Broad Street Licensing Group Food News
In what Fortune magazine has called an historic first, activist investment hedge fund Starboard Value L.P. took over a Fortune 500 company when its entire 12-person slate was voted in at Darden Restaurants Inc. this past October.
Starboard’s CEO Jeff Smith (dubbed by Fortune “the investor CEOs fear most) accomplished something even legendary corporate raiders like Carl Icahn had never succeeded: taking down the board of a Fortune 500 company, and with less than 10% of the stock.
While the proxy fight received high praise for nominating well-respected directors and supporting its move with a nearly 300-page plan of action, industry observers say Starboard was helped by gaffes from Darden management, including selling off the Red Lobster banner despite a majority of stockholders wanting a meeting with management about the divestiture. University of California, Berkeley law professor Steven Davidoff Solomon in the NY Times called that move “a stick in the eye for stockholders.”
The stunning success of Smith having himself named chairman not only sends shivers down the spines of publicly-traded companies, but likely signals more unrest in the private equity musical chairs of the past few years. According the Nation’s Restaurant News, brands that have seen takeover attempts are Cracker Barrel, Famous Dave’s, Ruby Tuesday, BJ’s Restaurants, Bob Evans, Red Robin, Denny’s and Popeyes. Sandell Asset Management recently notched four board seats at Bob Evans, forcing management to sell the corporate jet and bring in outside cost-cutters.
Activism can cut both ways: Biglari Holdings (owner of Steak n Shake and others) attempted to take on Cracker Barrel in the past, but is now facing a proxy fight from Groveland Capital, which is seeking to replace all six of Biglari Holding’s board members, including Chairman Sardar Biglari.
Uber is testing its solution in Los Angeles while Amazon has used Seattle once again for a test of home restaurant delivery as it did for grocery delivery back in 2007.
Both companies may be on to something according to a study by Technomic financed by grocery broker Acosta Sales & Marketing that found “in the past 30 days:
- 86% of diners ate at a restaurant
- 71% ordered food for pick-up or carry out, or ordered from a drive-thru
- 66% brought home prepared foods from a grocery store
- 48% ordered restaurant food for delivery
Unlike with its other products, restaurant delivery by Amazon is fulfilled by the nearly 150 eateries signed up for the service. Amazon merely takes the order and takes a small transaction fee for its trouble. That might not seem like much of a service, but the key here is loyal customers. According to this article, “Amazon visitors each month spend 88% more money online than the average Internet user and make over $22bn in offline purchases.”
That’s a pretty nice customer pool to fish in. And with the company asking the Federal Aviation Administration (FAA) to let it use commercial drones for home delivery, who knows what the future holds?
Uber on the other hand collects a $3 fee from restaurant customers who can order from a list of establishments in the tony West LA, Beverly Hills and West Hollywood neighborhoods. The service, called uberFRESH, promises food within “in about 10 minutes” (vs. what they claim is 45 minutes ordering from the restaurant directly). Unlike with the Amazon model, consumers can order only a single dish and must meet the driver at curbside instead of door-to-door.
Honey companies have been accused of selling adulterated honey contaminated with antibiotics or even heavy metals.
Indian honey has had similar problems, resulting in an outright ban by the European Union, but has been showing up on US grocery shelves.
Tests of grocery store honey in the US  show that up to ¾ is not real honey (as defined by the US Food & Drug Administration or FDA). Much of that honey has been ultra-filtered to remove all bee pollen, thereby rendering it impossible to know the product’s country of origin or composition. The process involves heating honey and then forcing it at high pressure through extremely small filters. The process has been developed by China, which has been accused of dumping inferior or adulterated honey on the US market.
Tests showed that 76% of honey on the shelves of grocers like Safeway, Giant Eagle, Kroger, Harris Teeter, A&P, and Stop & Shop was not honey. A similar percentage (77%) of samples from big box stores, including Costco, Sam’s Club, Walmart, and Target had all pollen filtered out. But an astonishing 100% of the so-called honey sold by Walgreens, Rite-Aid and CVS Pharmacy, as well as the small individual portions served by McDonald’s and KFC was bogus (i.e., contained no bee pollen). In contrast, 71% of organic honey tested turned out to be real (all of it imported from Brazil), with all the samples from farmers markets, co-ops and “natural” stores like Trader Joe’s testing correctly.
Sadly more than 60% of all honey consumed in the US is sold to the foodservice sector for use in baking, processed foods and beverages. While most marketers of honey both refuse to discuss the issue or reveal the origins of their products, those who do claim that ultra-filtering is required by US consumers who want “crystal clear” honey. This is disputed by honey experts, who say the only reason for removing the bee pollen is to hide the (likely illegal) countries of origin for commercial honey. To read the full article, click here.
