Super Bowl Wings Will Be Fat But Pricey as Chicken Count Shrinks

January 28, 2015

Lydia Mulvany
Bloomberg

Copyright © 2015 Vancouver Sun

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On Super Bowl Sunday, expect two things when your order of chicken wings arrives: They’ll be fat, and they’ll be pricey.

First the fat part. American farmers are giving their chickens extra feed, taking advantage of plunging corn and soybean costs to help lift poultry production – as measured by weight – to a record.

But each chicken, of course, still only has two wings, regardless of its size. And the number of actual chickens slaughtered last year fell, causing a drop of about 50 million wings, government data show. That smaller supply is what’s triggering the pricey part of the equation. The cost of wholesale wings sold by processors in Georgia, which sets the benchmark for the nation, has surged 8.2 per cent this month to $1.715 US a pound, the biggest jump to start a year since 2012.

Americans will consume 1.25 billion wings when game day arrives Feb. 1. That estimate, provided by the National Chicken Council, is unchanged from last year’s Super Bowl.

“Wings are just all over menus,” Darren Tristano, executive vice-president at Chicagobased research firm Technomic Inc., said in a recent interview. Demand for wings remains “very high with consumers because they’re customizable,” he said. “There’s a health halo around it, because it’s chicken. There are a lot of flavour profiles, and it’s a fun finger food.”

Buffalo Wild Wings Inc., a Minneapolis-based restaurant chain with more than 1,000 stores, raised menu prices by an average of three per cent in November, CEO Jim Schmidt said this month. The company normally would have raised prices in February, but made the increases earlier partly because of higher wing costs, he said.

Chicken output will rise 2.7 per cent from 2014’s record to an all-time high of 39.21 billion pounds this year, the U.S. Department of Agriculture estimates. Still, fewer birds slaughtered means that wholesale wing prices are up more than 30 per cent from a year earlier.

Americans paid 9.2 per cent more for meat last year, the biggest jump of any food group, USDA data show. The gains were led by increases for beef and veal amid shrinking cattle herds, and that advance helped support prices for other proteins as consumers sought cheaper alternatives to record costs for steaks.

“It’s a good thing the Super Bowl pastime is chicken wings and not hamburgers,” said Andy Wiederhorn, CEO of Beverly Hills, Calif.-based Buffalo’s Cafe, where a pound of wings costs about five to 10 per cent more than this time last year at its 50 locations in the U.S. and Canada. “The prices have been generally reasonable, unlike beef prices, which have skyrocketed to record highs.”

The Super Bowl, which will pit the Seattle Seahawks against the New England Patriots this year, marks the No. 1 wing-eating day in the U.S. Demand peaks in the first quarter of the year, with consumption also high south of the border for the National Collegiate Athletic Association basketball tournament games. An increase in restaurants serving wings is also supporting prices. The number of U.S. chicken-wing franchises grew seven per cent to more than 2,000 restaurants in the five years through 2013, according to Arlington, Va.-based franchise researcher Frandata. Demand for the meat is also rising as pizza chains including Pizza Hut and Little Caesar’s serve wings, Technomic’s Tristano said.

 


Shake Shack IPO Filing Comes Amid a Hunger for Premium Burgers

January 14, 2015

Passersby walk in front of the Shake Shack restaurant in the Manhattan borough of New YorkCopyright 2015 Thomson Reuters. All Rights Reserved.
By Anjali Athavaley

NEW YORK, Jan 2 (Reuters) – Shake Shack Inc’s filing this week for an initial public offering underscores a question for investors and foodies alike: How hungry are U.S. consumers for another burger chain?

A key part of Shake Shack’s growth strategy involves expanding its locations beyond its New York base, and investors and analysts are bullish on its prospects.

They say there is room for more “fast casual” restaurants that offer higher quality burgers, a variety of toppings and in some cases, beer and wine. Shake Shack’s burgers are described in its preliminary prospectus as all-natural and hormone- and antibiotic-free.

To be sure, there are skeptics who say the excitement over Shake Shack is overblown.

“Consumers love it and it will be well greeted in the market – and then probably fizzle out,” said Doug Kass, president of Seabreeze Partners Management in Palm Beach, Florida, and a noted short-seller.

“That a company of such a small size can get a valuation is symptomatic of the silliness … that develops in a period of zero interest rates,” he said.

A Shake Shack spokeswoman declined to comment.

Still, several factors appear to be working in Shake Shack’s favor. First, 2014 was a solid year for restaurant IPOs, particularly of the fast casual variety.

