Casual Dining: Frozen Dinners With Waitress Service

Includes: CPB, EAT, K, MCD, MDLZ, YUM
by: Michael Steinberg
Former FDA Commissioner David Kessler uses the terms “salient” and “hyperpalatable” in his book “The End of Overeating” to describe how the processed food industry optimizes sugar, fat and salt to create highly addictive food. The New York Times’ “The Hard Sell on Salt” lets us into laboratories at Kellogg (NYSE:K) to understand how three layers of salt are required to hold Cheez-It together: “Salt sprinkled on top gives the tongue a quick buzz. More salt in the cheese adds crunch. Still more in the dough blocks the tang that develops during fermentation.”
Campbell Soup (NYSE:CPB) and Kraft (KFT) explained in the Times article that by removing salt beyond a certain point they are in danger of losing customers. When salt is lowered, fat and sugar have to be increased to rebalance. But most importantly, lower salt requires food processors to use higher quality ingredients. Salt masks the taste of low quality tomatoes and over processed meat.
Both Kessler and the Times focus on the public’s need to feel good about what they eat. While fat and sugar affect your weight in the near term, high sodium intake is tomorrow’s high blood pressure. Managing the sugar, fat and salt mix is really about managing the feel-good rather than the consumers’ actual health.
Kessler spends the first section of the book reviewing animal experiments showing that the right balance of sugar, fat and salt can override the body’s natural control mechanisms, leading to overeating. The final sections deal with how we can fight the overwhelming power of the packaged food industry with behavioral changes. Nothing is startling in these parts of the book.
The second section elaborates how food is optimized for addiction. The Snicker’s bar is “extraordinarily well engineered” according to Sensory Spectrum’s founder Gail Vance Civille; it disappears without leaving any buildup in your mouth. One or two chews are desirable, but then the food must form a single savory blob to be swallowed without any residue. Think about how cookies, crackers and chips behave in your mouth. Achieving taste can be done with artificial ingredients, but texture is very dependent on the balance of sugar, fat and salt.
Kessler does give us insight into how foods satisfy us. Fats are the most satisfying because they leave the stomach at only 2 calories per minute; proteins empty at 4 calories per minute and simple sugars at 10 calories per minute. We all know the quick spike in satisfaction and then hunger of high sugar foods. But fats take the longest to signal that we are full. This is the danger of excess fat in combination with sugar and salt.
Investors should find Kessler’s most interesting chapter “A visit to Chili’s.” It got me to wondering who provides the best user interface: Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) or Chili’s (NYSE:EAT), KFC (NYSE:YUM) and McDonalds (NYSE:MCD)? This is not as odd a question as you might think. I expected McDonald’s food to be almost completely prepared in the factory, so it was no revelation that the fries and chicken breast are pre-fried and frozen before they get to the store. What I did not expect is that the casual dining segment is more about delivery than cooking.
I was naive to believe that cooks actually prepared meals according to strict recipes and procedures in the casual dining segment. I thought consistent quality and repeatability came through training. I should have realized that companies cannot expand to thousands of restaurants, including franchisees, by training cooks.
Kessler tells us that the GUI of the chain restaurant businesses are assemblers – not cooks. Flash freezing was the technical breakthrough. Each subassembly of the meal is frozen separately in the right size so that meal can come together in the store without any soggy parts. All the sauces arrive in jars or additional frozen packets. It’s just heat, plate and present to the customers. Consistency is not left to chance.
The restaurant business is about developing addictive food in an exciting atmosphere (the graphical part of their GUI). I had always believed the all moderately priced restaurants had to draw a line of where to semi-customize their food at the store; Greek diners in New Jersey are not exempt. How else could they have 99 entries on the menu? But Kessler taught us that chain style casual dining is a frozen dinner with waitress service.
I recommend Kessler’s book for any investor trying to evaluate large scale chain restaurants. It’s not just about health, it’s about business. The customer’s table is at the end of a long conveyer belt.
Note: Kessler talks with many flavor enhancement companies in the book, including McCormick (NYSE:MKC), beyond the scope of this article.
Disclosure: None