 Tests were done by the director of Texas A&M’s Palynology Research Laboratory, Vaughn Bryant for the online publication Food Safety News.
 Source: National Honey Board.
Even as Walmart continues to dominate the US grocery marketplace, its fresh foods (dairy, produce and meats) have had some recent issues.
According to this NY Times article, the company is trying to get better rotation of its products while attempting to keep down the number of workers and their attendant costs. Notes from an internal manager colloquium indicate the cutting of the workforce has meant that shelves go unstocked, products must be thrown out because they weren’t marked down in time, and the overall appearance of the fresh food departments is sometimes dirty and unkempt.
A Walmart spokesman insisted in the Times article that its stores are “fully staffed,” though it has reduced the number of workers per store from 338 in 2007 to 281 now. The number of Walmarts and Sam’s Club have increased, while worker numbers overall have been reduced. In the interim, Walmart cut the number of SKUs in stores, but had to add them back when customers voted with their feet. Additional workers to handle stocking problems have not been added.
About 55% of Walmart sales derive from groceries according to Supermarket News. Competition from traditional grocery chains has often meant a focus on fresh foods, including more varieties of meats (the company holds down 20% of the dry grocery market, but only has 15% of perishable items). Walmarts don’t have butchers, instead selling “cased” meats prepared ahead of time. The practice reduces labor costs but prevents a store from catering to (or even reacting to) consumer demand.
One of our beefs with today’s consumer culture is the anointment of some restaurants by social media as the darlings of consumers looking for “authentic” and “better for you” foods. Chipotle consistently is one of those darlings.
Now the Wall Street Journal has come up with some surprising and in some cases, disturbing, little-known facts about Chipotle the company and Chipotle’s food. It’s all here is the video:
Diamond Foods at one time believed that in order to rapidly accelerate growth and penetration for their Kettle and Emerald brands they needed to offer significant discounts and spend lavishly on promotions.
The problem with this is, while a company can gain a certain number of new trials, the loyal customers (who would have bought the product at its normal price because they believe in its quality/price relationship) are now rewarded for purchase at the expense of lower margins. In the case of Kettle, Brian Driscoll, Diamond Foods’ president and chief executive officer at the time, saw the light just in time, stating “this approach to top-line growth was inconsistent with Kettle’s premium positioning, and was margin dilutive.” He went on, “the fundamental underpinnings and origin of this brand are its natural, authentic and premium quality credentials.” The shifting of strategy will be to not make the Kettle brand more expensive, but rather build its presence in channels that are not focused on heavy discounting.
In the mind of the consumer, quality and price are interrelated. Deep discounts can cause the consumer to believe that something is wrong. Frequent discounting serves to lower the value of the brand, because of the consumer’s perception that quality also has been lowered. Lastly, in a “value rebound,” consumers begin to perceive the everyday price as too high and the brand is then bought only on deal.
Wow, here’s a shocker.
A study published in Archives of Pediatrics & Adolescence Medicine says restaurant food is bad for kids.
Don’t just blame the fast food outlets, though. Full-service restaurants are no better for children.
The study by Lisa M. Powell and Binh T. Nguyen of nearly 9,000 kids from 2-19 said:
Fast-food and full-service restaurant consumption, respectively, was associated with a net increase in daily total energy intake of 126.29 kcal and 160.49 kcal for children and 309.53 kcal and 267.30 kcal for adolescents and with higher intake of regular soda (73.77 g and 88.28 g for children and 163.67 g and 107.25 g for adolescents) and sugar-sweetened beverages generally. Fast-food consumption increased intake of total fat (7.03-14.36 g), saturated fat (1.99-4.64 g), and sugar (5.71-16.24 g) for both age groups and sodium (396.28 mg) and protein (7.94 g) for adolescents. Full-service restaurant consumption was associated with increases in all nutrients examined. Additional key findings were (1) adverse effects on diet were larger for lower-income children and adolescents and (2) among adolescents, increased soda intake was twice as large when fast food was consumed away from home than at home.
OK, for the rest of us: visiting a Quick Serve Restaurant increased caloric intake for 2-11 year-olds by 126 calories and 309 calories for kids 12-19. Full service restaurants were about as bad (160 calories and 267 calories respectively).
Not surprisingly with refills free or at-hand for sugary sodas, kids of all ages were far more likely to drink more soda eating out than eating the same food when taken home. The American Beverage Association will spend millions of dollars to fight soda taxes and drink size limits, yet it doesn’t take a weatherman to tell us which way the wind blows: sugary sodas add calories and contribute to diabetes and obesity.