business news in context, analysis with attitude

This is an old debate here on MNB, but one of my favorites…so, once more into the breach, dear friends.

MNB reported yesterday on a Brand Week report that Burger King’s deal with ConAgra will bring the fast feeder’s French fries to retail stores later this month, which large-sized versions – dubbed King Kolossalz, and King Wedgez – expected to follow shortly.

The microwaveable fries will retail for approximately $1.49 per box.

My comment: I would argue that supermarkets ought to consider whether carrying Burger King-branded French fries is a good competitive move, considering that Burger King’s core mission is to get people to eat out rather than at home. Why do anything to bolster the competition?

There will be folks who will argue that I am being too absolutist in this position, but let’s be clear. My goal is not to be absolutist, but rather to suggest that everybody in the food business is in a battle for share of stomach, and therefore everybody ought to be playing hardball. That’s what BK is doing…using supermarkets to bolster its own brand credibility and bottom line. Why be complicit?

One MNB user responded:

I’m sorry but I simply think you are wrong here and that you risk encouraging supermarket retailers to focus on the wrong thing.

First off, BK says their mission is “"We will prepare and sell quick service food to fulfill our guest's needs more accurately, quickly, courteously, and in a cleaner environment than our competitors.

Second, if BK is using supermarkets to bolster its own brand credibility and bottom line why shouldn’t a supermarket use BK to bolster its offering and build its bottom line assuming the product will sell well and return an acceptable margin?

Finally I would point to Wegmans who in my opinion have been very successful by presenting the absolute best alternative for supermarket shoppers in their markets. In spite of their remarkable prepared food offerings I believe their success has been the result of being the best supermarket they can be not from a focus on taking customers away from Burger King.

I think BK’s growth and share of stomach is much more tied to our love and use of automobiles and our busy lifestyles than some choice we make between I am going to prepare and eat at home or I am going to go out for dinner. If I weren’t already out and pressed for time I would likely be eating at home or in a sit down restaurant rather than at BK or the Mac.

I certainly hope I’m not encouraging retailers to focus on the wrong thing.

I would respond that I’m not entirely sure that Burger King’s fries bolster a supermarket’s image. But more importantly, your use of Wegmans as an example is a good one – because Wegmans has such strong brand equity that carrying competing brands doesn’t hurt it. How many retailers have such a strong image, and deliver on its value promise with such consistency?

MNB user Steven Barry wrote:

I think this is a good move for BK. You need the cross promotional and branding opportunities when you’re up against the likes or McDonalds…. Even though everyone knows who they are, the extra ad space in the consumers’ freezer door does not hurt the cause. It’s much like the way Pepsi and Coke spend a whole lot of resources and dollars advertising during a super bowl. People are going to eat out anyway as they are also going to eat in as well. Those are a couple of facts that are far beyond BK’s control but what will not hurt, is that the one of the last images the consumer has just after looking in the icebox and subsequently deciding to eat out, was a Burger King logo on the french fry box. They now have a leg up in the decision process. I do hope they have the sense to leave that crazy looking plastic faced King out of the marketing plan though as it tends to scare the kids…and me as well I must divulge.

I’d be a lot more scared by the notion of providing equity, space and sales to a company that competes with me for share of stomach.

MNB user Mike Sommers wrote:

Is this not a win-win for both BK and supermarkets? Supermarkets are going to make profit by selling French fries whether the brand is Ore-Ida or BK French Fries. Burger King is making a very smart move because they realize with the down economy people are eating out less and eating at home more, so it makes sense for them to try and sell their brand where the customers are, which is the grocery store. Supermarkets wouldn’t agree to putting this new brand on their shelves if they weren’t going to make money on it…so what does the name of the brand matter?

Could this not be a case where it would be an intelligent loss of business?

Again, while I am arguing the absolutist position, I’m not really so absolutist on this issue. I’m just endeavoring to get retailers to think in hardball terms about the notion of share of stomach.

Another MNB user wrote:

Setting aside for a moment your 'share of stomach' argument (which is quite valid, especially as people are now eating out less in order to save money), the real thing that bothers me about the BK French Fries story is that they're not that good. Certainly not nearly as tasty as McDonald's or Wendy's.

If, at some time in the future, they put their onion rings in your local store's freezer case - then you'll have something to worry about! 😉

We had a piece yesterday about a New York Times story about a controversy surrounding the Smart Choices program, which uses a green checkmark on CPG products to denote “smarter food and beverage choices.” At issue are the standards used by Smart Choices to define these smarter options …and the fact that “sugar-laden cereals like Cocoa Krispies and Froot Loops” have made the list.

My comments, in part: This is a debate that ultimately doesn’t do any of the nutritional labeling programs any good, because it creates doubts about legitimacy and consumer value. I’m sure the Smart Choices folks are doing their best to offer viable and actionable guidance, but I’m not sure they are doing themselves any favors by saying that “sugar-laden” cereals are good for you, and falling back on the “well, they are better for you than some other things” defense. In the end, as many of these companies actually spent a lot of time and money trying to develop healthier options, they may undermine those efforts by lumping them in with less healthy products…

There will, I suspect, be some folks who will say that this is why there needs to be a national nutritional labeling system, but I also think there is a good argument for why a multitude of programs may better serve shoppers…if for no other reason than it allows people to choose which programs best serve their needs. For example, if I think that the Guiding Stars program is the one that best suits my buying patterns and nutritional priorities, then I can choose the local store that offers it. If I feel that way about the Nuval system, then I can choose the store that uses that system.

Sure, there is the possibility that this could all get confusing for consumers, and it is up to retailers to a) explain the way their chosen systems work, b) explain the differential advantages of their system. This puts a greater burden on retailers, but since this is something they ought to be doing anyway – being a resource for information as well as a source of product – it ought to fit into a broader strategic imperative.

One MNB user responded:

You are pandering on this multiple choice system issue, Kevin. While choice is a nice concept, history is shown abuse and confusion is too easy. Your choice mantra is a net circle to where we are today, confused, overweight and sickly. Fruit Loops - I rest my case.

MNB user Bob Anderson wrote:

A few of us in the Private Label industry three years ago meet with the FDA at their offices and address this very issue. We asked the US Government to come up with the standards as well as logos so we wouldn't have a bunch of marketing folks coming up with their version of what it should be. The FDA was shocked to hear that retailers want them to do this..(we were told that the big branded companies sure didn't). They told us that they would look into it. This is the best way not only to create credibility with the customer but to legitimize the program. Believe it or not more people do read the labels and to have everyone "doing their thing" only turns more folks off then on.

Still another MNB user wrote:

KC, the purpose of these programs is to give people adequate information where they can make an informed choice as what is best for themselves and their children. It is not the responsibility of the government or anyone, to tell us what we can and cannot eat, as some people believe. If someone wants to eat sugary cereal then be my guest. All we can do is inform the consumer the good/bad health benefits of what they are choosing to eat. We should believe in good health but not in lose of freedom....which seems to be the direction some politicians want us to go. Labeling should be just that...labeling.

Listen, even if you accept the notion that a single government standard is the best approach to nutritional labeling, does anyone really think that in the current political climate – where hysteria and hyperbole seem to rule, and where highly paid lobbyists seem to outnumber the people’s representatives – that we actually could come up with one?

I have my doubts.
KC's View: