick, I just want to say from a high-level, any time a group of people have a shared experience, you're going to be changed forever. And I think all of us worldwide at the exact same time being on quarantine, locked inside together, there's going to be a lot of ephemeral changes that we can't identify. I think one change that we for sure I can identify, though, is I think people are going to wash their hands a lot more.
When everyone around the world, every time they turn on the TV for the past six weeks, two months here is, you need to wash your hands, you need to isolate, don't touch your face, all those sorts of things. I think those behaviors really get pounded in.
I pulled a YouGov poll from January 20th, 2020, so this was right when things were starting to ramp up, and it was asking, how often, if ever, do you wash your hands with soap after going to the restroom at home. 58% of people said always. And the other, whatever it is, 42% of people don't wash their hands all the time. I would imagine if you ran that poll again today, you're looking at +90% of people washing their hands all the time. And, you know, that sounds pretty trite and trivial.
If you look at some stats on this, we're going to get sick a lot less as a result. So, I think 80% of common infections are spread by hands. If you look at some CDC data, if you increase handwashing of soap and water you can reduce death from diarrheal associated diseases by up to 50%, and reduce absenteeism in schools from gastrointestinal illnesses in school children. Lots of trickle down affects you would never think about from just simply everyone in the world, at the same time, getting pounded into your head how important it is to wash our hands. And so, I think that's a change that really is going to be lasting, because if you're six or 60, you've gotten this message, and everyone is going to have that pounded in.
And so, I think, for at least this generation of people, there's going to be a really increased focus on washing your hands, and I think there's going to be some trickle down effects from the health perspective, even beyond COVID.
Lewis: Nick, are you long soap?
Sciple: No, I'm not long soap, but [laughs] I think it'll probably get used more, that's for sure.
Lewis: It's hard to argue that that's not a good thing, you know. Like, if we can look for silver linings in all of this and the COVID episode that we're dealing with, I think that that's something where it's generally better for people to be washing their hands.
Sciple: Yeah. So, I think that that's one change I think we'll see. I think if you look back to 1919, we saw some significant changes coming out of that pandemic as governments really stood up a lot of healthcare infrastructure, maybe we'll see some of that now. There's been a lot of pushes in the political realm to kind of change how we treat our healthcare industry. I think that's possible; we shall see.
Okay. On the back-half of the show, we're going to talk about some trends that are accelerating because of COVID-19 and some things we think are just going to go right back to normal when all of this comes to an end.
Okay. So, the next topic we're going to discuss is a trend that was already going to happen that got accelerated by COVID-19. Dylan went first the last time, so, Emily, we'll let you go first this time around.
Flippen: That's great, because I was a little bit afraid Dylan might steal mine, although, it's out there, so I don't know why that fear was in my head. I think that we've seen for a couple of years now, at a minimum, a trend toward online real estate, right.
And online real estate is kind of a fluffy term. Essentially people using more digital tools during the process of buying/selling homes. So, companies like Redfin, like Zillow, have launched their own iBuying programs. So, while they're taking ownership of the home, it's really aiming to simplify the purchase process for consumers who are buying or selling their own homes.
And it's been controversial, I myself was a bit of a skeptic. But it's needless to say that the real estate market as it exists today is not very friendly to buyers or sellers. And it's an industry that's ripe for disruption. And when you have a global pandemic, like we're seeing today, I mean, all in-person tours, for the most part in the heavily hit areas, have completely stopped. And while Redfin and Zillow have largely stopped any new purchases under their iBuying programs, a lot of the properties they own and real estate agents have instituted virtual tours, virtual purchasing. I mean, ways to write up mortgage contracts that don't require fax machines or in-person signatures or notaries. I mean, this is an entire outdated process that I think during this pandemic is being accelerated and it's moved to the online medium. And I think there's a very realistic world in the relatively near future in which you can buy and sell a home completely online.
Now, not to say you would necessarily want to, especially not if you are a purchaser, if you haven't seen the property but you should be able to, if that is your choice, and it should be relatively easy for you to do so. So, we're not quite there yet, but I think if anything, this pandemic is showing us that if something can be done digitally, if something can be done without face-to-face person interaction, that extra time, that extra effort, then it should be.
Sciple: Yeah, maybe I can hop in on this one, because mine rhymes with this very closely. And share all the other points on Redfin, although, I may be a little bit more skeptical on the iBuying side of the business. But I do think, as you mentioned in the first part of the show, an increased trend toward remote-work, and I think that's going to accelerate a trend toward more people moving away from cities, right, if you're stuck in your apartment.
