Call them meat free, imitation meats, vegan burgers, vegie burgers or beef substitutes, a recent story in The Wall Street Journal documents the success that some chains have had with the non-meat products. One recent success story came from White Castle, which saw comparable store sales rise 4 percentage points in the 2 months following introduction of the impossible Foods burger. The article also mentioned other chains selling meat alternative menu items including Burger King, Little Caesars, Del Taco, Carl’s Jr., Hardee’s, TGI Friday and Red Robin Gourmet Hamburgers.
Technomic Inc. reported that 15 percent of U.S. restaurants had meatless burgers on their menus in March. The concept of meatless burgers is decades old but the technology has evidently improved so the current products being offered by impossible Foods and Beyond Meat are superior tasting compared with the bean- and/or mushroom-based products of the past. However, the current products are more expensive that ground beef. Then, too, the success of the new brands has led to a shortage of supply and left the manufacturers apologizing to operators.
Not all operators are sold on the non-meat product. The president of Arby’s Restaurant Group says his company competes with rivals by offering meat, not meat alternatives. He also doubts that people will pay more for something that tastes worse. Further, McDonald’s was quoted as saying they have no plans to offer any meat alternatives in the U.S.; however they do have vegan options in Finland and Sweden.
Economic News This Week
- The Institute for Supply Management’s Manufacturing Index showed a slight retreat in May with the index sliding from 52.8 in April to 52.1 in May. (Any reading greater than 50 shows increasing activity, so the May index indicates manufacturing activity increased but at a slightly slower rate from April.) The institute notes May is the 121st consecutive month of higher manufacturing activity. Most changes from April to May were small and probably insignificant. For example, the New Orders Index rose 1.0 percent while the Production Index declined 1.0 percent. All of the indexes stayed above the critical 50 reading with the exception of the Order Backlog Index, which declined 6.7 percentage points to 47.2. Of the 18 manufacturing industries in the study, 11 reported growth in May and 6 contracted and it is probably safe to assume one was flat.
- The Institute for Supply Management’s Non-Manufacturing Index ticked up slightly in May. The index increased 1.4 percentage points to 56.9. (Any number greater than 50 indicates increasing activity.) This is the 118th consecutive month the Non-Manufacturing index has showed growth. The Business Activity/Production Index rose 1.7 percentage points to 61.2. The New Orders Index edged up 0.5 percentage point to 58.6 but the Backlog of Orders Index fell 2.5 percentage points. The Employment Index jumped 4.4 percentage points to 58.1. Of the 18 Non-Manufacturing industries studied, one was flat, one reported a decrease and the other 16 reported growth. The Institute lists the industries in order of growth and Accommodations & Foodservices was first.
- New orders for manufactured durable goods declined 2.1 percent in April according to the U.S. Census Bureau’s full report. The drop in orders followed a 1.7 perecnt increase in March. The decline was driven by a 5.9 percent decrease in Transportation Equipment. New orders for manufactured nondurable goods rose 0.5 percent in April.
- Business sector labor productivity increased 3.4 percent in the first quarter of this year as output increased 3.9 percent and hours worked increased 0.5 percent. The Bureau of Labor Statistics also reported unit labor costs decreased 1.6 percent in the first quarter this year and decreased 0.8 percent over the last 4 quarters. This is the lowest 4 quarter rate since a 1.7 percent decline in the fourth quarter of 2013.
- ADP reported that U.S. employment increased by just 27,000 in May with employment at smaller employers reporting a decline of 52,000. The report also said the Leisure and Hospitality sector added 16,000 new jobs.
- Initial jobless claims increased 3,000 to 215,000 for the week ending May 25 from the adjusted number of claims the previous week. The 4-week moving average declined by 3,750 to 216,750.
- The U.S. Bureau of Labor Statistics reported that employment increased 75,000 in May. The average increase in the first 4 months of this year was 190,000. The Bureau also revised the employment numbers down from those previously reported for both April and March. On the positive side, the unemployment rate remained at 3.6 percent, which matches a 50-year low, while average hourly earnings have increased a respectable 3.1 percent throughout the year. (For May hiring in foodservice, please look at the Foodservice News This Week section below.)
- The Federal Reserve reported that consumers increased borrowing by 5.25 percent in April on a seasonally adjusted annual basis. Revolving credit, which is mostly credit card borrowing, rose at an annual rate of 8.0 percent while nonrevolving credit, which include auto loans, student loans, etc., increased at an annual rate of 4.25 percent.
Foodservice New This Week
- Foodservice operators added 16,900 employees to their payrolls in May according to the Bureau of Labor Statistics. With employers in the private sector adding 90,000 new jobs (government employment dropped
- Chipotle Mexican Grill says proposed tariffs on Mexican goods could cost the chain $15 million. The Trump administration wants the tariffs in place to put pressure the Mexican government to cut down on illegal immigrants entering the U.S. from Mexico. Chipotle’s chief financial officer said if the tariffs became permanent Chipotle would cover the increased costs by cost cutting and/or modest menu price increases. https://lasvegassun.com/news/2019/jun/03/chipotle-says-tariffs-could-increase-costs-15m/
- Wingstop’s CEO invests in technology to boost sales and control labor costs. Wingstop’s digital transactions are almost $5.00 higher on average, which improves franchise’s return on investment. Wingstop utilizes a 1,750-square-foot unit to hold down costs.
- Corporate Stirrings: Fast casual chain Pei Wei Asian Kitchen was acquired by California-based PWD Acquisitions, which is owned by restauranteur Lorne Goldberg. He also owns three other Asian chains – Pick Up Stix, Leeann Chin and Mandarin Express — and will effectively double the number of locations when those 165 are added to Pei Wei’s 167. Pei Wei was previously owned by owned by the New York private investment firm of Centerbridge Partners LP. The financial terms of the acquisition were not disclosed. Jamba Juice will drop “juice” from its name. The chain thought it was too narrow and didn’t adequately tell the consumer what they offered.
- Growth Chains: Landry’s plans on opening 10 to 12 Saltgrass Steak Houses in 2019.
- Comparable Store Sales Reports.
For the most recent same-store sales data, click here for the latest Green Sheet.