Where’s the beef? How inflation hits the food industry

IIf Clara Peller were still with us, she would be called back to serving American consumers who wonder what they’re getting for ordering a hamburger. Peller was, of course, the one who perfected the signature line “Where’s the beef?” in Wendy’s advertisements in the 1980s.

In recent weeks, lawyers have posed this question to McDonald’s (MCD), Wendy’s (WEN) and Burger King (QSR), filing a lawsuit against each company for using publicity photos that enlarge their burgers to 35%. One of Wendy’s photographers also noted that she used undercooked patties in her work because fully cooked burgers looked less appetizing.

Ironically, the lawsuits against McDonald’s and Wendy’s claim beef hype has diverted consumers’ purchases away from competitors, essentially asking the court to answer Clara Peller’s haunting question: Where’s the beef?

So hot it leaves grill marks

Photographic evidence notwithstanding, making “the beef” disappear is actually becoming an increasingly popular move in the food industry, albeit with a little more transparency.

Climate change, the Russian invasion of Ukraine and the continued impact of COVID have all pushed food inflation higher than at any time in the past generation – and higher than at any time. moment in the professional life of most food professionals. This is unlikely to change as the ongoing mega-drought in the western United States is also leading cattle producers to reduce their herds in the face of rising feed costs.

In response, restaurants are choosing to reduce “beef”, as well as chicken and pork.

Domino’s and Burger King have reduced the number of wings in an order from 10 to eight, a 20% reduction. Subway has also reduced portion sizes of roast chicken in sandwiches and wraps. A host of groceries lost a bit of weight or became a few smaller items.

Restaurant industry insider publications like Behind the house also ask leaders to reflect adapt their portions. Does a serving of meat have to be 16 ounces, or could it be 14 ounces, they ask. Or will a diner notice an ounce less cheese on their plate? Hope the avocados don’t look too closely when their meal is served. Cocktails can serve as a distraction.

Chefs aren’t the only ones playing this game. In response to rising menu prices, diners are also ordering fewer items, about 1/3 less item per order for the typical restaurant, according to the NPD Group, a market research company.

Finally, they received my order

Restaurant companies try to make these changes as unnoticeable as possible, knowing that getting less for the same price is not a good deal for customers. But the increase in prices is even more disheartening for diners.

What’s missing from too many companies’ playbook is the one consumers seem to want, which is to change recipes to include slightly smaller portions of meat. and slightly larger portions of other ingredients, many of which are less expensive. For about 40% of US consumers, it’s actually the best combo deal.

According to a Changing Tastes study conducted earlier this year, 39% of adult American consumers want to eat less meat in the coming year, with more than 1/15 of Americans making this choice since the response began. to COVID. Their number one strategy for doing this is to simply eat smaller portions.

Imagine the surprise of discovering that the best solution for catering companies to manage food inflation is the one their customers actually want.

For a key demographic – Millennials and GenZers – it’s an even more attractive offer. Our research found that 60% of them would be willing to make slightly different food choices if it reduced the environmental footprint of what they ate or helped fight climate change. Just under half of older consumers (above millennials) said the same.

This may explain why a few restaurant companies have started changing their recipes — a culinary strategy — rather than cutting ounces.

Del Taco (JACK) Epic Burritos from Jack in the Box now feature crinkle-cut fries as a topping in their epic one-pound burritos. Noodles and Co. (NDLS) is now launching a high-protein offering that includes high-protein, low-carb noodles, but no more meat, chicken or shrimp. Wendy’s also surprised the market by introducing strawberry salad as a limited-time summer menu option, rather than a sandwich or burger, which offers a much larger meal with the same protein as a single chicken sandwich. . The promotional photos look delicious. But as one of Wendy’s photographers reminded us, publicity shots can be deceiving.

what looks good

There is no clear winner yet, just examples of good tactical moves. For now, this is not good news for investors, as food inflation ignores supply chain strategies and business models.

But as the restaurant industry continues to navigate an unprecedented business environment, culinary innovation and emphasizing the role of the chef seem like the best approach. Just as over the past two centuries, the fundamental questions of what is available, what looks good and what we can afford can all guide our choices if catering companies can make them fast enough before the next shoe falls.

With summer now upon us and temperatures as hot as inflation, these are the same questions I’ll be asking when figuring out what to throw on the grill this weekend.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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