Mixue Group's Splashy Debut, Kroger's Change, Stuffed Crust Pizza, and Med Spas

In this podcast, Motley Fool analyst Bill Barker and host Dylan Lewis discuss:

• Mixue Group's splashy debut on the Hong Kong stock exchange, and how the boba tea chain stacks up to Starbucks and McDonald's.
• Rodney McMullen's departure from Kroger and what's next for the nation's largest grocery chain.
• Domino's finally delivering what the people want: stuffed crust pizza.

Have you seen a med spa in your neighborhood? Motley Fool host Mary Long caught up with Motley Fool analyst Nick Sciple to find out why this industry is booming and one company that's selling a few products that can help you look a little younger.

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A full transcript follows the video.

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This video was recorded on March 03, 2025

Dylan Lewis: We're talking boba, groceries, and stuffed crust pizza. Motley Fool Money starts now. I'm Dylan Lewis, and I'm joined over the airwaves by Motley Fool analyst, Bill Barker. Bill, thanks for joining me today.

Bill Barker: Thanks for having me.

Dylan Lewis: We are all food all the time on today's show. Those are the most fun shows that we get to do. We can talk about financials, we can talk about insurance, but it's most fun when we can really visualize what we're getting into on the show. A lot of stories in that zone today. First one up might be a fun one because it gets us outside the US. There is a new fresh name on the Hong Kong Stock Exchange, Mixue. You might see it spelled M-I-X-U-E in headlines. It's a tea and ice cream fast food chain in China. Bill, I don't know about you, but my eyebrow went up when I saw the headline from CNN. This boba chain you've never heard of has more outlets than McDonald's.

Bill Barker: Yes, that is the headline. The other alternative to that headline is it's got more outlets than Starbucks, which is not really possible. What else do we know about it? It's got a snowman thing going on there. They play their theme on a loop in the stores, apparently. I don't know how that works. But this is a very large in terms of number of outlets and number of cups of boba tea and ice cream that it's serving. But it's also not really running the stores itself, it's franchising more or less everything.

Dylan Lewis: We're getting up to speed on this one because it is not in our local market here, so we're relying a lot on the reporting for this. It is known to be a budget friendly chain in China. The promise for customers is you can eat and drink well for about two bucks. They are a competitive, very value-oriented chain. They lean very heavily on the franchise model as you mentioned. We have seen that be very successful for a lot of companies. It's interesting to invoke McDonald's in a comparison because that is a model that they've harnessed. I think 90% plus of their locations are franchises, and they've been able to grow very as a result of that. It's a little bit of a different approach, and I think what I worry about when I see so much reliance on the franchise model is, what is the experience like store to store and how reliable and consistent is this growth going to be?

Bill Barker: We're not going to be able to provide any answer to that without getting on a plane and going to Tier 2 and Tier 3 cities in China, which is primarily where these locations are. As much as it has grown and it's become bigger in terms of units in McDonald's or Starbucks in far less time, it is in China, so that gives you a lot of potential customers, and it is serving a lot of those potential customers. The next place where the growth might take it is in a higher competition areas, the Tier 1 cities which are already well occupied by favorite boba tea provisioners, and that is what their next stage of growth is likely to be, as well as internationally, there, I think, 17, 18 different countries. There's lots of places still to expand, especially as you point out, for such a low cost provider.

Dylan Lewis: Are you proposing a field trip? It almost sounded like you were saying we should get on a plane together and do a little boots on the ground.

Bill Barker: I'm pretty happy to do that. I've gone on less relevant business trips in my life. Not for this company, but elsewhere, so I think that's it. Would not set a record.

Dylan Lewis: I would love a recurring segment, less relevant business trips with Bill Barker. I think that would be a fun time to explore your past lives working. Looking at the business, while the location counts are impressive and seemingly dwarf what we see with McDonald's and Starbucks, because of the value orientation and because of the markets they operate in, they are a fraction of the size of Starbucks or McDonald's when it comes to sales and when it comes to income. For as splashy a story as this is, this is still in the grand scheme of the businesses out there, not the biggest business, even in China, not the biggest debut, even, I think, on the Hong Kong stock Exchange over the last couple of years. There's a lot to have to still go right for this business to reach the size of those more internationally known competitors. I imagine that there are probably some people that are listening to us talk about this bill and saying, I've heard you talk about companies with a similar story in China before, and Luckin Coffee comes to mind, where incredible growth story, a lot of investor excitement, but a lot of investors also got that burnt coffee taste in their mouth in 2020 when the accounting scandals came out. How do you think about an opportunity like this and a company like this hitting the markets?

Bill Barker: Right now, I think it as one that is best left in the too hard pile. That is, give it a few years of audited financials that you see and then some quarterly semi annual reports. It's up 43% today on the IPO in Hong Kong, which is a sign of speculation, perhaps, but I think you're right to point out that China is not known for only providing honest businesses. I think that the assumption is this one. It's huge, it would be very difficult to get to something approaching this size without being legitimate in all manner. But hey, give it a couple of years, keep an eye on it. We can't tell you just because it's got what is 45,000 stores, that means everything about it is a good investment idea. It's grown. It's still growing. That's part, but not everything in what you want in an investment.

Dylan Lewis: I guess in some level of fairness to Luckin and the business outlook in China, there was a very rough period for that business, 90% fall in March of 2020 due to accounting issues that they were systematically overstaying the revenue and doing a lot of things behind the scenes to inflate their numbers. They have since gotten themselves right, and I think the stock is well above where they debuted. I think it's still off highs. But the opportunity is there to meet the Chinese consumer with a lot of these businesses, just a matter of whether all the other things are right for some of these companies as well.

Bill Barker: Well, and China has been a good place to be I know starting investments this year are more based on AI news that's coming out of China and then what that's done for the biggest names in the tech base in China, more so than this right now. China's economy has got issues, but so do all the economies. I think that it's good that it is expanding outside of China. That's going to be some diversification that you would want, I think, to see in this investment.

Dylan Lewis: Bringing us back over state side. Kroger CEO Rodney McMullen is stepping down from his leadership role at America's largest supermarket chain. The company's board investigated issues around personal conduct, and that led to his departure. This is an interesting one, Bill. It doesn't seem to have anything to do with what the company's reporting, how it's operating, but personal conduct, specifically. McMullen held the role of CEO for over a decade at this company. He has been at the company since the late 1970s. But conduct stuff aside. For the business, this feels like a pretty big set of shoes for someone to step in and fill.

Bill Barker: He's been there for a long time. I don't know lucky, we'll see what happens with the outcome of the lawsuits regarding the attempt to acquire Albertsons, which was, according to Albertsons, not attempted hard enough. Therefore, Kroger gets to be sued by Albertsons for the failure to get that deal closed. It was not approved by the government as antitrust issues. I think that it was a successful reign up until whatever he did because we're not getting any details that I've seen yet. Personal conduct is what is quoted in the headlines, and in fact, in quotes in the headlines. Why can't you just say he's out for personal conduct rather than he's out for "personal conduct." It just sounds that much more salacious, but we really don't know what the conduct was. It was personal, we get that.

Dylan Lewis: That's what we know.

Bill Barker: That's what we know. Maybe that's all we're entitled to know. Maybe it's not our business, what the personal conduct was because it didn't relate to Kroger. It doesn't appear to have been an inappropriate relationship with another Kroger employee or executive, but it was also treated rather quickly. This came up, I think, to the attention of Kroger's board, I don't know, week ago.

Dylan Lewis: It's possible that we may get some more commentary. We're certainly going to get some more questions about this because Kroger is set to report earnings later this week. Company management is going to be in front of analysts presenting the business. I have to imagine that this is going to be one of the topics that pops up. In the interim, Ronald Sargent, one of the company's directors, is going to be stepping in as the CEO. Kroger is in such an interesting place as a business, because you mentioned they didn't try hard enough Albertsons acquisition.

Bill Barker: I'm not saying they didn't try hard enough.

Dylan Lewis: I'm sorry. I'm quoting Albertsons here. Let me be very specific in my quotation. [laughs] They are staring at a failed acquisition. They are also now looking at losing their longtime CEO. You would think concerns abound for a business like this. Yet, the stock is just off of all time highs. There seems to be plenty of support and excitement for the business, despite the fact that things have not gone particularly well in the last year or so.

Bill Barker: I think not acquiring Albertsons really was things going well. They made an offer when prices were high and it didn't get approved. Let's imagine that one of the reasons that it didn't get approved was that they saw that they had offered too much money for Albertsons and put in a 50% effort on trying to get it approved. I'm not saying that's the case, that's what Albertsons is saying. But certainly that deal collapsing did not hurt the stock as you point out, and I think that's because the price being offered was the wrong price.

Dylan Lewis: I guess my question there then is, the major priorities and direction for this business have been sideswiped over the last year or so. They had plans to become a much larger combined chain. We're not doing that anymore. We had a leadership vision that was set out by an executive who is on his way out. Where do you feel like this business really needs to be focusing and maybe where this new incoming CEO, whenever they choose one, needs to be focused?

Bill Barker: I think continuing what they have been doing most as we say, this is at at all time high, more or less within a couple of dollars and it's down today on this news. I think to just be a steady hand calming influence, everything's going great at the actual Kroger and the other brands that Kroger operates, rather than trying to reimagine any part of the business. You got to keep refreshing outlets, you've got to find the right locations. It's blocking and tackling stuff. I think largely, when you're talking about something which is this thin a margin operation, if you're blocking and tackling better than the next guy, you're going to sell more groceries, and that is going to be how you achieve the best return to shareholders.

Dylan Lewis: Our dessert for this food news breakdown. After decades of resisting, Domino's has finally caved to the stuff crust pizza fans. The chain will be looking to win back some business currently going to Pizza Hut and Papa Johns for those who really enjoy that cheesy stuffed crust pizza. I don't know about you, but I saw this quote from management, and it took me a little bit by surprise. "Nearly 13 million Domino's customers each year are buying stuffed crust pizza from competitors. These are customers who leave our brand." Bill, I don't have a child in my life, I'm not a parent. I haven't had a stuffed crust pizza in a very long time. Have you?

Bill Barker: Never have them.

Dylan Lewis: You've never had one?

Bill Barker: No.

Dylan Lewis: Is that something OK? [laughs] Is that a hill you will die on or are you willing to try one?

Bill Barker: Within the context of pizza, this won't make too much sense, but I'm not that into cheese. I think crust is awfully good without cheese in it. How would from my perspective, it be improved by suffocating it with cheese?

Dylan Lewis: I guess people that really love cheese would disagree with you.

Bill Barker: Yes, but we're talking about me and whether I've eaten it. I'm not blaming anybody else for enjoying cheese.

Dylan Lewis: [laughs] You are not one of the 13 million who have been buying from elsewhere, it sounds like. You maybe weren't even buying from Domino's to begin with, if you're not a fan of cheese.

Bill Barker: I don't check the credit cards as closely as I should about what the kids put on them sometimes, so I wouldn't doubt that I've paid for a stuffed cruft pizza somewhere along the way.

Dylan Lewis: We're having some fun with this one, but I think one of the things that was interesting to me looking at this was the development process for this was three years long. We look at so much of the menu innovation. We've seen some chains do such a great job of this. Taco Bell, in particular, really comes to mind. It's a great reminder of how something seemingly so simple. You can go get a stuffed crust pizza in the frozen section of your grocery store. But for a chain to roll out something like this in a large scaled way takes a ton of R&D time behind the scenes. Actually, one of the big concerns that Domino's had for a long time in bringing this out there was the effect it would have on throughput. It seems to me like they've basically said, we got to meet the customer here even if it means we're not quite going to be at the speed we normally would be with our pizzas.

Bill Barker: This is an example of Silicon Valley -esque run fast and break things approach to how to get something out on the mark. Just get it out there. It's a 1.0. It'll be good by six months from now, but just get it out there. That is not as viable a thing to do with, as you state, their operations 7,000 units, I think, for Domino's and to roll it all out to make it available everywhere. You're going to start advertising campaigns around this, so people are going to be ordering it online. You've got to be able to order pretty much, I guess, from all the units. A lot of meticulous planning going into this three years' worth does strike. I think you definitely strikes me as a lot of time to do this. Especially because this is a innovation, and imagine me saying that word with air quotes around it. That has a 30 year history. Isn't that when Pizza had [inaudible] .

Dylan Lewis: They've been doing this for a while.

Bill Barker: No, everybody does it. Papa Johns and Little Caesars and everybody but Domino's. Domino's has done very well as a stock for the last 20 years. This is not exactly kneecap them. But this is an incremental growth opportunity if, as you point out, it is done in a way that does not negatively affect throughput.

Dylan Lewis: I love that this has been someone's job for three years, is to be focused on stuffed crust pizza. If they needed a taste tester, would you be capable of taste testing pizza for three years with your not so fondness for cheese?

Bill Barker: I could eat a lot of pizza. It's just like when you add more cheese than the amount that I particularly want on it, then I'm going to eat less. No, that sounds like a decent job. I've had worse jobs than that. I keep coming back to my career. I've had worse jobs than pizza tasting.

Dylan Lewis: Worse jobs and less relevant business trips?

Bill Barker: We all had a worse job than pizza tasting at some point.

Dylan Lewis: No, that's as good as it gets. Bill, you're as good as it gets. Thanks for joining me today.

Bill Barker: Thanks for having me.

Dylan Lewis: Coming up, have you seen a med spa in your neighborhood? Mary Long cut up with TMF senior analyst Nick Sciple to find out why the industry is booming and one company that's selling a few products that can help you look a little younger.

Mary Long: Business week reporter Amanda Mole had a fascinating story out the other week about America's med spa boom. Nick, this is something that I've been following and interested in for a while. But Amanda highlighted the business perspective of this. For anyone unfamiliar, med spa is short for medical spa. It's basically a hybrid between a doctor's office and a salon. It's a place where you can go to get Botox, to get lip filler. You can get something called cool sculpting, which is a non-surgical procedure that freezes and destroys fat. You can get hair removal, IV drips if you had a little bit too much to drink the night before. In some places, you can get hormone therapy, and increasingly, you can get access to compounded GLP-1 drugs. Nick, I wanted to talk to you about this because you and I have had some conversations recently about investing in highly regulated industries such as nicotine. The hair salon piece of this is innocuous enough, but it's the medical part of that med spa equation that is interesting to me. What does regulation look like in this hybrid salon/doctor's office med spa space?

Nick Sciple: If you look at med spa is really been a booming industry, you'll get some numbers we'll talk about later. But really, regulation falls between a traditional doctor's office and one of these traditional spa. Generally, the med spa will need to have either be owned by a medical doctor or another medical professional, or you can have a medical professional act as a medical director of the facility. The folks actually injecting things like Botox and filler products tends to need medical licensing to perform procedures. However, the general training required it's pretty low, and that barrier to entry to enter the med spa business. Plus, there's the incredible demand we've seen for all those underlying products you listed out, is part of why we're seeing such massive growth in the business.

Mary Long: You talked about incredible demand, and I'll put some numbers behind that. Between 2010 and 2023, the med spa industry grew six fold. There are now more than 10,000 med spa locations across the United States. Average annual revenue per spa is just shy of $1.5 million. That's more than doubled in that same 2010-2023 period.

Mary Long: In 2023, med spas as a whole, were a $15 billion business, and analyses show that the industry will expand by 15% per year moving forward. Most of these med spas are privately owned, though there is an increasing interest among private equity types in investing in and rolling up these businesses like we've seen happen with vets and dentists, etc. What might a public markets investor do with all this information about the seemingly booming med spa industry?

Nick Sciple: Limited opportunities to invest directly in the med spa business, as you laid out, many of these privately held. However, lots of opportunities to invest in the products that these injectors are selling. Little over 2/3 of that $15 billion market you mentioned is driven by dermal fillers like Juvederm and Restylane, and also neurotoxins like Botox, which we'll talk about later. Those are continuing to grow. It is a high single digits, low double digit rates, and should grow for years to come. They're really the staple products of these businesses. To the extent you've got the sales force growing rapidly year over year, should help pull through product sales for those underlying products.

Mary Long: Botox is probably the name that is most familiar to listeners. AbbVie is the pharmaceutical company that owns Botox. But AbbVie's got a lot of other products in its portfolio. Perhaps a more direct way to play into this trend of injections and neurotoxins and fillers would be to look at Evolus, which is a "performance beauty company." It's got a specialization in medical aesthetic products. It's flagship product is a competitor to Botox. It's called Jeuveau. From a consumer standpoint, what is the difference between Jeuveau and Botox?

Nick Sciple: For the person receiving the injection, not really significant difference at all. In terms of efficacy, there's no statistically significant difference between Jeuveau and Botox. That's been proved and head to head trials. For the injector, though, you could argue is the customer here. Jeuveau significantly more profitable. We'll talk about Evolus has a cash pay. Focus model allows them a little bit more flexibility. Pricing relative to other folks on the market allows Evolus to participate in co-branded marketing. With those injectors, all that translates to neurotoxin product Jeuveau that gives the end user very similar results as you get from Botox, but for the injector is significantly more profitable.

Mary Long: You mentioned Evolus' cash pay business model. This is something that the company calls it unique. Why exactly does that matter to folks who might be interested in investing in this business?

Nick Sciple: Well, it gives Evolus a lot more flexibility than its competitors, because it doesn't subject to the same type of red tape and regulation that other folks have to deal with as folks who sell a product that is both used for aesthetic and for medical purposes. Botox, for example, is also used for medical procedures like migraine treatments. Because they take insurance dollars, you're not allowed to charge cash payers a lower price than what you charge the insurance payers. Folks who might be using this for medical purpose. Because Jeuveau does not receive reimbursement from insurers, Evolus can be a lot more flexible than its competitors in marketing and pricing, which makes Jeuveau more attractive and profitable for cosmetic injectors. It also allows them to be more aggressive in how they market to the injectors, co-branded marketing, those things. For the med spa can be significantly more profitable. Most of these med spas worth mentioning, are cash pay businesses.

Mary Long: Evolus calls itself a performance beauty company. I do not know exactly what that means. What is performance beauty, Nick?

Nick Sciple: Well, we're really talking about neurotoxins and fillers. Today, Evolus is a single product company, Jeuveau, again, an analog to Botox and Dysport, the other large neurotoxin businesses. However, in the second quarter, going to enter the filler market with their brand, Esteem. They're really talking about injectable beauty products that are used exclusively for aesthetic purposes to make you prettier.

Mary Long: I'll take a moment to zoom out and distinguish what a filler is versus a neurotoxin. Jeuveau and Botox are neurotoxins, and they work to stop movement and basically prevent wrinkles. Dermal fillers work a bit differently. The neurotoxins, they're used to restore facial volume, so to plump lips, to plump cheeks, that thing. Let's talk for a moment about, we've mentioned that Evolus has this Botox competitor. Jeuveau, they're also working on rolling out another product, Evolis to distinguish between the name Evolus. What exactly is the growth potential there with Evolis in the dermal filler market?

Nick Sciple: If you look at Evolus, they think that the addition of the filler will expand their address for market by 78%. The $6 billion. If you look at the company's long-term guidance by 2028, playing to reach $700 million in net revenue and non-GAAP operating margin of at least 20%. That'd be about a 28% compound annual growth rate over that time period. Interesting, worth noting, that Jeuveau can match the performance of Botox out there in the market, and because of Evolus' differentiated go-to-market strategy has really been able to capture share very quickly. With this Evolus filler product, on top of that business model differentiation that Evolus brings here. In the filler product, Evolus, it has shown statistical superiority to Galderma's Restylane product, another one of the leading fillers out there on the market. Now you've got a product with a differentiated go-to-market strategy. You've already scaled up your sales force to support Jeuveau. You're layering in a filler product that is already going to expand your address will market significantly, and it's statistically superior to the other products out there on the market. Lots of synergies for the existing business, and I think it's really going to drive significant growth moving forward for Evolus.

Mary Long: You talk about different go to market strategies and how these products go out to the injectors themselves and are marketed to those injectors. Botox' cosmetic sales grew only by low single digits throughout 2024. Meanwhile, you've got Jeuveau sales growing 30% year over year in the most recent quarter. Is this a story about Jeuveau gaining popularity and gaining market share or Botox losing it? Because a lot of this feels like a marketing story to me. How can investors today gauge the future success of AbbVie or Evolus or some other competitor based on that company's current marketing effort?

Nick Sciple: Sure. If you look at Botox, they did have a few points of market share erosion during 2024. However, still the market leading product about mid 60s when it comes to market share. AbbVie reduced their long-term guidance for Botox from low double digits down to high single digits. I think there's a few things going on there. First, obviously, competitive intensity increasing with Evolus, other folks going into the market. You have other neurotoxins that have also entered the market over the past couple of years. That has maybe crimped the potential growth for Botox, though it remains the market leader. Also, you have to think about the customer. People don't have an infinite beauty budget, and I'm sure you're familiar with the GLP-1 trend that we've seen progressing over the past year plus. Those drugs are quite expensive, to the extent that you see folks having a limited budget and subbing in GLP-1s into their beauty or their overall regimen. A little bit less cash available for spending on Botox or some of these other neurotoxins. I think the slowdown in sales that you're seeing from Botox is largely increased competitive intensity, and also customers are spending on other products out there in the market. Long-term, though, still expect to see the market grow. High single digits, low double digits and what you really want to pay attention to, to see how the individual competitors are trending over time is. Again, those are market share numbers. I was really excited to see Evolus post-launch get up to that double digit market share, and if they can continue to take share over time, I think that would be a good story for the business. But even if shares remains stable, the underlying industry should grow for many years to come.

Dylan Lewis: As always, people in the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Motley Fool only picks products it'd personally recommend to friends like you. For the team, I'm Dylan Lewis, signing off. We'll be back tomorrow.

Bill Barker has positions in McDonald's and Starbucks. Dylan Lewis has no position in any of the stocks mentioned. Mary Long has no position in any of the stocks mentioned. Nick Sciple has positions in Evolus. The Motley Fool has positions in and recommends AbbVie, Domino's Pizza, Evolus, Luckin Coffee, and Starbucks. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.