Who Says Innovation Is Dead in Age of Crazy Cheesy Crust

Who Says Innovation Is Dead in Age of Crazy Cheesy Crust

Move over hamburgers and fries. Here come the sweet-chili chicken wraps and bacon-filled tater tots.

Looking to lure Americans with the coolest new menu item, Burger King Worldwide Inc (BKW)., McDonald’s Corp. (MCD) (MCD) and Red Robin Gourmet Burgers Inc (RRGB) (RRGB). and others are turning up the heat in their test kitchens. At the same time, classically trained chefs, looking for more regular work hours and higher pay, are no longer snubbing large chains. The result has been an arms race among eateries to create the most exciting new foods to attract consumers and boost sales.

“Over the last 12 to 18 months, you’ve seen a lot of innovation,” Eric Hirschhorn, Burger King’s vice president of global innovation, said in an interview. The Miami-based chain last year introduced 57 new items, the biggest menu overhaul in the company’s history and more than twice as many as in 2011, he said. In March, the Whopper seller rolled out bacon-filled tater tots for $1.99.The new foods and drinks, some permanent and some for a limited time, are partly the result of the nascent economic recovery. During the downturn, some chains pulled back on creating items and promoted the value of their $1 menus. McDonald’s fiddled with the flavors of McCafe drinks at the expense of new food, while Burger King targeted young males. Now, both chains, and their rivals, are dishing up more creations.

Sales at the top 500 U.S. limited-service restaurant chains rose 5.6 percent to $184.9 billion last year, outpacing the 2.9 percent growth of sit-down eateries, according to Chicago-based researcher Technomic Inc.

Driving Traffic

“New product news in this space is what drives guest traffic,” said Peter Saleh, a New York-based analyst at Telsey Advisory Group. “You can’t just rely on the old faithful Big Mac and Whopper.”

McDonald’s recently began selling Fish McBites and sweet- chili chicken wraps and later this month will roll out a 250- calorie egg-white breakfast sandwich at its more than 14,100 U.S. locations.

Americans “want variety, and I think we’re starting to see that willingness to give them the variety that they’re looking for,” Dan Coudreaut, executive chef and director of culinary innovation at McDonald’s, said in an interview.

Coudreaut, who worked on the egg-white sandwich, has his own chefs’ kitchen at the company’s headquarters in Oak Brook, Illinois, while his team has six other test rooms. Prior to joining McDonald’s in 2004, Coudreaut had been a sous chef at Quatorze Bis in New York City and Cafe Pacific in Dallas.

New Items

There have been 32 new and limited-time menu items so far this year at McDonald’s, Burger King and Wendy’s Co. (WEN), compared with 10 last year during the same time, according to Datassential, a food-industry researcher in Los Angeles. Along with its new products, McDonald’s is testing a steak-and-egg burrito and chicken wings, while Wendy’s is trying out fish wraps in some locations.

Restaurants also are putting lower-calorie options on their menus to prepare for federal legislation that would require chains to list nutritional information on their menus, Saleh said. Burger King introduced a turkey burger for $3.99 and last year the chain rolled out fruit smoothies as well as chicken, apple and cranberry salads.

“They don’t want to be the one who doesn’t have something for 300 or 400 calories,” he said.

More Valuable

McDonald’s and Burger King have become more valuable to investors recently. The Big Mac seller traded at a 21 percent premium to the Standard & Poor’s 500 Index on a price-to- earnings basis yesterday, compared with 13 percent in November, as its shares gained 9.8 percent in the six months through yesterday. Burger King shares climbed 27 percent in the same period. Red Robin is also more valuable — it traded at a 39 percent premium to the S&P 500, compared with 6.1 percent in October. McDonald’s rose 0.5 percent to $101.96 at 9:44 a.m. in New York, while Burger King added 3.2 percent to $19.05 and Red Robin gained 0.2 percent to $44.74.

At Pizza Hut, Executive Chef Wiley Bates just introduced crazy cheesy crust pizza, a new pizza with pockets of melted cheese around the outer edge. Bates, who joined Pizza Hut in 2011, was previously a culinary arts professor and has been the director of food and beverage at Le Meridien (HOT) hotel in Dallas. The chain, owned by Yum! Brands Inc. (YUM), earlier this year started selling another Bates creation: pizza sliders — 9 for $10.

Still, restaurant test kitchens should proceed with caution, said Bob Goldin, executive vice president at Technomic. Restaurants have introduced some notable flops over the years, such as McDonald’s spaghetti and the Bell Beefer loose-meat sandwich at Taco Bell.

‘Core Audience’

“You don’t want to alienate your core audience, but you definitely want to expand,” he said.

Red Robin (RRGB), a 470-store burger chain, also is investing in new food. Last year, it added three people to its culinary team and opened a 12,000-square-foot (1,115-square-meter) test kitchen, where the televisions are usually tuned to the Food Network, near its headquarters in Greenwood Village, Colorado. The burger and beer seller is also turning to schools, such as Johnson & Wales University and the Culinary Institute of America, to bolster its culinary staff, said Denny Marie Post, senior vice president and chief menu and marketing officer.

“We are starting to look at recent graduates,” Post said. “They need not toil in the back of a kitchen.”

Luciana Page, a hospitality management student at Florida International University in North Miami, will intern with Red Robin this year after her Korean Kalbi BBQ hamburger won the company’s student burger recipe contest. While she started school with the goal of working at a Ritz Carlton hotel, she says she would consider employment at a large chain restaurant.

Appealing Job

Doing research in a test kitchen is appealing, Page, 35, said in an interview.

“Not just being a chef and making meals but sitting there and coming up with concepts,” she said. Page’s hamburger may be sold in Red Robin restaurants later this year.

Along with its signature burgers, Red Robin this year began selling an alcoholic shake made with Guinness beer, Jameson whiskey and chocolate ice cream.

There’s been more interest in working in test kitchens.

“There are so many different restaurants that are coming up with innovative things,” said Kianna Ramos, career services director at Le Cordon Bleu College of Culinary Arts in Minneapolis/St. Paul, which has its campus in Mendota Heights, Minnesota. “There have been more students that are wondering, ’Does that fit’” my career plans?

Culinary Students

The same thing is happening at the Culinary Institute of America’s three U.S. campuses, said Wendy Higgins, career services director in Hyde Park, New York. Chipotle Mexican Grill Inc (CMG). recruits students at the school’s quarterly job fairs and founder Steve Ells is a graduate, she said.

“You’re seeing more and more students coming up that are attracted to this side of the business,” said Marshall Scarborough, manager of global product development at Atlanta- based Popeyes Louisiana Kitchen, owned by AFC Enterprises Inc (AFCE)., and a student adviser at the Research Chefs Association in Atlanta. Scarborough, who used to cook at country clubs and at a Michelin-starred restaurant in Frisange, Luxembourg, started at Popeyes in 2006.

Scarborough helped with the creation of six chicken dipping sauces that were introduced at Popeyes last year. Among the new flavors: Bayou Buffalo, Sweet Heat and Blackened Ranch.

Besides the appeal of creating food for millions of people, culinary-school graduates like the 9 a.m. to 5 p.m. schedule at many test kitchens, Scarborough said.

“They see that they can have a life outside of a restaurant,” he said.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: