McDonald’s is the latest to address antibiotics usage in its beef

McDonald’s is the latest to address antibiotics usage in its beef

In the vein of better late than never, McDonald’s has announced it will join the ranks of KFC, Pizza Hut, Boston Market, Carl’s Jr., Hardee’s, Chipotle Mexican Grill, Subway and Panera in moving toward only using antibiotic-free meat at its restaurants. McDonald’s has already made this move with chicken and is targeting the same for 85% of its beef supply chain in the next few years. This doubling down is clearly part of McDonald’s move to appeal to consumers that are embracing aspects of our Clean Living investing theme, which will have reverberations across the supply chain that feed its 37,000 global locations.

McDonald’s said Tuesday that it planned to reduce the usage of antibiotics across 85 percent of its beef supply chain in the coming years, in a move designed to help curb the rise of drug-resistant bacteria.

The burger chain said it will begin working with its top beef sources to analyze and measure the current state of antibiotics usage and by 2020 would set antibiotics-usage reduction targets. Starting in 2022, McDonald’s will begin reporting its progress on the systematic reduction of antibiotics in the food it serves.

The chain has previously addressed antibiotic usage in its menu items. In 2016 in announced that it had removed antibiotics important for human medicine in chicken products in the U.S. and later expanded its efforts with stricter guidelines for its global suppliers.

McDonald’s is not the only company to introduce antibiotics usage policies in recent years. Other quick-service chains working to address this public health issue include KFC, Pizza Hut, Boston Market, Carl’s Jr. and Hardee’s, which all have made moves toward only using antibiotic-free chicken in recent years. Subway has also joined such “clean” food-focused restaurant chains as Panera and Chipotle in working to eliminate antibiotics from its supply chain entirely by 2025. In 2016, In-N-Out Burger announced a phase-out of beef raised with antibiotics.

Source: McDonald’s to reduce antibiotics usage in beef

Panera highlights its focus on Cleaner food and drinks

Panera highlights its focus on Cleaner food and drinks

We are seeing more restaurant companies highlight their ingredient choices in the food and drinks they serve in their marketing campaigns. These companies are looking to build consumer awareness as they look to the growing portion of the population that are opting for foods, drinks, and snacks that are better for you. In other words, look to ride the tailwind associated with our Clean Living investing theme.
Recent companies looking to embrace this tailwind and distinguish themselves from their competition include Chipotle and to some extent McDonald’s, but Panera, as well as Yum Brands’ Pizza Hut and Taco Bell, were some of the early adopters. Panera, in particular, has made several strides in recent years to inform consumers about the ingredients in their offerings and in 2016 phased out artificial ingredients from its menu.
We suspect we will be seeing far more companies embrace this investing theme with their marketing materials in the days and weeks to come. Of course, it’s one thing to market that you have better for you ingredients, but a cheeseburger no matter how you make it is still going to be part of our Guilty Pleasure investing theme. Sorry, McDonald’s.


Panera is betting that customers want to know more about what’s in their food.

The restaurant chain announced on Tuesday that it has started identifying the amount of whole grain per serving, as well as the overall percentage of whole grain, on all of their whole-grain bread.

The strategy anticipates that health-conscious consumers will shop more at Panera if they have a better idea of what they’re eating and an easier way to incorporate healthy foods into their diets.

In 2016, the company finished phasing out artificial ingredients from its menu. Last year, Panera began disclosing the amount of added sugar and calories in its fountain drinks, and it introduced a new line of drinks with lower sugar and no artificial sweeteners, flavors, colors or preservatives. Panera observed that customers were choosing healthier drinks.


Source: Panera wants you to know exactly what’s in its bread – CNN

Facebook joins Amazon in disrupting food delivery 

Facebook joins Amazon in disrupting food delivery 

Recently it was announced that Amazon (AMZN) partnered with Olo, a supplier of order and pay technology to thousands of U.S.  restaurants, to expand its burgeoning food order/delivery service. After testing a similar solution over the last year, Facebook (FB) is now taking its own take on this live across the U.S. As we watch these and other competing services that are likely to develop (where is Alphabet/Google on this?),  it will be interesting to see the split between online orders at home or office vs. mobile orders.

We suspect mobile activity, as with several other aspects of our Connected Society investing theme, will win the day. We also suspect restaurant companies, especially smaller ones, a breathing a sigh of relief that as they embrace this technology disruptor their fate may be somewhat different than brick & mortar retail.

Facebook Inc. wants to be a bigger player in the restaurant game.The social network has announced a new feature that will let users buy meals on its website through third-party delivery services like DoorDash or directly from a group of restaurants such as Chipotle Mexican Grill Inc. and Five Guys.

Facebook has been working on the new product for a year, and carried out tests with restaurants including Papa John’s. It’s part of tech company efforts to boost their presence in the restaurant industry.

Source: Facebook to Take Food Delivery Orders Directly on Its Website – Bloomberg

Shifting Consumer Preferences Favor Food with Integrity Bullets Not Restaurant Shares

Shifting Consumer Preferences Favor Food with Integrity Bullets Not Restaurant Shares

It’s no secret the restaurant industry is having a tough time given restaurant traffic data and less-than-flattering industry articles as it grapples with several consumer-centric issues. We received yet another indication of that restaurant pain last week when Sonic Corp. (SONC) reported a 7.4 percent decline in same-store-sales. The company’s management team chalked up the drop to “a sluggish consumer environment, weather headwinds and share losses…” amid a “very intense” competitive environment. Predictably, the company is retooling its menu offering and even though it’s late to the party, it is also jumping on the smartphone bandwagon.

Stepping back there is a larger issue that Sonic and other restaurants have to contend with – declining restaurant traffic that is due not only to lower prices at grocery stores but also to the shift in consumer preferences to healthier foods. That preference shift is toward natural and organic offerings as well as paleo, gluten-free and others and that’s one of the reason’s we’ve favored shares of United Natural Foods (UNFI) as grocers expand their offering to meet that demand.

Even as companies like Coca-Cola (KO) and PepsiCo (PEP) tinker with their carbonated soft drink formulas to reduce sugar, the new enemy, they have to do so without sacrificing taste. Some investors may remember the whole New Coke thing back in 1985 that was ultimately a failure given the different taste. As Coca-Cola, PepsiCo and even Dr. Pepper Snapple (DPS) look to reformulate to ride either the lower sugar or better-for-you shift, it bodes rather well for flavor companies like International Flavors & Fragrances (IFF) or Sensient Tech (SXT).

That shifting preference has led several restaurant companies such as Panera Bread (PNRA) and Darden’s (DRI) Olive Garden to change up their menus in order to lure eaters. Over the last several years, Panera has been working to eliminate artificial additives in its food to make it “cleaner” for consumers and in 2015 it released a “no-no” list of more than 96 ingredients that it vowed to either remove from or never use in food. Darden is shifting to lighter fare recipes that have far fewer calories than prior ones. Even Chipotle (CMG), the one-time poster child for our Food with Integrity investing theme until its food safety woes last year, has come to fulfill its pledge of using no added colors, flavors or preservatives of any kind in any of its ingredients.

These are all confirming signs of our Food with Integrity investing theme that Lenore Hawkins and I talked about on last week’s podcast. Here too with these new menu offerings, it’s a question of how can restaurants offer healthier alternatives without sacrificing flavor? To us, the answer is found in  International Flavors & Fragrances, McCormick & Co. (MKC) and Sensient shares as well as other flavor companies.

Against that backdrop — – the shift to eating not only at home but eating food that is better for you – we have serious doubts when it comes to the quick service restaurant industry. According to the data research firm Sense360, which analyzed data from 140 chains and 5 million limited-service visits, 38% of heavy quick-service restaurant users reduced their visits in February, compared with the period before Christmas. Not exactly an inspiring reason to revisit shares of Sonic or several other QSR (Quick Service Restaurant) chains like McDonald’s  (MCD) or Wendy’s (WEN) at a time when bank card delinquency rates are climbing, subprime auto issues are doing the same, student debt levels loom over consumers and real wage growth has been meager at best.

While more people eating at home is a positive for Kroger (KR) and Wal-Mart (WMT), our “buy the bullets not the gun” approach continues to favor shares of McCormick and International Flavors & Fragrances in particular.  For those unfamiliar with “buy the bullets, not the gun” it’s a strategy that looks to capitalize on select industry suppliers that serve the majority of the industry with key components or other inputs. Shining examples of this strategy have included Intel (INTC), Qualcomm (QCOM) and recently acquired ARM Holdings. Common traits among them include a diverse customers base and strong competitive position with a leading market position for their products. The same holds true for both McCormick and International Flavors & Fragrances, which are also benefitting from our Rise & Fall of the Middle Class investing theme.

Facing Higher Wages, Wendy’s Exploring Automation Options To Cut Costs

Facing Higher Wages, Wendy’s Exploring Automation Options To Cut Costs

What do rising minimum wages and the need for workers that are always prompt and courteous add up to?

If you’re an employer, especially in the quick-service restaurant industry you may say higher costs and problems. When there are problems, companies tend to look for solutions and we’ve already seen ordering kiosks pop up at Panera, mobile ordering at Starbucks and its coming this year to McDonald’s. Wendy’s is jumping on the ordering kiosk bandwagon, but it is also eyeing other “forays into automation.” Based on a recent McKinsey analysis of 800 occupations,  “accommodation and food service” contain the highest percentage of tasks—73%—that could be completed using current technology. It seems automation, which includes robots of different kinds, could be popping up at Wendy’s before too long… not good news for the 5 million Americans who work in food and beverage serving industries.

By the end of the year, Wendy’s says it will have installed self-serve ordering kiosks in 1,000 of its restaurants.

COO Robert Wright told the LA Times that the machines, along with other forays into automation, will help reduce labor costs, which rose 5% at the company last year as a number of states—including Alaska, California, and Massachusetts—raised their minimum wages. Replacing human labor with machines, or threatening to do so, has become a common response to raising wages by fast food executives.

The first automated burger machine, for instance, debuted more than 50 years ago, but practical considerations, like the cost of the machine compared to labor and the machine’s limitations, stalled adoption. Today, as the price of labor rises, the cost of machines drop (three of Wendy’s kiosks, according to the LA Times, will cost just $15,000), and the quality of the technology improves, automation technology is becoming a legitimate option to fast food restaurants.

Source: Wendy’s will make automate ordering at 1,000 stores this year — Quartz