Broad Street Licensing Group Food News

Archive for the ‘Opinion’ Category

“Slimeaggeddon”

Tuesday, April 3rd, 2012

At least one industry pundit is saying the fallout over Lean Finely-Textured Beef (LFTB) – popularly known now as “Pink Slime” – is a product more of hysteria than science.

And she’s right.

While much greater food safety issues proliferate, retailers like Wal-Mart, Kroger and Supevalu, as well as burger chains McDonald’s and Burger King have panicked and dropped so-called pink slime because it seems, well, nasty. Change.org has reportedly signed up 250,000 signatures trying to ban pink slime from school lunches, despite the fact it helps make burgers leaner.

As the old saying goes, you’ll never eat sausage again if you watch it being made.

The US Dept of Agriculture says 300 billion servings can’t be wrong, that there is nothing wrong with pink slime other than it sounds disgusting. Folks, much of our food chain includes nasty things like butchering animals that have been grown or penned in semi-barbaric conditions, or funneling plant-based foods through processing pipelines that can contaminate them with deadly pathogens or spread ones picked up naturally. Pink slime is processed beef that is passed through ammonia gas to reduce germs and make the results safer, though one would think it had been soaked in floor wax remover. Are there any health risks for using it? None have been identified so far. In fact, mixing pink slime into ground beef has helped reduce the fat content, thereby making the results leaner and supposedly better for you. Media reports have latched onto the ammonia, ignoring that supermarket ground beef is frequently treated with carbon monoxide gas to make it redder and therefore more appealing to shoppers.

Next time you break open a pack of ground beef, note how the inside meat is brownish, while only the outside is red or pinkish.

The amount of CO is small (0.4-0.5%), but is it safe? Do you want your meat gassed this way? It doesn’t matter, since the beef industry persuaded the Food & Drug Administration in 2002 to give the process GRAS status (generally regarded as safe), despite concerns it masks spoilage. The FDA insists carbon monoxide processing doesn’t effect spoilage odors, but GRAS status means retailers & processors do not have to disclose it on labels.

The fall-out from “slimeaggeddon” includes the bankruptcy of meat processor AFA, who along with Beef Products, Inc., has been in the news over pink slime. The company hopes Chapter 11 will protect it while attempting to stay in business.

Post Cereals: Restaurants Impact Package Good Sales

Monday, March 12th, 2012

When companies suffer at the hands of competitors, it’s usually companies in the same business.

But in a remarkable admission quoted here, Post cereals has said that a 45% drop in profits was due primarily to competition from Quick Serve Restaurant breakfast items.

It’s a stunning confirmation of the message Broad Street Licensing Group has been saying for years: restaurants don’t compete just with other similar restaurants in their niche…

Or even with other restaurants…

But with every food outlet.

Sometimes that competition is to their disadvantage. This is one time that the home team has pulled ahead.

Post Holdings was spun off by Ralcorp Holdings last month. Ralcorp purchased the brand from Kraft in 2007 for much more than it realized from the spin-off. Post markets such brands as Raisin Bran and Grape Nuts.

Organics Struggle in the New Economy/”All Natural” Litigation

Thursday, February 23rd, 2012

Despite an upbeat assertion that the world-wide organics market has reached $60bn and that the US has surpassed Europe as the largest segment of that market, a recent report[1] shows that challenges are keeping growth stagnate or non-existent.

Years of double-digit expansion were replaced by 4.7% overall growth in 2010, with downturns in Europe because of the economy and the perceived price differences between organic and conventional products holding back growth (the actual price difference is often around 15%). With demand outreaching supply in the US, Latin Americahas become the #1 source of organic fruits, vegetables, meats, nuts and seeds.

One of the reasons organic has stalled is consumers perceive “all natural” to be just as good. Of course, what they don’t realize or seem to care about is that “all natural” has no legal or regulatory underpinnings: bread made with sawdust could conceivably be labeled as “all natural,” since on a certain level, it IS all natural.