So, the example I think of is, say, you're someone who works at Google [Alphabet] in San Francisco, where housing is very expensive and where people are very well-paid based on their skills. So, say, you make $100,000 in San Francisco, and because of the cost of living there, you're in a two-bedroom apartment with three other roommates. That's a realistic picture of how someone might live there. Now, before this pandemic took place, you worked at Google, you got free meals brought to you every day, you got all these great amenities at your workplace. And so, you didn't mind living in kind of crowded conditions.
Well, after two months or longer -- I mean, Google has canceled a lot of their events even further out than a lot of other companies -- you're living in those conditions and a company offers you the ability to work remotely and move to Columbus, Ohio and live in a three-bedroom house, say, or Birmingham, Alabama or Nashville, Tennessee or any one of these places.
Given that, you know, Twitter just announced this week they're going to allow folks to permanently work from home. I think there's going to be a massive move of folks out of cities, at least, the white-collar workers who can work remotely into more rural areas where they can get more space, that sort of thing.
And this as well something that we've been waiting for, this increase in homeownership among millennials, rates have been trailing where they were in previous generations. We've seen since 2008 homeownership rates in a downtrend, they've been starting to trend up since 2016. I really think that accelerates with this increase in work from home. And that plays right into Redfin's advantage as a national brokerage with primarily online focus, all those things that Emily mentioned earlier.
And so, when you're looking at first-time home buyers moving far away from where they're currently at into these distant areas, that plays into Redfin's advantage as a national brokerage as well as its "online first" presence. Because if you look at National Association of Realtors data, there's two primary ways that homebuyers find a real estate agent, it's either through a referral, someone that they've already done a transaction with before, or it's online. Well, a lot of these folks are first-time homebuyers, so they're probably not going to get a referral. And Redfin is the No. 1 most-visited online brokerage website.
So, I think a lot of these trends play into a company, like Redfin, as folks move more rural. So, that's my trend, I think folks are going to be more away from cities, particular, white-collar folks.
Alright, I talked for a long time, so, Dylan, I'll let you in now.
Lewis: I've got the peril of going last here, because you both managed to, kind of, touch on something that I was going to talk about, and prepared two different thoughts for this one, and you guys, kind of, both -- to put some more numbers to the remote-work element of this. So, prior to COVID, in 2020, five million employees, so just under 4% of the entire U.S. workforce worked-from-home for at least half the time. I have to imagine that that number is going to go up.
And you mentioned the news that Twitter was going to be allowing people that were in a position to do so, to basically work-from-home forever, so long as it doesn't disrupt their ability to get things done. I think, in the same way that we saw all these perks that Google laid out there for employees, saying, you don't need to leave, we're going to give you these wonderful meals, we're going to take care of transportation all that kind of stuff, the ability to work from home is very quickly becoming a perk and a hiring advantage for a lot of companies. And so, I think you're going to see that more and more.
The reality is, for companies, I mean, that's just a benefit. You know, it's less office space that they need to rent and it means that they're able to be far more versatile and far more dynamic.
And that actually leads me to the second point that I was [laughs] going to make about things that I think are going to change; and Emily touched on this too. But I think that this really highlights the advantages that digital businesses have.
The disruption in the supply chain that we've seen with anything that involves a physical product, whether it's retail, groceries, what have you, are totally sidestepped by companies that are able to digitally deliver their products. And there was already a bit of a gap, you can call it, I guess, a wealth gap between these types of companies and the valuations that they deserve.
And these digital companies very often enjoyed benefits of scale, benefits of higher margin. And now we are seeing that they have more resilient businesses when there is a pandemic going on. And I think that it just highlights their strengths.
Sciple: So, one thing that I've thought about, and I don't have a correct answer for this, but I think it's something that we can discuss for a little bit, is this move more to remote-work, how does this change dynamics around, you know, companies locating in Silicon Valley for access to talent or New York City or any of these places? So, they can have access to these labor pools which drives up property values, that sort of thing, as companies locating in states that maybe don't have ideal tax advantages for them.
How do you think this shift to online work changes that whole calculus of where you locate your business, how you go about recruiting workers, comp structure? I mean, you pay folks more instead of paying for this HQ? I mean, all those factors -- any ideas on how that changes the world?
