What if Sugary and Salty Wasn’t Good for Business. Does Healthy Food Mean Greater Profits?

fat MichelangeloTo me, it was always clear that if you find yourself in places like McDonald’s, Wendy’s, or Taco Bell, you should look for the low-calorie options. After all, at least in terms of calories, it’s healthier to consume a nice grilled chicken classic sandwich (350 calories) at McDonald’s rather than a Big Mac (550 calories). But while cutting calories in a meal seemed to be good for consumers, it wasn’t really clear if they’re also good for business. Well, at least until now.

Last Thursday, the Hudson Institute, a public policy research organization, published a new study that makes the business case for offering low-calorie foods and beverages in restaurant chains. Titled Lower-Calorie Foods: It’s Just Good Business, this study shows that restaurant chains that serve more lower-calorie foods and beverages have better business performance.

“Consumers are hungry for restaurant meals that won’t expand their waist lines, and the chains that recognize this are doing better than those that don’t,” said Hank Cardello, lead author of the report, senior fellow at the Hudson Institute, and director of the Institute’s Obesity Solutions Initiative.

The report, which was funded by the Robert Wood Johnson Foundation, analyzed 21 of the largest restaurant chains in the U.S., including quick-service chains such as McDonald’s, Wendy’s, Burger King, and Taco Bell, and sit-down chains such as Applebee’s, Olive Garden, Chili’s, and Outback Steakhouse. Its goal was to find out if “restaurant chains can do well by doing good,” and it is based on 2006-2011 data gathered from companies’ annual reports and from market research firms.

The study’s findings seem to be very clear: “Between 2006 and 2011, lower-calorie foods and beverages were the key growth engine for the restaurants studied.” The authors identified a couple of indicators showing that restaurant chains growing their servings of lower-calorie foods and beverages perform better, including same-store sales growth, increases in restaurant customer traffic and gains in overall restaurant servings:

Restaurants that increasedlower-calorie servings (9 chains in total) Restaurants that decreasedlower-calorie servings (12 chains in total)
Same-store sales growth +5.5% -5.5%
Restaurant customer traffic +10.9% -14.7%
Overall restaurant servings +8.9% -16.3%

On its face, these results seem great, providing another example to the trend that the latest study of MIT Sloan Management Review and Boston Consulting Group (BCG) articulated so well: “Sustainability is paying off for a growing number of companies that are utilizing innovation to translate sustainability opportunities and pressures into business value.”

Yet, appealing as the idea that “increasing lower-calorie menu portfolios can help quick-service and sit-down restaurant chains improve the key performance metrics” is to anyone who believes sustainability is good for business, there are two reasons to view these findings cautiously:

1. Your double cheeseburger is a low-calorie option – For this study, the authors set a 500-calorie limit for a sandwich or entrée to be called lower-calorie. For side dishes, appetizers and desserts, the limit was 150 calories and for beverages it was an eight-ounce or 50 calorie drinks. While these limits take off the list items like McDonald’s big Mac (550 calories) or small French fries (230 calories), it still leaves on the list of low-calorie offerings items like a double cheeseburger (440 calories) or McDouble (390 calories).

The study shows that between 2006 and 2011, chains saw an increase of 472 million servings of lower-calorie foods and beverages and a decrease of 1.3 billion servings of traditional items, but it doesn’t explain which items became more popular, except that consumers bought fewer French fries and soft drinks. Hence, we can’t really tell if the public actually consumes more healthy or notorious options. As far as we know, people could just be buying more double cheeseburgers.

2. Correlation does not imply causation – What does these findings basically tell us? Of the 21 chains analyzed, the nine increasing the number of lower-calorie items outperformed the other 12 chains that didn’t do so. While the study shows this correlation, it is still not enough data to prove causation, or in other words, it might not be enough to make the case that restaurants that do well do so because they sell more low-calorie items. We still need further research to make this claim valid.

Interestingly, the trend the study presents is mainly derived by consumers. “Consumers are voting with their feet. Nobody’s selling these items very hard. Demand is showing up here. You can’t ignore the consumer,” Cardello told Restaurant News.

Looking ahead, we might see two additional drivers that will take this trend even further – Obamacare includes a requirement that restaurants with 20 or more outlets must post calorie counts on their menus (although early studies on how posting calorie information affects consumer behavior provided mixed results) and a rise in the costs of ingredients that helped keep high-calorie items like chicken wings relatively cheap.

At the end of the day, even if the study is imperfect, its findings send a message to restaurants that they should take seriously and probably the sooner the better. As Cardello puts it, “If you’re not pushing these [low-calorie] items, you’re running the risk of seeing declines. It doesn’t mean you walk away from burgers, it just means you restructure the kinds of items you sell.”

This article was originally published on Triple Pundit
Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and Parsons the New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.