Burger chain Habit Restaurants Inc’s shares have risen 3 percent since its $30 Nasdaq debut on Nov. 20, based on Friday’s prices, and Zoe’s Kitchen was up 12 percent from its April market debut at $28.72 on Friday. Shares of El Pollo Loco, another fast casual company, were up 5.5 percent Friday from their $19 market debut in July.

Second, premium burger chains are outperforming the burger category as a whole, thanks to demand from younger, more affluent consumers. Sales at such chains including Five Guys and Smashburger rose 9 percent in 2013, according to restaurant consultancy Technomic Inc, while overall sales at all burger chains including fast food restaurants such as McDonald’s Corp were down 1 percent.

“The better burger space has been a pretty disruptive force for McDonald’s and other players,” said Darren Tristano, executive vice president at Technomic.

NEW YORK AND BEYOND

Shake Shack has developed a fervent following since it was founded by restaurateur Danny Meyer in 2001, but the challenge will be to replicate the success it has found in New York in the rest of the United States and overseas. The company has 31 company-operated and five licensed locations in 10 states and Washington, D.C., and 27 locations abroad.

The chain believes it has the potential to increase the number of domestic company-operated Shacks to at least 450 and analysts say that finding new locations with affluent consumers is critical.

Consumers such as Leticia Garza, 33, a middle school teacher in Austin, Texas, help illustrate the brand’s potential in other parts of the country, but also the challenges. Garza says she is excited to hear that Shake Shack planned to expand to Austin.

Still, she notes that she has many similar options. “There’s definitely going to be some competition because we have recently gotten an In-N-Out, and a couple of local versions that are similar to In-N-Out: P. Terry’s and Mighty Fine.” She adds: “We have Smashburger, too.”

Indeed, the market may be just a few years away from being saturated with too many fancy burger places, some analysts say. Furthermore, premium burger chains are not the only ones offering more personalized options: McDonald’s is rolling out a new “Create Your Taste” program this year that will give customers a choice of sandwich toppings.

In December, the world’s biggest fast food chain, which has not had a monthly gain in sales at its established U.S. restaurants since October 2013, said it also planned to cut the number of items on its U.S. menus. It also plans to use fewer ingredients in food, in an effort to reach consumers who want simpler, more natural choices.

McDonald’s is cheaper than Shack Shack and competes for a less affluent consumer. Still, industry watchers say such efforts could put pressure on premium burgers.

“We’re always looking for the latest version,” said Harry Balzer, an analyst at NPD Group, a market research company. But, he said, “there’s a limit to the burgers we’re going to eat.” (Additional reporting by Sinead Carew; Editing by Eric Effron and Tomasz Janowski)


McDonald’s: When the Chips are Down

January 13, 2015

20150110_WBP002_1(c) The Economist Newspaper Limited, London 2015. All rights reserved

After a long run of success, the world’s largest fast-food chain is floundering–and activist investors are circling

IN A brand-new McDonald’s outlet near its headquarters in Oak Brook, Illinois, customers do not have to queue at the counter. They can go to a touch screen and build their own burger by choosing a bun, toppings and sauces from a list of more than 20 “premium” ingredients, including grilled mushrooms, guacamole and caramelised onions. Then they sit down, waiting an average of seven minutes until a server brings their burgers to their table.

The company is planning to roll out its “Create Your Taste” burgers in up to 2,000 restaurants–it is not saying where–by late 2015, and possibly in more places if they do well. McDonald’s is also trying to engage with customers on social media and is working on a smartphone app, as well as testing mobile-payment systems such as Apple Pay, Softcard and Google Wallet.

All this is part of the “Experience of the Future”, a plan to revive the flagging popularity of McDonald’s, especially among younger consumers. “We are taking decisive action to change fundamentally the way we approach our business,” says Heidi Barker, a spokeswoman.

After a successful run which lifted the firm’s share price from $12 in 2003 to more than $100 at the end of 2011, McDonald’s had a tricky 2013 and a much harder time last year. When it announces its annual results on January 23rd, some analysts fear it will reveal a drop in global “like-for-like” sales (ie, after stripping out the effect of opening new outlets) for the whole of 2014–the first such fall since 2002.

In the past year Don Thompson, the firm’s relatively new boss, has had to fight fires around the world, some of them beyond his control. Sales in China fell sharply after a local meat supplier was found guilty of using expired and contaminated chicken and beef. Some Russian outlets were temporarily closed by food inspectors, apparently in retaliation for Western sanctions against Russia over its military intervention in Ukraine. And a strike at some American ports left Japanese McDonald’s outlets short of American-grown potatoes, forcing them to ration their portions of fries. (More recently several Japanese customers have reported finding bits of plastic, and even a tooth, in their food.)

However, the biggest problem has been in America–by far McDonald’s largest market, where it has 14,200 of its 35,000 mostly franchised restaurants. In November its American like-for-like sales were down 4.6% on a year earlier. It had weathered the 2008-09 recession and its aftermath by attracting cash-strapped consumers looking for a cheap bite. But more recently it has been squeezed by competition from Burger King, revitalised under the management of a private-equity firm, from other fast-food joints such as Subway and Starbucks, and from the growing popularity of slightly more upmarket “fast casual” outlets (see “Fast-casual restaurants: Better burgers, choicer chicken”).

In response, McDonald’s has expanded its menu with all manner of wraps, salads and so on. Its American menu now has almost 200 items. This strains kitchen staff and annoys franchisees, who often have to buy new equipment. It may also deter customers. “McDonald’s stands for value, consistency and convenience,” says Darren Tristano at Technomic, a restaurant-industry consultant, and it needs to stay true to this. Most diners want a Big Mac or a Quarter Pounder at a good price, served quickly. And, as company executives now acknowledge, its strategy of reeling in diners with a “Dollar Menu” then trying to tempt them with pricier dishes is not working.

McDonald’s says it has got the message and is experimenting in some parts of America with a simpler menu: one type of Quarter Pounder with cheese rather than four; one Snack Wrap rather than three; and so on. However, this seems to run contrary to the build-your-burger strategy it is trying elsewhere, which expands the number of choices. That in turn is McDonald’s response to the popularity of “better burger” chains, such as Shake Shack, which has just filed for a stockmarket flotation.

Some analysts think that McDonald’s should stop trying to replicate all its rivals’ offerings and go back to basics, offering a limited range of dishes at low prices, served freshly and quickly. Sara Senatore of Sanford C. Bernstein, a research outfit, notes that Burger King, having struggled against its big rival for years, has begun to do better with a simpler and cheaper version of the McDonald’s menu. For the third quarter of 2014 Burger King reported a like-for-like sales increase of 3.6% in America and Canada compared with a decrease by 3.3% of comparable sales at McDonald’s. That said, sales at an average McDonald’s in America are still roughly double those of an average Burger King. So the case for going back to basics remains unproven.

So far, McDonald’s looks as if it is undergoing a milder version of its last crisis, in 2002-03. Then, an over-rapid expansion had damaged its reputation for good service, its menu had become bloated and customers were drifting to rivals claiming to offer healthier food. Now, once again, “McDonald’s has a huge image problem in America,” says John Gordon, a restaurant expert at the Pacific Management Consulting Group. This is in part because of its use of frozen “factory food” packed with preservatives. In 2013 a story about a 14-year-old McDonald’s burger that had not rotted received huge coverage. Even Mike Andres, the new boss of the company’s American operations, recently asked bemused investors: “Why do we need to have preservatives in our food?” and then answered himself: “We probably don’t.”

McDonald’s doesn’t seem to be cool any more, especially among youngsters. Parents say their teenage children have been put off after seeing “Super Size Me”, a documentary about surviving only on McDonald’s food; and “Food, Inc”, another about the corporatisation of the food industry; and by reading “Fast Food Nation: The Dark Side of the All-American Meal”. It is hard to imagine the new McDonald’s initiatives getting the reaction Shake Shack got when it opened its first outlet in downtown Chicago in November: for the first two weeks it had long queues of people waiting outside in the freezing cold.

A lot of the negative PR that McDonald’s gets is the flipside of being the world’s biggest and most famous fast-food chain. This has made it the whipping-boy of food activists, labour activists, animal-rights campaigners and those who simply dislike all things American. In America it has been the focus of a campaign for fast-food workers and others to get a minimum salary of $15 an hour and the right to unionise. Last month the National Labour Relations Board, a federal agency, released details of 13 complaints against McDonald’s and many of its franchisees for violating employees’ rights to campaign for better pay and working conditions. The alleged violations relate to threats, surveillance, discrimination, reduced hours and even sackings of workers who supported the protests. McDonald’s contests these charges, while arguing that it is not responsible for its franchisees’ labour practices.

Not all the criticism McDonald’s gets may be merited–or at least it should be shared more fairly with its peers. However, the company’s troubles have begun to attract the attention of activist shareholders, who may prove somewhat harder to brush aside than labour or food activists. In November Jana Partners, an activist fund, took a stake in the firm. Then in December its shares jumped, on rumours that one of the most prominent and determined activists, Bill Ackman, intended to buy a stake and press for a shake-up.

McDonald’s says it welcomes all investors and is focused on maximising value for its shareholders. Even so, Mr Thompson’s new strategy needs to deliver results quickly. Mr Ackman’s Pershing Square Capital has done well out of its 11% stake in Burger King, because the chain’s main shareholder, 3G Capital, has pushed through a drastic cost-cutting programme and a merger with Tim Hortons, a Canadian restaurant group. “If McDonald’s were run like Burger King, the stock would go up a lot,” Mr Ackman mused recently. It looks like Mr Thompson may soon have to fight on another front.


Starbucks Sells 37 Million Gifts Cards During the Holidays

January 13, 2015

pictureStarbucks Corp. (SBUX) sold about 16 percent more gift cards in the U.S. during the 2014 holiday season as shoppers increasingly defaulted to the fail-safe option of treating their loved ones to lattes and Frappuccinos.

About 37 million gift cards were sold during the holiday season this year, up from about 32 million last year, the Seattle-based company said in an e-mail. More than $1.1 billion was loaded onto Starbucks gift cards between Nov. 3 and Dec. 25 in the U.S. and Canada, where a combined 40 million cards were sold, Starbucks said.

The world’s largest coffee-shop chain, with almost 12,000 cafes in the U.S., is an easy choice for consumers seeking the convenience of gift cards, said Darren Tristano, executive vice president at Chicago-based research firm Technomic Inc. Its stores are everywhere, and many customers visit almost daily.

“It becomes a safe bet,” he said. “We don’t want to give gift cards to people that we’re not sure they’re going to use.”

In 2013, Starbucks customers across the globe loaded $1.4 billion onto gift cards, including $1.3 billion in the U.S. and Canada, between October and December. Starbucks hasn’t yet released numbers for the corresponding period in 2014.

Starbucks said almost 2.5 million gift cards were activated on Christmas Eve this year, up from nearly 2 million sold that day last year. More than $20 billion has been loaded onto Starbucks gift cards since the program originated 13 years ago, the company said in a press release before Christmas.

The gift-card program reached new heights this year when the coffee chain sold a $200 Starbucks Card keychain that’s made with sterling silver and comes loaded with $50. The item sold out online and was available only in limited quantities at certain stores nationwide. Starbucks also offers monogrammed cards for $5.

Gift cards increase the amount of money customers spend when they’re in a Starbucks store, and the company should see a boost in sales in the first part of the year as coffee drinkers start to redeem the cards, Tristano said.

“It’s a significant part of what they do,” he said.


Tim Hortons’ Must-Win Battle

January 12, 2015

iStock_000020253130XXXLarge

By Sherri Daye Scott

COPYRIGHT © 2015 JOURNALISTIC INC. ALL RIGHTS RESERVED.

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Now that it’s merged with Burger King, the question is more important than ever: Can the Canadian favorite finally find true success south of the border?

Tim Hortons has devoted fans in the U.S. One need only to read the Twitter and Facebook feed on the brand’s U.S. website to see the passion. “Can you please open a Tim Hortons in Cincinnati???” writes Kevin Ryne Laile. “I just had the best/fastest/nicest @TimHortonsUS service!! The new one at 5 mile & Newburgh is awesome,” tweets @lemonyellowsun.

Yet the dedication of a few has not translated into the type of market domination the brand has seen in Canada, where Tim Hortons accounts for 42 percent of all quick-service transactions and 75 percent of quick-service caffeinated beverage sales.

Thirty years after opening its first store in the U.S., Tim Hortons’ share of fast-food bakery sales is less than 2 percent, according to Euromonitor. Size plays a role; competitors McDonald’s, Starbucks, and Dunkin’ Donuts operate 10 times the number of stores. But other factors are at play, such as low brand awareness and consumer loyalty to established American brands. Krispy Kreme, for example, operates fewer than 300 stores, compared with Tim Hortons’ 860-plus U.S. units, and enjoys more market share.

“Tim Hortons saw 3 percent sales growth in 2013, which is not bad,” says Elizabeth Friend, senior consumer foodservice analyst at Euromonitor. “But Dunkin’ saw 6 percent growth, while Krispy Kreme saw 7 percent.”

Still, Tim Hortons is determined to become a major player in the U.S. Its most recent annual report called the U.S. a “must-win” market and outlined a top-line, five-year growth strategy that focused on extending dayparts, increasing check averages, expanding the rollout of its bakery-café model, and seeding new markets. And that was before the brand was purchased by Burger King, which moved its headquarters to Canada, christened the new company Restaurant Brands International, and promised to invest in Tim Hortons to set it up for U.S.—and worldwide—success.

“When I look at the U.S. market, I see the world’s largest economic market,” Tim Hortons then-CEO Marc Caira told the Wall Street Journal in May 2014. “I see the world’s largest foodservice market. I see a food market that continues to grow. I see a population that continues to grow. I see a country [that’s similar]. … When you look at all these things and you have a brand like Tim Hortons, why would you not go into that market? To me, it’s not a question of not being there, but what are you going to do that’s different for you to succeed?”

Past performance
The U.S.’s first Tim Hortons opened near the Canadian border in Tonawanda, New York, in 1984. Wendy’s International Inc. purchased Tim Hortons parent company TDL Group Ltd. for $425 million in 1995. The goal was to leverage Tim Hortons’ coffee and baked goods to drive guests into cobranded Wendy’s/Tim Hortons units on both sides of the border during the breakfast daypart.

There were early signs that the partnership might falter. Tim Hortons cofounder Ron Joyce sold his stock in Wendy’s International in 2002 after losing confidence in senior management decisions, such as switching from locally baked goods to frozen par-baked product shipped from a central warehouse. And U.S. stores continually missed sales goals despite significant marketing investment.

“American consumers were confused. They didn’t understand how the two brands worked together, so the partnership just didn’t work,” says Darren Tristano, a restaurant industry consultant for Technomic.

Still, Canadian Tim Hortons stores performed well, accounting for one-quarter to one-third of parent company Wendy’s earnings in 2004. On the strength of those stores, investors began pressuring Wendy’s to spin off Tim Hortons to increase shareholder value. In 2005, Wendy’s announced plans to roll out its own breakfast menu by 2007. The next year, it listed Tim Hortons on the New York Stock Exchange and earned more than $670 million on the first day of trading. And in August 2006, Wendy’s told The Street is would sell its $4.17 billion worth of Tim Hortons stock.

Tim Hortons corporate ownership moved back to Canada in 2009, while U.S. operations remained in Dublin, Ohio. Cobranded units with Wendy’s remain in operation, though the two brands are no longer tied at the corporate level.

Since that time, the Tim Hortons standalone growth strategy in the U.S. has come under scrutiny from stockholders and industry-watchers alike. Thirty-six stores in the Northeast closed in 2010. U.S. same-store sales dipped 0.5 percent in the first quarter of 2013, inciting pressure from hedge fund investors Scout Capital Management LLC and Highfields Capital to curb U.S. expansion efforts in favor of buying back shares.

Now with the merger with Burger King, it remains to be seen how the “Must-Win” plan outlined by Caira, who is now vice chairman of Restaurant Brands International, will be adjusted, if at all.

The current state
With systemwide sales of $589.5 million in 2013 and more than 850 units operating, Tim Hortons ranks 41st among U.S. quick-service brands, according to the 2014 QSR 50. The chain operates in 10 U.S. states—Michigan, Maine, Connecticut, Ohio, West Virginia, Kentucky, Pennsylvania, Rhode Island, Massachusetts, and New York—with the largest concentration of stores in the Midwest and Northeast.

Last year saw the chain extend its breakfast menu until 5 p.m., expand its cold specialty beverage line to include Frozen Green Tea and Frozen Hot Chocolate, and test on-the-go offerings such as Spinach and Egg and Chorizo hand-held pies and a Meatball Panini, all in an attempt to reach a broader American audience and drive up average unit volumes in existing stores.

“Tim Hortons has a much bigger presence in the U.S. than people know,” Friend says. “They are definitely a player.”

A player in a field of tough competitors all vying for a share of U.S. breakfast, lunch, and beverage dollars. Along with Tim Hortons, Euromonitor places 24 other brands in the U.S. bakery fast-food category, including fast-casual concepts such as Panera Bread, Au Bon Pain, and Corner Bakery. Factor in convenience-store chains like 7-Eleven, Wawa, and Sheetz, and you have a market saturated with choice.

However, working in Tim Hortons’ favor as it seeks to stand out is a menu that straddles the line between fast food and fast casual. “They’re a notch above McDonald’s and just below Panera when it comes to food,” Tristano says. “The average check is less than $9, but the offering is closer to bakery-café than coffee [quick serves].”

“They are unique,” Friend says, “in that what they offer is closer to full-meal options than others in their category. Food—especially dinner, snack, and specialty beverage—has been a focus in the U.S., and it shows.”

Still, there is the issue of getting the uninitiated to step into a Tim Hortons stateside.

Tim Hortons is Canada’s No. 5 consumer brand, according to Interbrand, and sells eight out of every 10 cups of coffee poured there. According to YouGov’s August 2014 Brand Index, only 30 percent of Americans are aware of Tim Hortons, while 90 percent or more know Dunkin’ Donuts and Starbucks.

A variety of factors drive those numbers. Both Starbucks and Dunkin’ are established national brands with significant brand-building media spends each year. Plus there is the retail component. Starbucks, for example, sold more than $1 billion in packaged coffee and tea at grocery stores in 2013, bringing its brand to millions of consumers who might not otherwise interact with it.

But at the heart of the matter is the simple fact that Americans do not connect with the brand’s story and links to Canadian nostalgia the way their neighbors to the north do. They view Tim Hortons as simply another bakery-café option—and an unfamiliar one, at that.

“Tim Hortons is essentially starting from scratch in the U.S.,” Friend says. “There is not enough awareness for there to be public perception about the brand, good or bad.”

The positive news for Tim Hortons, though, is that once a guest is introduced to the brand, they rank it comparatively to Dunkin’ and Starbucks on quality and significantly higher than Starbucks on value, according to YouGov’s research.

To reach its goal of 300 new stores by 2018, Tim Hortons is aggressively courting would-be franchisees. Area development and master franchisee deals have already been signed in new markets such as St. Louis; Youngstown, Ohio; Fort Wayne, Indiana; and Fargo, North Dakota. Franchise start-up costs are similar to Dunkin’ Donuts: net worth of $500,000 plus liquid assets in the $250,000–$300,000 range.

“I understand the attraction to the U.S. market,” says Peter Saleh, New York–based analyst at Telsey Advisory Group. “There’s a lot of money to be made if you do it right. But there’s also the risk of losing money for many years as Tim Hortons builds brand recognition. I don’t know that they are going to find a lot of franchisees outside core markets willing to do that.”

At the center of U.S. expansion efforts is the Tim Hortons Café & Bake Shop concept that launched in 2010. The chain describes the prototype on its website as featuring “contemporary exteriors, warm, inviting interiors, advanced equipment and new digital menu technologies.” In an August 2014 report, Morningstar analyst R.J. Hottovy noted the format’s positive impact on same-stores sales and building and equipment costs in the U.S. market.

Looking forward
The question on everyone’s mind, of course, is how the Burger King buyout will impact Tim Hortons’ U.S. plans.

Opinions vary. Some say the merger should help Tim Hortons align itself with savvy master franchisees here in the States and move into battleground states like Texas and Illinois. There is also the potential to expose millions of Burger King customers to the Tim Hortons brand by switching from Seattle’s Best coffee in favor of Tim Hortons products.

Others believe the deal will have little effect on U.S. growth efforts, but might be a positive for overseas expansion. Burger King operates 18,000 stores in 100-plus countries. Pre-sale deals are already in place to open 120 Tim Hortons stores across Qatar, Kuwait, the UAE, Oman, and Bahrain by next year, plus an additional 100 Tim Hortons stores in Saudi Arabia by 2018.

“I’m not totally sold that the U.S. should be a focus for Tim Hortons,” Friend says. “There are plenty of other international markets where there’s opportunity for organic growth versus fighting for market share.”

If the chain is to remain focused on U.S. growth, targeting Millennials with a message of quality is a smart move, Tristano says.

“The Millennial consumer is always looking for something new,” he says. “Tim Hortons could be that for them. Kids see Dunkin’ Donuts as older, their parents’ place. And they don’t have enough money to eat at Panera, but are very focused on quality. If they try Tim Hortons and experience the quality, they’ll pay more.”

Tristano’s advice is telling: the food, not the brand, is the key to find success in the U.S.


Here Are the Only 6 Food Trends You Need to Know for 2015

January 12, 2015

pictureExperts forecast that we’ll be eating more fat and insects, and predict the next sriracha

With all due respect to sports geeks, music freaks, stock jocks, and teenage girls, there is no group more obsessed with The Next Big Thing conversation than food people.
The “restaurant trends for 2015″ predictions aren’t just coming now; they’ve been coming, steadily, since before Halloween. Press releases, slideshows, listicles in trades and foodie zines all aimed at telling us what’s the next kale, sriracha, or quinoa.

Interesting reading, often hunger inducing, but with so many predictions — from so many chefs, flavor-makers, food companies, bloggers— it’s hard to make sense of it all.
So this year, to cut through the tsunami of food punditry, I submit a highly abridged list.

I asked only six experts — all industry people who live and breathe food trends. And I asked these carefully chosen experts to make some carefully chosen decisions. Instead of a top ten list — or even a five-item slideshow — just give me that one big food prediction for 2015.

1. The Rise of Fat
For most health-conscious people, fat ranks right up there on the no-no list with nicotine and smog. But Kara Nielsen, culinary director of the Boulder, CO-based Sterling-Rice Group, believes 2015 could be known as the year that more and more Americans get over their fat phobia.

Nielsen isn’t talking about just any fat — not the trans fats found in highly processed foods. She’s talking about natural, animal-derived fats. Real butter sales are at a 40-year high; cultured butter is surging in popularity; high-end burger joints, like Shake Shack, celebrate fat as an essential part of a better burger. And the trend seems to be broadening: There’s a San Francisco restaurant selling a wildly popular chicken fat rice dish; there’s a rapidly growing Boulder company that only features full-fat yogurt. Nielsen expects more high-fat dairy products, more fat-celebrating meat purveyors, and more higher fat Asian foods to hit restaurant menus and grocery store shelves in 2015. “Americans are recognizing that the fear of fat that we’ve lived under for so long is erroneous,” said Nielsen. And it’s not just because of a foodie quest for flavor. Says Nielsen: “It’s also because of books like The Big Fat Surprise that are making the argument that natural fat is an essential part of a healthy diet.”

2. Local Meat
There’s near unanimity among food trend trackers that the local foods movement will continue to grow in 2015. Darren Tristano is no exception. Tristano, who tracks the restaurant industry for market research giant Technomic, expects more local produce, more local beer, more local grains. But Tristano believes the big local story of next year will be local meat. Californians will see more menus boasting of grass-fed beef from Niman Ranch; Chicagoans will likely see more free-range bacon from Slagel Farm. Diners in DC will see more chicken sandwiches from Polyface Farms. In short, get ready for more restaurants to celebrate the local origins of their chicken, beef, or pork just as zealously as their local Brandywine tomatoes or radicchio.

3. Insect-Powered Foods
Restaurants serving grasshopper tacos and ant guacamole, entrepreneurs peddling cricket-powered powerbars —there’s been tons of media coverage of insect-eating in 2014. Yet most people regard it as a curiosity, more Fear Factor-fad than food trend.

Not Suzy Badaracco. The president of food trend consultancy Culinary Tides believes insects will rise as a foodstuff in the U.S. far sooner than many expect. In picking insects as her “Food of 2015,” Badaracco said that insects draw on not one but three food trends: the growing interest in foraging, the invasivore movement (i.e., don’t kill them, eat them), and, the granddaddy of current trends, the desire for more protein. (Insects are protein powerhouses; grasshoppers, for instance, have about the same protein content as a chicken breast). Full-bodied insects won’t appear in your Safeway this year; get ready for them to arrive in processed form, especially protein-packed power bars, like Chapul and Exo. Badaracco expects insects, processed as flour, to soon become a popular protein sources for bakery and cereal products. Full-bodied insects — tentacles and all? Further off, but coming. Badaracco sent a list of more than a dozen American restaurants that feature insect options, such as the “Grass Whopper” —a burger made from cricket meat.

4. The Next Sriracha is Harissa
A few years ago, it was the unpronounceable hot sauce that you might find in Chinatown. Now, you can get a Subway chicken sriracha melt with a side of sriracha potato chips.

Maeve Webster, a restaurant analyst for market researcher Datamonitor, believes the next sauce to experience a sriracha-like rise is harissa, a spread of dried chiles, garlic, tomatoes, caraway, paprika, coriander, and olive oil that’s as common as ketchup in Tunisia. It’s still largely unknown to Americans, but Webster says all the elements are in place for harissa. “U.S. consumers can’t get enough of spicy foods. Harissa has a flavor profile that is both spicy and familiar,” Webster says. Like sriracha, harissa is also versatile and can work in a wide variety of applications. Last year, Datamonitor found that less than 3% of American restaurants included a harisssa item, but Webster noted that’s a more than 180% leap over three years. If Webster is right, get ready for the chicken harissa melt — maybe not this year, but soon.

5. The Next Quinoa is Millet
Melissa Abbot, director of culinary insights at The Hartman Group, concedes that her pick for “Food of 2015″ is not very sexy. Millet is, after all, best known as the main ingredient in birdseed. But Abbot believes that this avian staple could quite possibly become the next quinoa. Ever since quinoa exploded on the scene, the food industry has been in hot pursuit of the Next Great Grain, and there are plenty of healthful, gluten-free candidates. So why millet, and why not amaranth, sorghum, teff, or fonio? It’s gluten-free, protein-rich, high fiber, and, Abbot says, has a superfood quality all of its own. “It retains its alkaline properties after being cooked, which helps in reducing inflammation ideal for those with wheat allergies and sensitive digestion.” Another plus for millet: it’s local. The Great Plains, especially Colorado, is one of the world’s major millet growing regions.