Not surprisingly, with a vacuum in the regulatory framework, litigation has come to the fore instead. This post from an excellent blog about the food industry & the law written by David L. Ter Molen talks about the many class action lawsuits filed against “all natural” claims. Some are relatively straightforward: Kashi is supposedly using sodium molybdate, phytonadione, sodium selenite, magnesium phosphate, and other jaw-breakers “that have been declared to be synthetic substances by federal regulations.” Seems pretty cut & dried to me.

Another suit against Arizona Beverages contends that their use of high fructose corn syrup (along with citric acid) constitutes the use of non-natural products. There is no scientific basis for seeing HFCS as anything more than another form of sweetening (like beet sugar), and so the lawsuit seems to be hair-splitting of the most arcane form. What else, though, can we expect with the lack of clear guidance by either the FDA or USDA but for the lawyers to run wild (pace to Mr. Ter Molen and his firm, LOL). There’s even a suit against Ben & Jerry’s that is going forward despite the fact this division of Unilever has agreed to drop its “all natural” claims!

Several of the lawsuits in the article focus on the use of genetically-modified crops in prepared foods, including corn and soybeans (often in their oil form). The biggest seems to be against “the evil empire,” Frito-Lay. Plaintiffs claim “[t]he reasonable consumer assumes that seeds created by swapping genetic material across species to exhibit traits not naturally theirs are not ‘all natural.’” It’s a fascinating issue, since some scientists believe GM crops will eventually take over from non-GM ones through the process of cross-pollination.

Where will that leave us (and the lawyers) then?

 


[1] Source: market research firm Organic Monitor.

Supersize Me

Wednesday, February 22nd, 2012

Are we surprised?

A study[1] says combo meals encourage unhealthy eating. Duh!

Consumers perceive value in the bundled meals, which typically have much more calories than if ordered separately simply because restaurants offer larger sizes. Those participants who didn’t order fries in an a-la-carte–only scenario ordered a bundled meal with medium fries, a 380-calorie increase. Those who ordered small fries from the a la carte–only menu chose a bundled meal with medium fries, 150 calories more. Restaurants like combo meals, both for profitability (because of deals from beverage suppliers) and convenience (by speeding up service). They also find consumers want them. El Pollo Loco, for example, says its research tells it that customers prefer combos.

But one of the study’s authors points out that restaurants have removed small drink options, substituting massive 44 oz. “super sizes” instead.


[1] Source: “Consumption Effects of Bundling: Consumer Perceptions, Firm Actions, and Public Policy Implications” in the Journal of Public Policy & Marketing by Kathryn Sharpe (University of Virginia’s Darden School of Business) and Richard Staelin (Duke University’s Fuqua School of Business)  called

Why Kids Are Fat

Tuesday, February 14th, 2012

It doesn’t take a genius to figure out why kids are fat.

But the latest study from Yale University[1] compared the marketing to children by twelve of the largest fast-food chains from 2007-2009. I don’t think we have to tell you who the heavies are in this movie:

Preschoolers were exposed to 21% more ads McDonald’s, 9% more for Burger King and 56% more for Subway. Those 6-11 saw 26% more commercials for McDonald’s, 10% more for Burger King and 59% more for Subway. The ads now focus more on building brand loyalty than promoting specific food items.

Even though QSRs have promised to curtail marketing to kids, the researchers found the opposite was the case, driven mostly by the proliferation of “alternative,” inexpensive measures like web sites, Facebook, Twitter and YouTube. Jennifer L. Harris, director of marketing initiatives at Yale’s Rudd Center, says “preschoolers see 21% more fast-food ads on TV than they saw in 2003, and somewhat older children see 34% more.” When analyzed for nutritional content, only 12 of a possible 3,039 possible children’s meal combinations met the criteria for preschoolers, with only 15 meeting nutritional criteria for older children.


[1] Source: Yale University’s Rudd Center for Food Policy & Obesity.

Dead Men Walking

Thursday, February 9th, 2012

They call them “Dead Men Walking.”

Restaurant chains that, despite being in bankruptcy, won’t fall down.

Their private equity owners seem to play a game of musical debts, passing one asset around in the belief that someone else will do a better job when the real solution is probably to shutter the restaurants and tighten the competition in the restaurant sector.

