CHANGING VALUES 2004-05-24 (2)

ROSEANNE HARPER

McDonald's new adult Happy Meal and other chains' expanding lists of low-carb options have grabbed the media spotlight -- and it holds lessons for supermarkets, sources told SN.

Their efforts are focused on encouraging healthy eating and giving customers what they need to stick to the eating plan they've adopted, quick-serve restaurant chain officials said. Other industry sources call food service's new attention to health-consciousness smart and farsighted.

McDonald's and other food and beverage purveyors have faced obesity suits. Nonetheless, the immense investment in its recently unveiled "balanced lifestyles platform" cannot be purely a defensive maneuver, one industry expert said.

"McDonald's is doing something real. All those menu changes cost a lot of money and you can bet they're not doing that just to assuage the media. Anything they've done, they've studied hard and are giving it their best shot," said Tom Miner, principal, Technomic Inc., a Chicago-based consulting and research firm that works with the food-service and retail food industries.

"There have been a lot of menu changes [throughout the food-service arena] in the past six months but it seems like even more because they've been accompanied by promotional activity and that has hit the wire like crazy," Miner said.

One retailer told SN he sees all the media attention and the constant freestanding inserts proclaiming new low-carb menus at the likes of Burger King, Hardee's, Subway and Charlie Brown's as a boon to the supermarket deli business.

"It's all positive. The more people talk about low carb the better. The deli is a natural stomping ground for people watching their carbs. Look at all the high proteins -- the meats, the cheeses -- especially the cheeses," said Ed Meyer, vice president, deli-seafood-carryout foods, at Schnuck Markets, a St. Louis, Mo.-based independent with more than a 100 stores.

He explained that "low-carbers' attention to cheese" is very timely for retailers.

"The wholesale cheese market has gone up unbelievably. That means higher prices for both us and the consumer. But Atkins accents the positives of cheese, and that acts as a counterbalance to the negative publicity about the higher prices."

And although in-store bakeries may have to struggle to make a profit on their newly introduced low-carb items, such is not the case in the deli.

"Look at it this way. When low-fat was in, we had to add some products and do some things, but the deli doesn't have to do much to offer low-carb items. That's what we have. I'd say 75% of all my [stockkeeping units] fit into, or are somewhat related to, the Atkins or other diets," Meyer said.

Other retailers agreed and added it's not hard to make a profit with them either.

"The trend is good for deli. We have a good margin on low-carb deli salads. Now we're working on making low-carb sandwiches and I'm starting to advertise [Hansel & Gretel] Healthy Deli zero-carb ham and zero-carb beef bologna," said Richard Travaglione, vice president, operations, at 10-unit Morton Williams Associated Stores in New York's borough of The Bronx. "Hopefully, we can draw people from supermarkets that aren't doing these things."

Actually, Hardee's, the St. Louis, Mo.-based hamburger chain that launched its lettuce-wrapped low-carb burger last December, has found that the low-carb version of its popular Thick Burger has brought in new business.

Hardee's was the first to make a low-carb, bunless burger a permanent menu item, so it has had a few months to analyze the item's track record. The company is happy with what it sees, said Bev Pfeifer-Harms, public relations manager, at the 2,100-unit Hardee's.

"It's giving us incremental sales. We're not just moving people from choosing a bunned burger to a bunless burger. We know from the numbers we see that we're getting new people coming to Hardee's specifically to order a low-carb option. In fact, customers tell us that and they thank us."

The low-carb Thick Burger's success has spurred two new menu items at Hardee's: a low-carb Breakfast Bowl stacked with folded-over eggs, sausage patties, cheese, crumbled bacon and topped with an omelet; and the latest, a grilled chicken club, which made its debut in March. That and the Breakfast Bowl were no-brainers considering the success of the low-carb Thick Burger, Pfeifer-Harms explained.

"After the Thick Burger, it was easy for us to move into other parts of the menu. Breakfast, for instance, was a daypart nobody was doing a low-carb option for. We figured people are specifically coming to us for the low-carb burger, so why not give them a reason to come in for breakfast?"

In supermarkets, naturally low-carb items have served to stabilize deli business at LaCrosse, Wis.-based Quillin's, particularly in the face of a new Wal-Mart Supercenter, officials there said.

"Our deli hasn't taken a hit with Wal-Mart moving in. Actually, we've become a destination. The low-carb consciousness has allowed us to showcase what we've always been selling," said Tony Doering, the nine-unit independent's senior deli manager, who also agreed that the attention to low-carb in food service is good for supermarket delis.

And it's not just in the fast-food arena that menus are changing. Even at steakhouses such as regional chain Charlie Brown's, Mountainside, N.J., where steaks and chops should have always made a low-carb dieter's heart sing, there's now a printed low-carb menu in addition to the chain's regular menu.

"We've always had low-carb items, of course, but we're just making it a little simpler, showing what has what number of grams [of carbohydrates] and we've modified some of our recipes," said Laurie Piro, director of marketing at Charlie Brown's. "For instance, on the low-carb menu, our shrimp cocktail comes with tartar sauce and we took the croutons out of the chicken Caesar salad. We're also trying to do more of a breakdown for other diets. For example, we have listed gluten-free items on our Web site."

Miner at Technomic said that like steakhouses, who specialize in high-protein items, supermarket deli and food-service departments could capitalize on the low-carb trend fairly easily.

"Low-carb menu items generally are simpler, more elemental. It's almost like a deconstruction of standard recipes. In the process, you leave out a few ingredients that are carrying the carbs and replace them with something that's no-carb but enhances flavor in a different way. That's certainly something the retailer can play to."

McDonald's, on the other hand, has had to do some hefty research and stands to lose money on some changes it has made, such as the downsizing of supersized portions, industry sources said.

"McDonald's and other QSRs are the targets of the obesity police. Enter Dr. Atkins, smaller portions, burger dishes without bread, low-carbs, no carbs. The cause of the day or week or month is causing, appropriately so, operators to be market-driven and give the consumer what he wants or thinks he wants," said Ira Blumenthal, president, Co-Opportunities, an Atlanta-based consulting and marketing firm.

Downsizing portions is just part of what McDonald's is doing to promote healthy eating. Indeed, earlier this month, the Oak Brook, Ill., chain launched Happy Meals for adults that include one of the chain's new entree salads, a bottle of water, a pedometer and a walking tips booklet.

Addressing all aspects of healthy eating, the world's largest restaurant chain has unveiled a whole "balanced lifestyles platform" that officials said is aimed at decreasing obesity in America and improving the nation's overall physical well-being.

The new program gives customers opportunities to mix and match offerings in the adult and children's Happy Meals. Other innovations include enabling customers to order burgers and other sandwiches "low-carb style," without the buns, and the introduction of a "simple steps" brochure that shows customers how to order across the menu to lower fat, calories and carbohydrates, if desired.

Next up, in June, will be the addition of healthy choices in children's Happy Meals. There will be fresh, peeled apple slices served with a low-fat caramel dipping sauce and new beverage choices, including 100% apple juice, and white and chocolate 1% milk served in child-friendly containers.

"McDonald's is the single most successful restaurant chain in the world and that's because of their commitment to invest, to test, to re-invent, to do extensive menu-concepting and recipe development. They'll maintain their margins and succeed with some of the new offerings. Some will make the cut and perhaps become ongoing menu items," Blumenthal said.

He also praised McDonald's and the rest of the food-service industry's marketing of its menu changes and said retailers could take a lesson from that.

"If they market products' nutritional values with a restaurant-esque flair, the supermarket will surely benefit from the movement toward healthful eating."