FAST-FOOD firms have to be a thick-skinned bunch. Health experts regularly lambast them for peddling food that makes people fat. Critics even complain that McDonald’s, whose golden arches symbolise calorie excess, should not have been allowed to sponsor the World Cup. These are things fast-food firms have learnt to cope with and to deflect. But not perhaps for much longer. The burger business faces more pressure from regulators at a time when it is already adapting strategies in response to shifts in the global economy.

Fast food was once thought to be recession-proof. When consumers need to cut spending, the logic goes, cheap meals like Big Macs and Whoppers become even more attractive. Such “trading down” proved true for much of the latest recession, when fast-food companies picked up customers who could no longer afford to eat at casual restaurants. Traffic was boosted in America, the home of fast food, with discounts and promotions, such as $1 menus and cheap combination meals.

As a result, fast-food chains have weathered the recession better than their pricier competitors. In 2009 sales at full-service restaurants in America fell by more than 6%, but total sales remained about the same at fast-food chains. In some markets, such as Japan, France and Britain, total spending on fast food increased. Same-store sales in America at McDonald’s, the world’s largest fast-food company, did not decline throughout the downturn. Panera Bread, an American fast-food chain known for its fresh ingredients, performed well, too: its boss, Ron Shaich, claims this is because it offers higher-quality food at lower prices than restaurants.

But not all fast-food companies have been as fortunate. Many, such as Burger King, have seen sales fall. In a severe recession, while some people trade down to fast food, many others eat at home more frequently to save money. David Palmer, an analyst at UBS, a bank, says smaller fast-food chains in America, such as Jack in the Box and Carl’s Jr., have been hit particularly hard in this downturn because at the same time they are “slugging it out with a global powerhouse” in the form of McDonald’s, which ramped up spending on advertising by more than 7% last year as others cut back.

Some fast-food companies also cannibalised their own profits by trying to give customers better value. During the recession companies set prices low, hoping that once they had tempted customers through the door they would be persuaded to order more expensive items. But in many cases that strategy backfired. Last year Burger King franchisees sued the company over its double-cheeseburger promotion, claiming it was unfair for them to be required to sell these for $1 when they cost $1.10 to make. In May a judge ruled in favour of Burger King. Nevertheless, the company may still be cursing its decision to promote cheap choices over more expensive ones because items on its “value menu” now account for around 20% of all sales, up from 12% last October.

Analysts expect the fast-food industry to grow modestly this year. But the downturn is making them rethink their strategies. Many companies are now introducing higher-priced items to entice consumers away from $1 specials. KFC, a division of Yum! Brands, which also owns Taco Bell and Pizza Hut, has launched a chicken sandwich that costs around $5. And in May Burger King introduced barbecue pork ribs at a hefty $7 for eight.

More cheeseburgers

Companies are also trying to get customers to buy new and more items, including drinks. McDonald’s started selling better coffee as a challenge to Starbucks. Its “McCafé” line now accounts for an estimated 6% of sales in America. Others are testing a similar strategy. Starbucks has sold rights to its Seattle’s Best coffee brand to Burger King, which will start selling it later this year. McDonald’s is now rolling out frappé coffees and smoothies.

As fast-food companies shift from “super size” to “more buys” they need to keep customer traffic high throughout the day. Many see breakfast as a big opportunity, and not just for fatty food. McDonald’s will start selling porridge in America next year. Breakfast has the potential to be very lucrative, says Sara Senatore of Bernstein, a research firm, because the margins can be high. Fast-food companies are also adding midday and late-night snacks, such as blended drinks and wraps. The idea is that by having a greater range of things on the menu, “we can sell to consumers products they want all day,” says Rick Carucci, the chief financial officer of Yum! Brands.

Yet growth opportunities in America are limited because the market is considered to be “saturated”, not so much in fats but outlets. China is the place where most fast-food chains, like so many industries, see big expansion. Mr Carucci, for one, thinks China will be “the biggest growth opportunity for the industry this century”. If so, then Yum!, which has the greatest presence in China of any Western fast-food company, will be celebrating. Already around 30% of the company’s profits come from China, and in the next five years this is expected to grow to 40%. India also looks like a succulent opportunity. Others plan to serve up more business in Russia and elsewhere in Europe. Given that around 75% of fast-food companies’ revenue in Europe comes from people eating in the restaurants (compared with half in America), older European outlets are being done up to make them more attractive places.

Getting chunky

The recession also proved the importance of size in competing for customers, which means that more consolidation is likely. Wendy’s and Arby’s, two American fast-food chains, merged in 2008. On June 11th their shares surged following news that a buyer was interested in the company. Smaller chains may catch the eye of private-equity firms, just as CKE Restaurants did earlier this year when Apollo Management, a buy-out firm, purchased it.

But what about those growing waistlines? So far, fast-food firms have nimbly avoided government regulation. By providing healthy options, like salads and low-calorie sandwiches, they have at least given the impression of doing something about helping to fight obesity. These offerings are not necessarily loss-leaders, as they broaden the appeal of outlets to groups of diners that include some people who don’t want to eat a burger. But customers cannot be forced to order salads instead of fries.

In the future, simply offering a healthy option may not be good enough. “Every packaged-food and restaurant company I know is concerned about regulation right now,” says Mr Palmer of UBS. America’s health-reform bill, which Congress passed this year, requires restaurant chains with 20 or more outlets to put the calorie-content of items they serve on the menu. A study by the National Bureau of Economic Research, which tracked the effects on Starbucks of a similar calorie-posting law in New York City in 2007, found that the average calorie-count per transaction fell 6% and revenue increased 3% at Starbucks stores where a Dunkin Donuts outlet was nearby—a sign, it is said, that menu-labelling could favour chains that have more nutritious offerings.

In order to avoid other legislation in America and elsewhere, fast-food companies will have to continue innovating. Walt Riker of McDonald’s claims the makeover it has given to its menu means it offers more healthy items than it did a few years ago. “We probably sell more lettuce, more milk, more salads, more apples than any restaurant business in the world,” he says. But the recent proposal by a county in California to ban the golden arches from including toys in its high-calorie “Happy Meals”, because legislators believe it attracts children to unhealthy food, suggests there is a lot more left to do.

The changes facing fast food: Good and hungry | The Economist.

Members of the European Parliament (MEPs) are due to vote on new legislation on food labelling – determining what nutritional information should be displayed on the packaging of items such as snacks, soft drinks and ready-meals. The vote has been the subject of a major lobby campaign by the food industry, opposed to mandatory information on food packaging.

The Confederation of the food and drink industries of the EU (CIAA) has spent €1 billion opposing proposals for front-of-pack ‘traffic light’ labels – which have a green symbol for healthy options and a red symbol for sugary, fatty and salty foods – in favour of a system based on guideline daily amounts (GDAs), which shows how many calories a ‘portion’ contains as a percentage of an adult’s daily needs.

Health and consumer campaigners argue that such labels are less effective because they are single-coloured, so less visible, rely on an arbitrary notion of a portion, and only reflect adult needs, which are not relevant for children – often the target market for snacks and sweets. They favour the traffic-light label which is much easier to understand for a larger audience and the most socially disadvantaged. But their voices were completely outnumbered by industry’s campaign, which included TV adverts, lunch debates with MEPs, and tons of detailed ‘voting recommendations’ sent to MEPs.

Industry also commissioned two studies to look at consumer perceptions of labels from the European Food Information Council (EUFIC), a think tank which is funded by the food industry. The studies focused almost exclusively on industry’s preferred GDA approach and did not compare it with traffic lights to see which scheme provides shoppers with the best information at-a-glance on healthier foods.

An independent study in Australia found that people who used traffic light labelling were five times more likely to be able to identify healthier food products than those who saw the single coloured counterpart promoted by industry.

In March, the European Parliament’s Environment committee rejected the traffic-light system by 32 to 30 votes and that Committee’s report is due to be discussed and adopted by MEPs next week in Strasbourg.

A red light for consumer information | Corporate Europe Observatory.

READ the original article on Kellogs claims here.

The Federal Trade Commission barred Kellogg’s last year from running ads saying Mini-Wheats are “clinically shown to improve kids’ attentiveness by 20 percent.” To claim “benefits to cognitive health, process or function provided by any cereal or any morning food or snack food,” was a no-no, unless the claims were true. But the F.T.C.’s order covered only cognitive abilities. So just as it was signing its consent, Kellogg’s was starting a new campaign in which “Snap, Crackle and Pop” called out to parents from the Rice Krispies box promising to help “support your child’s IMMUNITY.”

Last week, the F.T.C. said that it had closed that loophole, reaching an agreement with Kellogg’s that would bar the company from making any claims about the health benefits of their food unless they were backed by scientific evidence and not misleading.

Businesses have been making dubious claims about their products at least since the 17th century, when the British clergyman Anthony Daffy sold Daffy’s Elixir as a cure for scurvy as well as agues, gout, rheumatism, rickets, worms and other ailments. Hucksterism — no matter how implausible the claim — lives on.

In 2004, the F.T.C. barred KFC from saying its fried chicken was compatible with low-carbohydrate weight-loss programs — because such diets specifically advise against breaded, fried foods. The Food and Drug Administration sent letters to 17 food companies in March warning them about misleading product labels. Dreyer’s claimed there is no trans-fat in its ice cream but forgot to mention it has lots of saturated fat. POM Wonderful claimed its pomegranate juice helps treat, prevent or cure hypertension, diabetes and cancer.

This might be par for the course for an era of swift-boating political ads and a torrent of television commercials plumping for myriad wonder drugs (sudden death may result). It leaves the consumer in a quandary: what part of the label can be believed?

Editorial – Snake Oil for Breakfast – NYTimes.com.

WASHINGTON — Maybe it should have just stuck with Snap, Crackle and Pop.

The Kellogg Company has agreed to advertising restrictions to resolve an investigation into its claims about the health benefits of its Rice Krispies cereal, the Federal Trade Commission said on Thursday.

The agreement expands on a settlement order that Kellogg agreed to last July over similar claims that another cereal, Frosted Mini-Wheats, was “clinically shown to improve kids’ attentiveness by nearly 20 percent.”

The commission acted against Kellogg as public health researchers and obesity opponents have intensified their challenges to the marketing of sugary foods.

“We expect more from a great American company than making dubious claims — not once, but twice — that its cereals improve children’s health,” Jon Leibowitz, the chairman of the F.T.C., said in a statement.

Marion Nestle, a nutrition professor at New York University, said it was unusual for the commission to act in a case involving health claims made for food products, an area traditionally handled by the Food and Drug Administration.

Last summer, Kellogg unveiled product packaging claiming that Rice Krispies “now helps support your child’s immunity” and that the cereal “has been improved to include antioxidants and nutrients that your family needs to help them stay healthy.”

In the order covering Frosted Mini-Wheats, Kellogg had agreed to stop making claims about benefits to “cognitive health, process or function provided by any cereal or any morning food or snack food” unless the claims were true and substantiated.

The new expanded order bars the company from making “claims about any health benefit of any food unless the claims are backed by scientific evidence and not misleading.”

In a statement, Kellogg, based in Battle Creek, Mich., said it had “a long history of responsible advertising,” but did not specifically address the latest accusations.

“We stand behind the validity of our product claims and research, so we agreed to an order that covers those claims,” the company said. “We believe that the revisions to the existing consent agreement satisfied any remaining concerns.”

Jennifer L. Harris, a psychologist who studies food marketing at the Rudd Center for Food Policy and Obesity at Yale, said the agreement highlighted the need to tighten requirements so that all health-related claims on packaging are based on scientific evidence, which is not the case now.

“As parents become more health-conscious, these claims try to make high-sugar cereals healthier than they really are,” she said.

A study by the Rudd Center found that the least healthful cereals were the ones most heavily marketed to children, and that children were exposed to more advertising for highly sweetened cereals than for any other kind of packaged food.

via Kellogg to Restrict Ads to Settle U.S. Investigation – NYTimes.com.

Swati Kapoor, 25, was about to order a double chocolate cake doughnut when she noticed something new on the rack at Dunkin’ Donuts. A tag said 290 calories. In an instant, she switched to a chocolate frosted doughnut (230 calories).

“To prevent obesity,” the skinny medical student explained, munching away at a table in 30th Street Station.

Philadelphia begins phasing in enforcement of its strictest-in-the-nation menu-labeling law tomorrow. This first part, requiring chain restaurants to list calories on food tags and menu boards, is a relatively simple proposition that research shows can influence ordering habits.

A similar law will take effect in New Jersey next year, and dozens of such bills are pending around the country, including in Harrisburg.

What’s different in Philadelphia will become apparent on April 1, when restaurants with individual menus must list saturated fats, trans fats, carbohydrates, and sodium, in addition to calories, with every item.

No one really knows what will come of this broader experiment in attempted behavioral change.

“The majority of people, I believe, will see this as cumbersome and an overreaction and not necessary,” said George McKerrow Jr., president and chief executive officer of Ted’s Montana Grill, who anticipates having to expand the menu at his South Broad Street location from two pages to six.

Still, just two months after Ted’s added calories alone to its menu here, responding to a New York City requirement, McKerrow has noticed a small but measurable change in Philadelphia: “Some people have chosen to eat the healthier items more often.”

Restaurants initially fought all efforts to mandate labels on menus. As the movement spread, with dozens of variations proposed across the country, the industry switched its goal to uniformity: calories, yes; sodium, no.

It has won that fight everywhere except Philadelphia. City Council approved the measure in 2008, after viewing data that showed the impact of chronic diseases related to diet – diabetes is diagnosed in 13 percent of residents, high blood pressure in 36 percent – broken down by district.

Diabetics must manage their intake of carbohydrates (including sugar); too much sodium can raise blood pressure. Both are listed on the familiar nutrition-facts label on all prepackaged goods.

“But it is really hard for people, if they eat out, to know about the sodium content,” city Health Commissioner Donald Schwarz said.

At Olive Garden, for example, nothing on the dinner menu hints at a difference between linguine alla marinara (900 milligrams of sodium, according to its Web site) and pork Milanese (3,100 mg) – or notes that the Food and Drug Administration recommends less than 2,300 mg a day total, a line that must be added by April 1.

“It would make a difference,” said Nashikai Ianscoli, 57, of Center City, who has had to go on a diet to control her blood pressure. She grew up on a farm in the South where her mother got fresh vegetables by the bushel.

Much has changed since she was a child.

“Back in the 1970s, eating out was a special occasion. What people ate didn’t matter as much,” said Margo G. Wootan, nutrition-policy director at the Center for Science in the Public Interest.

Americans now get an estimated one-third of their calories from meals outside the home. And though FDA serving sizes haven’t changed, restaurant portions, especially fast food, have doubled or tripled. Skyrocketing obesity rates – one-third of Americans are obese, about the same as in Philadelphia – defied every big fix attempted.

In 2003, an influential study examined long-term trends and calculated that a difference of 100 calories a day, either ingested or spent, could tip the balance from national weight gain to weight loss. This, the researchers concluded in the journal Science, could be accomplished through small changes that the public would be more likely to embrace.

Wootan’s Washington center, meanwhile, had been pondering how to get people to eat better. At a conference, she recalled, dietitians were presented with hamburgers, onion rings, and other fare from sit-down restaurants and asked to estimate caloric content. Even with nutrition degrees, they were off by hundreds of calories, always on the low side.

Wootan developed a model menu-labeling law and started calling dozens of policymakers around the country: Maine (the first to introduce a bill), New York City (the first to pass it), Philadelphia (the fourth to implement it).

Read more on: What’s on the menu? Food facts | Philadelphia Inquirer | 01/31/2010.

William, Neuman, The New York Times,  January 10, 2010

First New York City required restaurants to cut out trans fat. Then it made restaurant chains post calorie counts on their menus. Now it wants to protect people from another health scourge: salt.

On Monday, the Bloomberg administration plans to unveil a broad new health initiative aimed at encouraging food manufacturers and restaurant chains across the country to curtail the amount of salt in their products.

The plan, for which the city claims support from health agencies in other cities and states, sets a goal of reducing the amount of salt in packaged and restaurant food by 25 percent over the next five years.

Public health experts say that would reduce the incidence of high blood pressure and should help prevent some of the strokes and heart attacks associated with that condition. The plan is voluntary for food companies and involves no legislation. It allows companies to cut salt gradually over five years so the change is not so noticeable to consumers.

“We all consume way too much salt, and most of the salt we consume is in the food when we buy it,” said Dr. Thomas Farley, the city health commissioner, whose department is leading the effort. Eighty percent of the salt in Americans’ diets comes from packaged or restaurant food. Dr. Farley said reducing salt from those sources would save lives.

Since taking office, Mayor Michael R. Bloomberg, who just began his third term, has gained a reputation as an advocate for healthy living, initiating prominent campaigns against smoking and harmful trans fats. To combat obesity, he has campaigned for calorie labeling on restaurant menus and warned consumers about sugary soft drinks.

The city’s salt campaign is in some ways more ambitious and less certain of success than the ones it waged against smoking and obesity. For one thing, the changes it prescribes require cooperation on a national scale, city officials said, because major food companies cannot be expected to alter their products for just the New York market.

And removing salt from many products can be complicated. Salt plays many roles in food, enhancing flavor, preventing spoilage and improving shelf life. It helps bread to rise and brown.

The city’s campaign against salt resembles its push to cut trans fat from restaurant foods, which began with a call for voluntary compliance. When that did not work, the city passed a law to force restaurants to eliminate trans fat.

But city officials said it would be difficult to legislate sodium reduction.

“There’s not an easy regulatory fix,” said Geoffrey Cowley, an associate health commissioner. “You would have to micromanage so many targets for so many different products.”

He said officials hoped the campaign would work through public pressure. Companies that complied would benefit from good publicity.

The city has been discussing the program with the food industry since late 2008, yet only a few companies appear ready to jump on board. One of those is A.& P., the supermarket chain.

“We think it’s a very realistic set of criteria that our suppliers can adhere to,” said Douglas A. Palmer, vice president for store brands at A.& P.

He said the company expected to embrace the city’s salt reduction goals for the hundreds of store brand products it sells under labels like America’s Choice and Smart Price in 435 supermarkets throughout the Northeast and Mid-Atlantic regions. In Manhattan, the chain operates under the name Food Emporium.

Subway, the fast food sandwich chain, also said it expected to commit to the city’s salt guidelines at its nearly 23,000 stores across the country.

Lanette R. Kovachi, Subway’s corporate dietitian, said the company has reduced salt in stores in several other countries, including Britain and Australia, in response to government programs there.

“We view these as achievable goals,” she said.

The company’s best-selling item, a six-inch turkey sandwich, is already below the city’s five-year average target for lunch meat sandwiches in restaurants. But the chain also has a six-inch spicy Italian sub whose salt content is well above the city’s goals.

On Monday, after a year of consultations with industry, the city will release preliminary targets for sodium content. After a review, the city will unveil final targets in the spring and ask companies to commit to the program.

The system proposed by the city is complex, with reductions ranging from 10 to 40 percent for 61 classes of packaged foods and 25 classes of restaurant foods.

It would measure the average salt content of a company’s entire line of a particular type of product, like canned vegetables, breakfast cereals or frozen dinners, adjusted to give greater weight to products with the highest sales. That would allow companies to maintain a range of sodium levels but would create incentive to cut back on salt in the most popular items.

While most food companies say they agree at least with the goal of reducing salt, some medical researchers have questioned the scientific basis for the initiative, saying insufficient research had been done on possible effects. While agreeing that reducing salt is likely to lower average blood pressure, they say it can lead to other physiological changes, some of which may be associated with heart problems.

An elaborate clinical trial could weigh the pluses and minuses of cutting salt in a large group of people. But that would cost millions, and it has not been done.

Dr. Michael H. Alderman, a professor at the Albert Einstein College of Medicine, said the city’s initiative, if successful in reducing salt, would amount to an uncontrolled experiment with the public’s health.

“I’m always worried about unintended consequences,” he said.

The federal government recommends that sodium intake from salt be limited to 1,500 to 2,300 milligrams a day, with the latter figure equaling about a teaspoon. But the average adult in this country consumes about 3,400 milligrams a day.

Several major companies, including some that have been leaders in reducing salt, said they would not join the city initiative.

“One of the things we want to bring across to New York City is that sodium reduction does not always follow a prescribed time or prescribed progress,” said Chor-San Khoo, vice president for global nutrition and health at the Campbell Soup Company. “There’s no one size fits all.”

Campbell has already made significant reductions in the amount of salt in many of its products, including many canned soups, V8 beverages and Pepperidge Farm breads.

“We will continue to reduce sodium as long as there’s consumer acceptance in the marketplace,” Ms. Khoo said.

ConAgra, which makes a wide array of products, including Hunt’s canned tomato products and Chef Boyardee packaged meals, said it would continue with previously announced plans to cut the sodium in its portfolio of products by 20 percent by 2015.

“We don’t have plans to join other organizations’ pledges,” the company said.

via Citing Hazard, New York Says Hold the Salt – NYTimes.com.