6. Peas
This pick for “Food of 2015″ will not necessarily be found on restaurant menus or on grocery store shelves. You may even need glasses to notice it.

Barb Stuckey, who is a vice president at Mattson, one of the world’s largest food product developers, describes Americans as being in a “torrid love affair” with protein. While it’s debatable whether Americans should be seeking out more protein, the reality is food companies are responding to our love affair with protein by giving us more protein.

Soy is one of the best, most widely available, efficient ways of fortifying foods with protein, Stuckey says. But whether deserved or not, soy is falling out of favor. Food makers are searching for non-GMO plant-based sources of protein and, Stuckey says, “the newest, hottest kid on the block is pea.” Peas are high in protein and, as people gain more experience processing it, the flavor is improving. “Look for pea protein to show up the ingredient list of bars, cereals, beverages, you name it.”


GrubMarket Aims to Bring Farmers Markets Straight to Your Door

January 7, 2015

chi-grubmarket-mike-xu-bsi-20150102-001By Amina Elahi

Copyright © 2015, Chicago Tribune

There’s not much growing around Chicago these days. That means farmers markets are on hold and even the most persistent locavores are forced to shop at conventional grocery stores.

A young San Francisco company called GrubMarket hopes it can keep consumers connected to local food suppliers with an ecommerce platform that lets farmers and small food businesses sell their goods, even in mid-winter. The company expanded operations to Chicago in December in its first push beyond the west coast.

“I am a big fan of local food and supporting local farms,” said founder and CEO Mike Xu.

GrubMarket is a member of of the San Francisco accelerator Y Combinator’s current class. Xu said the company has raised $2 million from the program and other investors since launching in February. The platform includes 280 vendors who sell to the Chicago and San Francisco markets, Xu said. The majority of those are in the Bay Area.

Chicago is GrubMarket’s first expansion market because of Xu’s connection to the Midwest — he went to the University of Wisconsin at Madison — and due to the number of farms and farmers markets here.

The vendors GrubMarket works with may not be big enough or even willing to sell their goods through retail channels. Xu said his company can help those who want an easier way to sell directly to customers. He’s set on creating software to automate the inventory process, for example.

“We need to manage the logistics and communication with vendors, local small farms,” Xu said. “They need a lot of coordination with us and the buyers.”

Xu said GrubMarket has sold $400,000 worth of food, including fresh produce, cheeses, nuts, condiments, meats and more. GrubMarket contracts with drivers to offer free delivery of goods, though vendors have the option of charging customers for direct shipping. The site indicates when products will be available for delivery, so customers know if an item won’t be available until the following week, for example.

Sharon Seleb, the company’s general manager for Chicago and the Midwest, said Chicago customers can buy goods from vendors in Illinois, Indiana, Wisconsin and Michigan. She said she works with vendors and helps them market their goods with free photography. Since GrubMarket takes a negotiated percentage of vendors’ gross revenue, Seleb said it’s in the company’s interest to promote their goods.

Customers also have the option of ordering Grub Boxes, pre-selected cases of goods with themes such as fruits or meats to be delivered at regular intervals. The prices depend on size and contents. GrubMarket’s California Fruit Bounty box costs $45 for a regular box and $65 for the large version.

“Our customer is more educated, and they would understand the purpose of getting a certified organic apple versus the apple for 50 cents,” Seleb said. “In terms of price point, our prices will be more on par with a Whole Foods or a farmers market. They’re not cheap.”

The service thereby is unlikely to replace the grocery habits of most Chicagoans, said Darren Tristano, executive vice president at Chicago-based food and foodservice consulting firm Technomic. He expects Millennials or more affluent consumers — those who likely frequent farmers markets — to take interest in GrubMarket.

Tristano said the local food movement is driven by shoppers’ desire to make purchases they see as supportive of their communities or eco-friendly because products don’t need to be shipped as far. All of this has contributed to a change in these consumers’ values.

“Traditionally it’s been around price and quantity, but the new consumer equation seems to be around where does it come from, how does it connect to my lifestyle, can I connect to this brand?” Tristano said. “Those things are all driving value to a Millennial consumer and to those who can quite frankly afford it.”

Tristano also pointed to restaurants’ role in the success of farmers markets. In many places, he said, chefs seek out fresh goods from local markets. He suggested that some may turn to GrubMarket for similar reasons.


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