Lewis: I mean, I think it lets businesses be more creative. You know, you can kind of structure payments a lot of different ways, but if you're not paying for someone to physically be in headquarters or a company office or something like that, you can probably pay a little bit better in terms of salary. I think that the bargain that a lot of workers have probably been dealing with for the last couple of years is, more flexible work-from-home but possibly taking a little bit of a hit on pay because of that. And that might be something that changes, because there are cost savings that those employers can then pass along to workers.
Flippen: I think you can think about it in the context of what we do here at The Motley Fool. So, we're filming this podcast where we're communicating with each other over Zoom, taping it and then sending it out, and it's very similar to the product that we would create if we were in an office. Now, this makes it a little bit different because we have studio equipment and such. But I think for the majority of the workers at a company like The Motley Fool, they effectively do their job whether they're doing it from our office or at home, preferences aside.
So, if we were in a situation where -- you know, I think, Twitter recently came out and said everybody can work remotely. If Tom Gardner were to come to us and said, OK, if you want to come in, come in, we have floating desks, but if you don't want to, stay at home. You can probably look at yourself and look at your coworkers and ask yourself, how many people would leave -- I mean, we live in Maryland, Virginia, DC -- high-tax states to states that maybe have no income tax, who do their work remotely. It raises a lot of questions about culture, about the legal consequences and about how communication among your coworkers changes.
But throughout this all COVID-19 has been, at a minimum, a really interesting scenario that we've played out for what has been a couple of months now about what life like that could look like for workers across America.
Sciple: Right. I mean, there's this question of, as everyone has had this experience of remote-work, and there was already rising demand for this, one of these barriers has been regulatory. Is it becoming a point where there's so much demand among the electorate that, you know, you have to open up some of those barriers, we don't know? But this is a factor that's changed because before, many people wouldn't have had the opportunity to even try working from home.
Lewis: Yeah. And I think it also creates a lot of interesting [laughs] state boundary line questions as well. You know, there are some excellent, excellent explorations of what companies do with tax benefits they are given and what they decide to do after those tax benefits expire. And very often it's, look around, see where they can get better tax benefits and move their offices.
And if you're put in a position where you have a lot of workers that can live anywhere, [laughs] they're probably going to go to places that don't have income tax. And that's going to create some major budgetary issues for states. And so long as there's varying state tax policy, I think that that's going to be something people are going to think about.
Sciple: Yeah, I think that's a great point. If you're going to forecast an exodus of people from Silicon Valley, which is one of the most high-income areas in the whole state of California, and California is a very high tax state, that changes some calculus in what the state is going to do too. A lot of potential things that can change.
And that's what's so funny about all this, is like, there's one thing changing, and there are so many second- and third order effects and how does this impact things all over the place. And you know, we as investors, part of our job is to try to predict the future, where things are going to go? And now more than ever, it's pretty complicated to try to figure that out, so it's fun to discuss this little bit.
Alright, let's move to our third topic which is, what is a change that was caused by COVID that we think will return to "normal," whatever new normal is, after this. So, we'll go back to, Emily, I'll let you go first on this one. What you got?
Flippen: I think, I might have a contrary opinion here, you'll notice that I was remarkably silent when you were talking about handwashing, Nick. And that's because the topic that I had planned was actually the caution.
I expect the caution that many people are acting with today to largely go away once this pandemic, once you have a vaccine, once it's largely moved on, similar to the way that the Spanish Flu caused a lot of panic about influenza. And nowadays people still don't wash their hands after they go to the bathroom, even though they could catch the flu. Not to say coronavirus is like the flu, but it is to say that I think when people tend to up their caution because of whatever is happening in the media, whatever is happening in the world at a certain time, it makes them very scared. And the moment they stop hearing about it, the moment they're stopped affected by, you know, at least on a personal basis, they revert right back to what's normal, they revert right back to what's comfortable.
So, I think it's very likely that the caution we've seen people express, whether it's about washing their hands, whether it's about big events, whether it's about travel. I think people go back to living those same ways, right. I think people will still go to events a year from now, even if there is that increased risk, even if they shouldn't, I think people will still want to do that. And I think people will still be, you know, be silly, let's say it that way, [laughs] and not wash their hands in situations in which they should, because people go back to what's normal, they revert to a median. And I think a median for a lot of people is, you know, unsanitary and comfortable.
Sciple: Okay. So, along the lines of unsanitary, comfortable, returning back to normal. Sorry, for anybody I might offend with this one. I think the big, I guess, measuring point for me returning back to normal is when you get on a cruise ship. Because that was obviously where one of these things really started. They've been kind of Petri dish. How quickly do you think people will return to cruise ships, Emily?
Flippen: I think people will return to cruise ships by next year; I really do. And I know that's a controversial opinion. I know a lot of people think that people are going to avoid cruises, they're going to avoid concerts, Coachella-like events. But I think that once people believe that it's safe, they will move back really quickly. I mean, anecdotally I have friends who are booking tickets to Disney for, like, October this year under the expectation that, yeah, we'll be able to go back and gather in large groups of people.
And cruise ships might take a little bit longer, [laughs] because, again, they were such an issue during this pandemic. But I think that these cruises will have great media events where they're cleaning the ships, promising safety, and I think people will come back with great deals, yeah.
Lewis: Emily, to your point, I mean, frequent Industry Focus contributor, Dan Kline, is chomping at the bit to get back on a cruise ship. [laughs]
Flippen: Yeah. And maybe my opinion is biased, because I talk with Dan so often. [laughs]
Lewis: Yeah, but I think you're right, I think there are a lot of people that will do whatever, kind of, systemic changes need to happen. And on a personal level, you know, those are the changes that are harder. You know, if you think back to the bubonic plague, we were doing things as a society that wasn't particularly great, we had human waste in the streets and that led to a lot of problems. As a system deciding that we shouldn't do that was not something that people really had to make an individual decision on, that was a top-down decision. And I think when those types of things are pushed on people, they lead to better overall behaviors, but if you're asking people to make a routine decision, it's really hard for those to stick.
Sciple: Yeah, it's going to be tough for me to get back on a cruise ship. Actually, I've never been on one, but I really wanted to go on one before all this craziness happened.
I do think people are going to do a lot more camping and things like that. I think there was already a little bit of a trendy, hipster vibe to camping and doing that sort of thing. I think that trend will probably get some more juice added to it. But I don't know, I don't know about cruise ships, I don't know, I can't get there.
Lewis: [laughs] The thing that I, kind of, look at and I'm kind of interested in; and this is something that I really hope it changes, I don't think it's going to change, I think it's going to snap right back, kind of, on a similar note to Emily, instead of physical wellness, this is going to be financial wellness. And I think that a lot of people, either because they aren't currently working or because there's uncertainty, have really ramped down their consumer spend, which totally makes sense. I think that as things start to open up and people are employed again, we're going to see that go up.
And, again, if there's a silver lining to these types of situations, it's that, it's a really good time to check in on what is truly necessary versus the things that we convince ourselves are necessary in our lives.
And, you know, we went through the Great Recession just about a decade ago and what we saw shortly after that was a reduction in the amount of consumer debt that was out there, a reduction in monthly spend, you can look at a bunch of different datasets and the number will differ slightly, but the reality is, we saw a dip and then we saw an uptick again over the last seven or eight years. And there are a lot of people living in debt, there are a lot of people that are living slightly beyond their means.
And the personal finance part if me is like, [laughs] maybe this is a moment for people to check in on some of that stuff and rein in spending and live a little bit more conservatively so that they aren't getting themselves into trouble. That said, we've seen this story before and people haven't necessarily changed behaviors.
Sciple: Yeah, it's tough, people backslide, it's difficult. I do think, like, there are things that have changed on the margins since 2008, don't you think? I think like, our generation, the millennial generation has a little bit less credit card debt than the previous generation, but it just got replaced by a boatload of student debt that we couldn't get away from. It's tough.
Lewis: It is. And I mean, we've seen the spend change too, it's been less material, it's been much more experiential, you know, to your point about camping. And then that kind of plays on the idea of people wanting to go to concerts and do things rather than own material possessions. But the problem is that debt is so darn easy. You know, people are so willing to extend it to you. I know, I just bought a house and I was shocked at how simple it was to go through the process. And they're very happy to give you that money, because they know that it locks you into payments.
And I hope that people can take this opportunity to look and be a little bit more critical of where their money is going. I think that that could be a small good outcome that comes from all this.
Sciple: Okay, so along the lines of people going back to their old habits and things snapping back to normal. I think alcohol and weed sales are going to go back to their normal growth rates. So, if you look at, you know, in the recent months, online alcohol sales were up 250% year-over-year. If you look at Nielsen's weekly retail sales of alcoholic beverages, if you look at the weekly numbers, they're up anywhere from 25% to 55% over the past recent weeks. You've got people drinking quarantinees on social media. So, you know, it's taken things over.
And at that same time, if you look at off-premise alcohol sales, bars, breweries and restaurants, down 67% to 75% throughout the month of April. Similarly, if you look at pot sales in Oregon, Michigan, California, these states have seen rapid increases in sales. Suspiciously during the week of April 13th to 19th, they really spiked during that period of time.
So, clearly, I think a lot of this is folk stocking up on their mind-altering substance of choice to partake in, while they're stuck inside. I think a lot of this is folks stocking up. So, these are sales that were accelerated more so than, you know, some step-change increase.
And I do expect people to start going back to bars, restaurants, breweries as those opportunities are opened up. I think if restaurants are allowed to be half-full, they're probably going to be full to capacity as soon as they're allowed to open back up. So, I do think those shifts in sales of alcohol and marijuana over the past six weeks or so aren't some material up-change in how we consume, they're just accelerations of what we've done before. Which isn't that surprising.
I'm not way out on a limb here with this pick, but I don't know, Emily, what are your thoughts on what's going on with pot during all this craziness, I know you follow that pretty closely.
Flippen: Yeah. Honestly, cannabis is a little bit harder to track the trends for, because it has legal -- and for the very first year in so many states, right? So, it's a harder thing to track trends over time. I totally agree with your analysis, though, that we, for both alcohol and cannabis, have seen stockpiling, especially in the cannabis sector. I mean, if you listen to a lot of these companies when they report earnings, they had a pretty decent quarter last quarter, actually. Because it, you know, suspiciously ends right there, you know. When everybody was stockpiling, I think, for the next quarter, that's when you're going to start seeing the real impacts of this.
But I want to push back on you, Nick; not that I disagree with your premise, because I do agree. But it got me thinking. Let's say that a lot of companies start permanently working from home. People who are working from home now, stay working from home, do you think that the new normal for alcohol sales in particular -- again, pot is a little harder to talk about -- but alcohol sales, in general, do you think that, that new normal actually increases or do you think it stays the same as it was before?
Sciple: So, are people going to be drinking at work, because they can get away with it? [laughs]
Flippen: Maybe or maybe they just spend more time at home, so you're more likely to have a drink when you come home as opposed to going out to a bar with your coworkers after work, that sort of thing.
Sciple: I tend to think, from my personal experience, if I worked from home all the time and never came into an office, I'd probably do more happy hours, because it gives you that socialization with coworkers and that casual conversation that you would get around the water cooler. I don't think I would drink more at home, I generally don't drink much at home already, but I think I would probably do more happy hours than I currently do. I don't know. What you think, Dylan?
Lewis: I think, short-term, you know in the immediate aftermath where you have businesses opening and people with some degree of confidence that they can go outside and be healthy and safe. I think there is going to be a lot of local support for businesses. And I think that people are going to want to do what they can to prop up the mom-and-pop shops they love so much, because those are really the people that have been probably hit the hardest by most of this stuff. It's a lot harder for smaller companies and businesses to get access to capital. They don't have public shareholders that are willing to give them money. And so, it's a little bit different.
Beyond that surge though, yeah, I think it's an interesting point. The element of this that I think is the most fascinating, is you mentioned the delivery side of alcohol. And what the last couple of months have highlighted is, how important meal delivery and alcohol delivery, you can lump that in there too, can be for a lot of these businesses. But also, how brutally uneconomical those businesses are. And how terrible they are financially even while they are totally screwing over restaurants.
[laughs] I've talked about this a lot on the tech show, but, you know, Grubhub as a business does a lot of things that are not particularly great for the restaurants that they work with. And they've been written up time and time again, they're kind of one of those companies that keep stepping in it with some of the things that they do.
And restaurants are not particularly high margin business to begin with. And so, you have companies that aren't making a lot of money, they're often mom-and-pop shops and you have publicly traded companies that are specializing in meal delivery that are also not making money. And I wonder, you know, we've seen how important this thing is when we can't go outside, but also, who makes money in this and do people keep using them after the need for them wears out?
Sciple: Yeah, I think that's a perfect point. That was, kind of, the counter-fact for what I was going to bring up to these changes in alcohol sales. If people are consuming less at home and going more out to on-premise than as a result this uptick that we've seen in food delivery, should come back down.
I think to another of your points, we've seen this big upswing as people have become more and more aware of some of those practices and how it's difficult for the restaurants they really love and are trying to support to make money. And some of these relationships of restaurants going to other platforms, standing up their own, kind of, ordering, that sort of thing.