The latest is Chevy’s/El Torito/Acapulco, part of Real Mex, a company Sun Capital purchased in 2006 for $359MM, but has now sold to RM Opco, a company of Real Mex debt holders, including Tennenbaum Capital Partners, JP Morgan Investment Management and Z Capital. The sale price?

$49MM in cash.

Plus an $80MM credit bid for Real Mex’s second-lien notes. The buyer also will assume other liabilities not specified, for a total of $129MM.

That’s a cool $230MM wipe-out for Sun. I wonder what its investors think about that?

In the “six degrees of separation” mode, the other bidder was Harshad Dharod, president of Friendly Franchisees Corporation, a Friendly’s franchise operator who also franchises 63 Carl’s Jr. restaurants, 12 Papa John’s and 18 Denny’s. Sun has been mired in legal and other controversies since it took the Massachusetts-based ice cream chain into Chapter 11 late last year, including large expenses by the Friendly’s CEO, Harsha Agadi: $243,000 “for Mr. Agadi’s business-related expenses such as travel and a franchise convention in Baltimore,” $190,000 in “relocation expenses,” a $44,000 loan to an Agadi-controlled company, all on top of his $50,000 monthly salary. According to the Wall Street Journal which reported the story, “court records don’t detail what sort of expense was reimbursed to the chairman and chief executive of the chain.”

I need to attend more franchise conventions…

Sun hasn’t had a great couple of months, running afoul of a Federal regulatory agency overseeing company pension plans during its Friendly’s Chapter 11 moves. The Pension Benefit Guaranty Corp. back in December alleged Sun was attempting to avoid its obligations to Friendly workers by shedding debts through a complex plan to sell the company, then buy it back minus the pension obligations (a development covered by our blog here). All of that appears to be moot following a bankruptcy judge’s ruling December 30th allowing Sun to assume control again of Friendly’s by providing $2.75MM to unsecured creditors, and to cover the cost of resolving the case such as Sun’s own fees and the those of the committee representing Friendly’s unsecured creditors. But disputes with landlords and others remain unresolved.

Real Mex’s new owners of course pledge to continue reviving the company that has suffered in competition to other Hispanic restaurants, especially Chipotle. Their solution? Rebranding, new menu items, yada-yada-yada.

Broad Street Licensing In the News

Friday, February 3rd, 2012

 

This article about Quick Serve chain breakfasts features Broad Street Licensing Group as the “experts” in the piece.

We often comment for publications about the restaurant business (which we monitor every day), retail trends, leveraging brands to grocery, etc. Other licensing agencies have food clients, but our company focuses on food and food only.

If your brand is looking for t-shirts at Kohl’s, then we’re not for you. We turn down business that wants lifestyle applications like clothing, toys, hard goods, etc.

Chains like Wendy’s, Burger King and others have launched, pulled and re-launched breakfast “makeovers” repeatedly (in Wendy’s case, at least three times we know of). The problem is that ad spends by chains other than McDonald’s just don’t move the needle. BK used to find that touting their breakfast items resulted in a spike of sales of Egg McMuffins. Not a great marketing strategy.

Without deploying a broad strategy, including good coffee and having items at retail, chains risk marginalization. IHOP’s licensed retail products, for example, are tearing up trees at Walmart. Yet you’d be surprised how many chains continue to think that retail is risky for them.

Is “Over-Processing” of Food the Root Cause of Obesity?

Wednesday, January 18th, 2012

A researcher is claiming that “ultra processing” of food is a significant and frequently overlooked contributor to the world epidemic of obesity.[1]

Carlos Monteiro of the Center for Epidemiological Studies in Health and Nutrition at Brazil’s University of São Paulo has identified what he calls three types of processing:

  • Type 1 does not significantly change the nutritional profile of the food (drying, parboiling or pasteurization);
  • Type 2 extracts substances from foods by crushing, enzymes, extrusion or refining);
  • Type 3, which he has named “ultra-processing,” combines several Type 2 processes to create “durable, accessible, convenient, attractive, ready-to-eat or ready-to-heat products.”

Monteiro sees a problem with Type 3 for two reasons: the principal ingredients in “over-processed” foods (oils, solid fats, sugars, salt, flours, starches) result in an excess of total fat, saturated or trans-fats, sugar and sodium, while reducing “micronutrients and other bioactive compounds” (including dietary fiber). Second, the high energy density of Type 3 foods, their hyper-palatability, along with being marketed in large and super-sizes supported by aggressive and sophisticated advertising, all “undermine the normal processes of appetite control, cause over-consumption, and therefore cause obesity and the diseases associated with obesity.”



[1] Source: the Journal of the World Public Health and Nutrition Association.

Retailer Meal Solutions’ Outlook Cloudy

Tuesday, January 10th, 2012

A new study by industry researchers Technomic indicates that RMS (retail meal solutions, a jargony version of heat n’ eat meals sold by grocerants) has an uncertain outlook. though there are indications it could do well.

The reasons are pretty logical and conform to informal input we’re getting from contacts in the fresh-prepared space:

  1. Retailers like store brands over branded
  2. Consumers like convenience, but are sensitive to price
  3. Frozens, declared dead at one point, remain highly-competitive because of price
  4. Restaurants face a real threat from retail meal solutions
  5. Consumers see fresh-prepared as a very viable alternative to home-made, take-out and frozen

Restaurants last year crowed that “catering” (their word for old-fashioned “take out”) would be the magic bullet that would slay the grocerants and return the foodservice sector to profitability. The many bankruptcies, consolidations and shutterings proved that was much hot air from those like Monkey Media peddling catering solutions.

  1. The RMS consumer tends to be a repeat customer, though is not loyal to a particular outlet or product
  2. 88% purchase a grocerant meal at least 2-3x monthly, though the drop-off is steep (45% buy 4-6x and only 17% 7-9x)
  3. Traditional grocery stores, club stores and mass merchandisers (Walmart) are the overwhelming destination for purchasing
  4. C-stores are making headway, with 55% of purchases
  5. But c-stores, while having the highest frequency of purchase, also lose the highest percentage of customers (2x that of upscale specialty stores and 8x that of traditional grocery stores)
  6. Dinner is the preferred daypart except for c-stores where it’s snacking that rules

Restaurants must understand that “Take Out” under any name is just one leg of the stool, with in-restaurant customers and retail customers as the other two.

The Code of the West

Tuesday, January 3rd, 2012

My friend, Chase LeBlanc, posted these words to live by. I thought they were good enough to repeat here. Let’s call it “The Code of the West”:

I have lived up, down, in the middle and on both sides of the USA, but I was raised in the West. I’m not a farmer or rancher, but as I was growing up I had a chance to spend some time “learning the ropes” from my relatives who were. You had to be hardy, smart and tough to make it in either place. Savvy- skill-craft was prized and so was an even disposition. You had to hold up your end of the bargain or you were sent packin’.

There was also a code, an unwritten agreement that bracketed your conduct. Lying, cheating or stealing were absolute no-fly zones, and you had to offer the other guy a “fair chance” in just about everything you did. I know some people will pass off my code recollections as myth, but I was not hanging out in Hollywood with A. Ladd, G. Cooper or J. Wayne – just with real people living real lives. In fact, responsible conduct was a major contributing factor to their sense of community and stewardship of the land.

In light of the recent news of a MAJOR failure of institutional leadership that is dominating today’s headlines, I thought it might be timely to share a few relevant “rules of the trail” that I know have been valuable to myself and others who aspired to become respectable, responsible citizens and leaders in their own right.

Be kind to kids and your horse
Don’t take any wooden nickels
Own a sharp knife and a sharper set of eyes
Doing the right thing ain’t courage… it’s just doing the right thing
If your best dog bites you more than once… they ain’t your best dog
A “howdy” and a smile cost you nuthin’… don’t make nobody pay to git one
Don’t make friends with rattlers… them that ain’t got feet or them that do
If you Rodeo… 8 seconds can change your life and if you don’t… they still can
An honest day’s work for an honest day’s dollar means a lot,
but your honest word means more.

Given the number of times people in business (and even in court) have lied, I take the last one as gospel.