Well, I think the big winner of this, kind of, uptick in food delivery might be somebody like Square or PayPal, the people that are actually going to process payments on these white label apps that restaurants are coming up with themselves more so than the food delivery networks, which I agree with you completely, Dylan, are just fundamentally uneconomic.
You know, you look at the problems of ride-hailing, well, they're even tougher when you put it into the food delivery area, because you're baking and waiting for the food, you're baking and going to the restaurant and then coming back to the person you're delivering to, versus just going straight to your destination after you pick somebody up. And because of that, there's fewer food deliveries you can make in an hour than even ride-hail rides you could give, and then you layer on top that you're skimming margins from restaurants that are struggling to make it by already.
I'm really skeptical of this business. I know this week there was news that came out that Uber is trying to buy Grubhub. I still don't think fundamentally that those businesses are going to be profitable even with increased consolidation, but we'll see, if you get to monopoly, you know, anybody can be profitable.
Lewis: Yeah, I mean, when you see consolidation, usually that means that they're going to realize some cost synergies by combining departments and reducing headcount. I think that the PR departments for both of those companies are probably going to stay, as staff as they currently are, [laughs] because they deal with a lot of negative press, and somewhat deservedly so.
And, yeah, I mean, that's a tough nut to crack. I don't envy them for trying to figure that out, because to pay someone a living wage and have it make sense for them to run to a store and do a delivery on behalf of somebody else, it either is something that you have to pass along to the customers and it's, you know, $5 or $8, which is a lot to add to a delivery order, or its profit that you just have to eat and decide that you're going to make it up on market share at some point down the road. And right now, it's not really working either way.
Sciple: Right. You're either going to lose a whole bunch of money and have a big TAM or going to have a very small TAM and be profitable. Those seem to be, kind of, the two levers you can push on.
Alright, so as we've discussed a lot of things that are going to change or stay the same during coronavirus. You know, all of us are hopeful to get out of our homes and go back to some semblance of normal here pretty soon. What is the first thing that you all want to do, the first thing they say it's safe and you can go back out and return to your day-to-day lives? Dylan?
Lewis: Oh, boy! You know, that's interesting, Nick. I mean, I feel guilty when I walk around Washington DC right now. Like, I'll do it with a mask on, but I love walking around the city, it's one of my favorite things to do, especially now during the Spring time when everything is blooming and, you know, the city is so green.
There's a park in DC, Meridian Hill Park, it is one of my favorite spots in the city. And I think I would love to go for, like, a couple hours and have a picnic out with friends. I think that is, like, top of my list for things to do.
Flippen: That's so wholesome. Oh, my gosh! That makes what I'm about to say very sad. Not to say that this would be the first thing that I do, but one thing I really hope I can do this year is -- I love, my favorite thing to do with my friends, every year we go to the renaissance fair, and it's the worst place to be during a pandemic because it's full of hot sweaty people breathing on each other and, you know, eating food basically off the floor. But it's a fun experience, I look forward to it every year. So, I'm just hopeful that I can do that in 2020.
Lewis: Nick, what about you, what's the plan?
Sciple: Yeah. So, I think the very first thing would be, go get, you know, a great steak dinner or something like that, go out to a great restaurant, get some good food. I think, along the lines of, kind of, more special events. I've got a bunch of friends that are planning to get married this Summer, they've had to reschedule their weddings that sort of thing.
I know it's always fun whenever all your college friends come together to celebrate somebody's wedding. And so, I'm looking forward to that. It's always great when that happens, but after a long period of time, getting stuck inside, not being able to socialize with folks, that's something I'd really be looking forward to. We'll break it down on the dance floor, you know, that sort of thing.
Lewis: [laughs] Yeah. I mean, you got to get ready for the electric slide, you got to practice. You know, those dance moves, they rust, if you don't use them.
Sciple: Yeah. The shout, man, and sitting here working at home, I got to get my knees ready to go to do the shout.
Lewis: You can watch Wedding Crashers to amp yourself up. [laughs]
Sciple: There we go. Alright, you all, thanks so much for hopping on the show, always great to have the Industry Focus team together in one place.
Lewis: Yeah. I feel like JaMo missed out, you know, like he put it out there whether we wanted to hop on for this one. I mean, we had a great time without him. [laughs]
Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear.
Thanks to Austin Morgan for making us all sound so nice. For Dylan Lewis and Emily Flippen, I'm Nick Sciple, thanks for listening and Fool on!