Did We "Scoop" The Times?

Well, we use "Scoop" loosely, but it’s still kinda cool that this was in last Saturday’s Times, ELEVEN whole days after we put a very similar post up here on “The Biz."

We questioned the Dark Side WEEKS ago...

While we hope that this means the venerable folks at America’s “Paper of Record” are reading us, we also realize that this story is growing and have to tip our hat to what the reporter, Randall Stross, has brought to the coverage.

We also had a lot of questions about how competition would affect OpenTable’s less-than-benign hegemony in the market that they seem to have created and Stross uses his space in the paper to introduce us to RezBook, a newly-minted offshoot of IAC’s (read: Barry Diller’s) UrbanSpoon that is aiming to take a bite out of OpenTable’s pie (food analogy… cute, right?).

But RezBook, according to Stross, does not seem to be straying too far from the original business model, charging similar prohibitive fees that are passed on to the restaurateurs. It would seem to follow that either (A) this model is the only one that works in this sector, or (B) Diller and Co. are looking to capitalize on OpenTable’s ongoing demonization with a site that does the same thing, with the same drawbacks, under a different name.

We’re currently on the lookout for local joints that use or don’t use OpenTable, so stay tuned for Updates…

Who's Paying for All This New Food Safety (Hint: It's you... twice)

The new food safety legislation passed by the Senate last week that will have a revolutionary impact on the way that food is tested, and inevitably produced, in America, will also have a mindboggling price tag.

The Omaha World-Herald, a great paper for agribusiness stories by the by, quotes the Congressional Budget Office (CBO) as estimating the cost of the bill at $1.4 billion over the next five years.

One point four billion. With a “B.”

And that’s just the government’s tab.

While no estimates have been made, or in all honestly could reasonably be made, of what the new legislation will cost the businesses who make the food that need to be inspected under the newly intensified strictures demanded by the bill, we can only expect it to be enormous.

And, whatever the number, it will most definitely be passed on to the consumer in the end.

The bill calls for unprecedented FDA oversight on all food inspections nationwide, which will demand an increase in FDA facilities to handle the extra workload. The Senate debate (or lack thereof as the bill was passed with an almost 3-1 margin) circled around the recent outbreak of deadly food-borne illnesses in a number of foods, namely eggs, that were responsible for a few deaths over the summer throughout the country.

Senators seemed enamored of presenting the bill as a health crusade that would “save lives” and help the government offset a health care cost associated with food-borne illnesses that the CBO also wagered a guess at, coming up with a figure of $152 billion.

While the government investment of $1.4 billion seems like a no-brainer investment to offset that huge healthcare number, it looks paltry and “spun” when put in contrast with the amount that implementation of the bill will cost businesses and, inevitably, the American consumer.

Doing anything to raise the cost of food (even imported food, per the language of the legislation) during the climb out this recession while simultaneously suspending unemployment benefit extensions to the most desperate Americans and asking them to pay tax dollars into a $1.4 billion government program that their government can't afford during this historical budget crisis, feels less-than savory to us humble editors at “The Biz.”


And the cost to on-the-margins, smaller fine food purveyors will inevitably be draconian. Off the top of our head, we have to speculate that this bill will have some real-life impact on the "Locavore" market.

Meaning, we hope you have budgetary wiggle room for that locally-sourced duck confit you like so much...  

The Beef Lobby's New Hipster PR Army

The current issue of Mother Jones has a story about a group of pro-agribusiness college students who are being simultaneously educated in press relations by “Big Beef” (agree with them or not, you have to appreciate Mother Jones’ anti-establishment literary aplomb).

As we’ve discussed here at “The Biz” a few times lately (scroll away), the price on beef commodities and beef futures are soaring due to a number of factors, not the least of which being some overseas grain crises, and the rise in cost could provide oxygen to the burgeoning flame of the various “locavore”/organic movements across the country.

Obviously “Big Beef,” or the “National Cattlemen’s Beef Association if we’re being journalistically proper, would prefer not to allow any threats to the profitability of their product to grow stronger, especially with the Senate’s decision on Tuesday* to increase standards of food safety nationwide, a decision that will certainly drive the costs of production and retail value upwards.

According to the MJ piece, at least part of the Beef Lobby’s plan is to target the de facto poet laureate of the “Locavore” movement, Michael Pollan.

Pollan, a best-selling author and quasi-prophetic figure in the hipster food community, has been a powerful opponent to the “factory farming” model of beef production that powers the financial engine of the vehicle that is the Beef Lobby.

And targeting Pollan apparently means creating “sleeper-cell” type groups of students that will make their livings in the worlds that agribusiness allows to exist in their economic shadow.

So the MBA’s (“Masters of Beef Advocacy”) are now on the prowl, with money from the Beef Lobby lining their pockets, and they’re apparent mission is to reach out within their own age group and zeitgeist to counterweigh the effects of Pollan and his messianic message of an American palate devoid of agribusiness-created foods.

* - (ed note: More on that Senate bill ASAP)

Red Bees in South Brooklyn!

While this isn’t exactly a business story, we find ourselves unable to resist posting this story from yesterday’s Times about red bees in Brooklyn.

The borough is home to us at “The Biz” so the mere idea that a maraschino factory nearby our home can turn living creatures red is one that is almost too cool not to muse on for a little while.

The mind boggles.

Enjoy your evenings, for tomorrow we put away such childish things and explore the laugh-a-minute world of newly overhauled food safety regulations.

Thanks, “the Senate!”

Is Tyson Now the Lazarus of the Meat Industry?

Or is there a more logical explanation?


We’ll start up the “Doubting Thomas” Machine in a second, but let’s first acknowledge (and stick with the biblical analogy) that Tyson Foods Inc. seems to have rolled away the metaphorical stone at the mouth of the metaphorical tomb in which they seemed to be ensconced after last year's dismal earnings reports.


2009 was a historically tough year for a company that has been around for more than a hundred of them since their founding in 1896. The Arkansas-based food giant reported a $215 million loss in their operating income at the close of last year’s business with profit margins on their beef business alone running at a loss of 3.2%


But, as The Times reported last week, it looks like Tyson is bouncing back.


Big time.


This year’s final quarter earnings almost look like that of a different company altogether with a reported operating income of roughly $1.5 billion dollars, a $1.77 billion turnaround in one year.


That’s some year.


But, returning to our Lazarus metaphor, the miraculous mending of Tyson’s finances might be not so divine as it is an actuarial inevitability brought about by external market forces.


One salient piece of info from Tyson’s 2010 Q4 earnings report (we read them so you don’t have to) is the performance of the company’s beef business. As we said earlier, that same sector of their revenue stream accounted for a loss of nearly $346 million during Q4 2009. 


In Q4 2010 beef accounted for $542 million in profit for Tyson, a 4.6% gain in profits on their margins.


And if you follow us here at “The Biz,” you know that this is not too surprising (remember?) as beef prices are spiking like a 19^th century fever patient.


So is Tyson really a company that has been rewarded with a second lease on life for its good values and strong belief in the American dream?


Or is it a company that’s getting a profit vacation from an unnatural bubble in beef prices brought about by grain shortages in lands far, far away?


We hesitate to make a call either way as we’re merely humble editors of a blog and not analysts at a commodities brokerage, but we think that Tyson is worth a look for investors.


But make sure it’s a long, lingering one.

Down with OpenTable!... Long Live OpenTable!

OpenTable.com, for those of you not “in the know,” is a website that allows diners to make restaurant reservations using the ease of the internet and also track availability at the “hottest” places, giving them a better chance and getting a precious table in temples of the new gastronomy in towns like New York and Chicago.

An aggregator like OpenTable should be a boon to the restaurant scene in any city where it crops up, and it has been popular enough to go into all 50 states, 22 major cities and now internationally in cities like Paris and Tokyo, but there’s a catch; to be a restaurant that can fill their open tables on OpenTable, one has to pay for the privilege.

And that is irking many of OpenTable’s current and potential clients.

In San Francisco, a bit of a furor has erupted over an “open letter” to OpenTable (clever, no?) on the website of a restaurant called Incanto.

Incanto’s owner, Mark Pastore, uses the space to somewhat excoriate OpenTable’s business practices and claims that the fees charged by the site to restaurants can, when broken down, run as high as $10.40 for a “four-top.”

That amount is undeniably problematic for a smaller restaurant operating on its own revenue margins, and we think it’s safe to estimate that the vast majority of American restaurants fit this description. 


Smaller (let’s just say “most”) restaurants would then be right to be fearful of OpenTable’s growing presence in their industry if the fee structure doesn’t adjust… and soon.

Pastore decries OpenTable’s “hegemony” and cites the $1.5 billion post-IPO valuation that the company currently carries as a newly minted public entity.

And that number is “the rub” as Shakespeare would pen if he had Pastore’s attention.

OpenTable’s success might be coming at the expense of the American Restaurateur, to whom Pastore is clearly trying to give voice, but they just might be too successful to be challenged with any real significance.

At the beginning of the month The Journal reported on OpenTable’s Q3, which was very healthy to say the least as earnings per share quadrupled from $.04 quarter-to-quarter from last year.

That type of growth does not create the image of a vulnerable venture and if we needed even more proof, they were even blessed by Sam Sifton a few weeks back.

When someone like “The Sifton,” who can move New Yorkers to restaurants like a pied piper, gets involved, it’s akin to powerful rivals eyeing each other respectfully across a battlefield.

So good news for OpenTable, bad news for the little guy? Or is this posturing by business owners trying to get a better deal from their already pretty good deal?

Happy Thanksgiving from "The Biz"

Here's a heartwarming (eventually, you need to read through) story from The Times about value-added food programs for the needy this holiday season.

For us, it takes an interesting angle that we've become all to familiar with, and are starting to tire of reading.

The marriage of "corporate responsibility"and food issues, while laudable and just, seems to be fast becoming the "low hanging fruit" of corporate PR.

In this story it's Morgan Stanley getting name-checked for the good work that, while menial, is (faux-Pollyanna inflection) just as hard "but more fun"than the financial sector jobs held by the quotable volunteers.

Maybe it's a bit subjective on our part, but with Wal-Mart going sustainable (see below, wink), Mike Bloomberg waging war on soda in NYC and his own city and private sector offices, large agro-business trying to change their images by force of "green" will and the publicly vocal, yet privately sneaky, praise of Michelle Obama's school lunch program, it just seems like lazy disingenuousness on the part of The Times to work with Morgan Stanley's PR people and quote people who are partially responsible for massive unemployment while they hand out value-added food to families who have been victimized by their greedy mistakes.

Anyway, happy happy,

Your Humble Buzzkill Editors

A Man Who Knows His Wine

A while back we interviewed a guy named David Hitchner for a piece we were writing on local NYC food businesses, and we thought we'd throw it up on here for the readers of "The Biz."

David owns a very cool wine shop and an awesome restaurant in the East Village. If you're a fellow New Yorker, you should really go frequent his establishments. "The Biz" approves.

Enjoy;

David Hitchner is a new breed of “wine geek,” the kind that might very well shape the tastes of wine drinkers in post-recession America.

“The options market on Bordeaux should be interesting this year,” he tells me in a calmly casual tone that fails to conceal his vibrant knowledge and impressive recall of wine-related minutiae, “2005 was the last [Bordeaux] vintage and all the reviews were great but since then a lot of vendors have liquidated their top-shelf stuff, like Brunellos.”

And, unlike the stereotype of the older, elitist, sommelier, he says this all without a hint of pedagogy in his voice.

The twenty-seven year old businessman can often be found offering his thoughts on viniculture from behind the bar of his intimate East Village wine bar “In Vino,” or, a few blocks farther east at his wine shop, “Alphabet City Wine Co,” where he can recline his lanky frame on one of the worn leather chairs that, along with a vintage looking turntable, constitute a lived-in, ad hoc living room in the center of the sales floor.

A Maryland native and graduate of McGill University in Montreal, Hitchner settled into the East Village during the autumn of 2007, where he started working at “In Vino” under its previous owner, putting his wine knowledge to use from the behind the bar.

Meanwhile he and some friends began to formulate the plan for their own mercantile wine business, one that fit their evolving view of how wine should be sold.

“I got into this because I love wine and the wine industry,” Hitchner says, “But my business partner and I found all the wine shops we went to were too big, too anonymous, too elitist. We wanted create a down to earth, affordable store for a younger, less prejudiced audience that was interested in drinking newer stuff and being educated by people who really love wine.”

They found an available commercial space, hired a lawyer that specialized in liquor board cases and began to apply for an off-premises liquor license, a notoriously difficult process within the borders of New York City.

In the end, the partners presented a forty-plus page application document that introduced their mission statement of “providing affordable wines from independent producers,” and also included Census records, building department blueprints, prospective investment reports and news clips.

“Our lawyer said it was the most detailed report he’d ever seen,” says Hitchner with obvious pride, “and he was a very good lawyer.”

As the liquor license process moved forward, Hitchner and his partner struck a deal with the owner of “In Vino” to buy the restaurant which they took over at the end of 2007.

Suddenly, the partners found themselves to be the proprietors of two businesses with a massive financial crisis looming invisibly on the horizon.

“The businesses kind of ‘grew up’ during the recession,” says Hitchner in hindsight, “and because we were new, we just seemed to grow despite the downturn.”

And he believes that their incongruous success can be attributed to the store’s original mission statement.

“We were educating people that good wine can be affordable wine, so people from the neighborhood came to trust us, and they kept coming back.”

This unique opportunity to educate and grow a consumer base should bode well for “The Alphabet Wine Co.” and its ability to continue growing, especially in a changing climate within the wine industry.

“This liquidation of more high-priced wines has shown just how on the margins distributors were,” Hitchner postulates, “there’s been a correction.”

That correction will be a once in a generation opportunity for younger, local wine merchants like Hitchner to capitalize on the moment and begin to be the primary of influencers of wine drinkers for years to come.

“After all Bordeaux isn’t run by vintners,” Hitchner says, returning to his ruminations on Bordeaux, “it’s a “marketing machine” run by the wine sellers.”

Hitchner is not being critical of himself with his observation, he’s blaming the “wine sellers,” not the “wine geeks.”

-----------------------------------------------------------------------------------------------------------

He's a good man.
Thanks again for your time David.

Let's Talk About This Four Loko (in the voice of your mother)

The news coverage of America’s most disliked new energy drink has reached almost every corner of media and is, at this point, almost unavoidable.

What has not been discussed enough though, and what really interests us here at “The Biz” is the cultural relativism inherent in the American lifestyle that allows a product like Four Loko to be conceived of, produced, funded, tested, approved, marketed and sold to willing consumers before “Watchdog Groups” leap in and start a campaign to destroy it.

Going back in very recent history (and for those you still unfamiliar with “The Loko”) the news of Four Loko’s impending demise seemed to come to light concurrently with a public awareness of its existence.

The energy drink, a product of Phusion Products, a four-year old, Chicago-based company, is an alcoholic beverage that contains malt liquor, giving it 12 percent alcohol by volume to be exact which is more than twice the average amount found in a light beer. The other ingredients are predominantly caffeine, guarana, a fruit from the Amazon that roughly twice as much caffeine as coffee beans, and taurine, an amino acid that accelerates the ability of the human body to synthesize the other three products.

Mmmm, tastes like science.

To mask the taste of the major four ingredients (Four Loko, get it?) the drink is sold in flavors like lemonade, kiwi strawberry and watermelon to name just a few.

Sound delicious yet?

Or at least intriguing?

If you said yes to either, you have a lot of company as Four Loko is never sold for more that $2.50 per can.

If you said no to both, you also have a lot of company as many have alleged that the beverage is dangerous and, in some states, unlawful.

Back in 2008, more than a few states tried to change state laws and make caffeinated alcoholic beverages illegal. The political pressure made a number of companies, like Anheuser Busch (does anyone out there remember “Sparks”?) change the formulas of the malt liquor beverages they produced that contained caffeine.

But Four Loko is a whole new ballgame and its formula makes all its predecessors seem innocuous by comparison.

So much so that there is another tidal wave of legislators throughout the country moving in concert to ban “The Loko” within their state lines.

A good example of the financial and political minefield that this aforementioned wave is creating is the opposition that Phusion and its creation are facing in New York.

Now "The Empire State" is admittedly home-base for “The Biz” but this is genuinely an interesting case as state law forbids the legislature from singling out certain products that have had their genus approved by the Food and Drug Administration.

Now since larger companies, like our old example Anheuser Busch, have worked with states to keep their products on the shelves, a small, newer company like Phusion can’t fight the state alone.

But will frothing intense opponents of Four Loko, like US Senator Chuck Schumer (D-NY) use the nuclear option and support a ban on alcoholic caffeine beverages and risk alienating large, potential donors just to keep a Kiwi-Lemonade flavored abomi booze that keeps you up all night, off of shelves?

So it seems like we’re looking at the old debate of government versus private enterprise, which means it could be a long, tough slog for everyone.

I hope the two sides have the energy and patience to get it figured out in a reasonable amount of time.

If not, can we here at “The Biz” suggest this cool new energy drink?....

Also, here's a little bit of "on topic fun"

Is Kellogg's Writing off 2010?

As The Times reported Tuesday (and we here at "The Biz" have suspected for a while) The Kellogg's Company is so disappointed with their sales figures for 2010 that they are publicly talking about a bounce back year in 2011.


Citing a June 25^th recall of their Apple Jacks, Corn Pops, Froot Loops and Honey Smacks brands of breakfast cereal boxes and lower sales figures for their Eggo brand toaster waffles, the Battle Creek, Michigan-based company reported a third-quarter income of $301 million a share for this year, compared to $353 for the same period last year. Earnings per share were down 14 percent to 80 cents. David Mackay, Kellogg Company's chief executive officer, said in October that the recall hit North American operating profits the hardest, plunging 13 percent.


So it’s no real surprise to hear that Mackay told The Times, “We are addressing the major issues that took us off course in 2010.”

With their CEO looking ahead before the company releases their fourth quarter numbers, investors in Kellogg’s shouldn’t be too hopeful for what they’re going to see in January. But it seems like the company is already trying to manage those expectations.

And we here at “The Biz” think that might be pretty gutsy considering that the grain shortages throughout Europe seem to be spreading and could very easily push the cost of grain upwards sooner than later.

This is definitely a “stay tuned” situation…

"Wal-Mart: America's Largest Locavore Grocer"... Wait... What?

According to a piece today on Reuters, Wal-Mart Stores Inc. has announced plans to double its commitment to sourcing its produce from smaller farms and ones more local to their retail locations.

Yes, that Wal-Mart...

"Welcome to Wal-Mart, I'm the Backbone
 of America"

The company claims that this change to their produce inventory will constitute a $1 billion increase to their sales of foods from "emerging markets."

By utilizing their enormous presence in the American retail market to... err... market, and sell all this locally-grown produce, the big-box behemoth claims that they can carve out 9% of market share for locally-grown 'fruits and veggies.'

That's NINE PERCENT of the ENTIRE U.S. produce market.

And by doing this, the company estimates that they can create a 10-15% rise in annual income for their new vendors, independent and other small farmers.

So... let's tick these off on our virtual fingers, shall we? Better quality produce... from local farms... that will reach a staggering percentage of possible consumers and potentially revolutionize the toxic American diet... while helping farmers?

Wow.

There is so much "do-goodery" represented on our digital fingertips that our avatar is blushing.*

And it's all due to the good people at... Wal-Mart.

We know, it feels weird.

So, why is the perceived Deathstar of Small Businesses making what seems to be an altruistic economic decision?

Why is the least-trusted corporation on the globe spending capital to research and develop a plan that provides better food for more people while making more money for the most honored of nationalistic, hardworking archetypes; the independent American Farmer?

And what does it say about our culture that the descendants of "Darth Walton" are now extending their profit minded tentacles, and offering the consuming public a freshly-picked, shiny, organic, small-batch nectarine... at an affordable price?

Well, maybe it's time to consider the option that this new approach is also good business.

And we here "The Biz" don't mean that as a slight to Wal-Mart. Any company that makes more than $405 billion in revenue annually, as the company made last year (a 7% increase from 2008), and can attribute more than half of that revenue domestically to grocery sales (51%), can continue to go about business as usual without making any significant changes to their business model.

Instead of going out to small, family farms and becoming a market conduit, bringing a huge portion of the American populace a higher level of nutritious produce, Wal-Mart could have continued to shell for poor quality, mass-produced swill that they buy at wholesale discounts from faceless "AgroGiants,"and still made hundreds of billions of dollars.

But, like it or not (and frankly, why would you not?), Wal-Mart has made this five-year commitment and it's very, very impressive.

It almost makes you hope they can make it work for their bottom line...

Hey, we said "almost."

* - (ed note- we don't actaully have an avatar... yet)

Enjoy that Delicious Steak While You Can... Still Afford it

Because as the price of corn surges higher and higher on the commodities markets, some publications have begun their watch of how it might affect cattle futures, and inevitably the cost of our steaks.

And corn isn’t just inching up slowly, today’s WSJ not only refers to a two year high of $5.79 a bushel (a figure that hit the limits allowed by The Chicago Board of Trade), it also shows that corn has shown 17% rise in price over the last 3 days.


The piece even goes so far as to quote an agricultural analyst who makes the claim that he “can smell $6 now.”

While the cause and effect between corn and cattle prices can be sometimes be viewed as not having immediate reciprocal impact, the signs in this case are already apparent.

A report on Bloomberg this Monday quoted a cattle futures analyst who reported data demonstrating that the U.S. annual per-capita beef supply for 2011 might plummet to a 35 year low of 46.8 pounds.

Any slump, or surge for that matter, in American beef production will have influence on retail prices, but a nosedive this dramatic will have more immediately negative impact on beef’s affordability for the average American consumer.

In fact, the very same report on Bloomberg foresees such a swift swelling in the cost of American beef that the rise in its value might outpace the rate of inflation on all U.S. food combined.

Unfortunately, this will be a bigger story in the months and years to come, as cattle aren’t commodities that can be discovered or harvested early. American cattle takes an average of three years to mature and even longer in the case of more “gourmet” strains of beef, like grass-fed for example.

And as corn is a major feeding crop for farm animals nationwide, we can expect to see the costs of other meats rise as well.

Bacon prices, for instance, are the highest they’ve been since the Carter Administration as the cost of feeding pigs, and thus maintaining equilibrium in the market for pork belly continues to be more and more expensive.

So it looks like “that place” you love with that “super cheap bacon cheeseburger” might be changing price points sooner than later…so can we here at “The Biz” interest you all in any genetically-altered Salmon while you wait? They’re corn free you know…

(editor's note) We here at “The Gastro Biz” are hot on the trails of some quotes from NYC restaurateurs to see what they’re seeing on the wholesale side of things and will update when we get one or two.

And Now for Something Completely Different...

After recently reading Dan Ariely's wonderful book Predictably Irrational, I decided to conduct an experiment of my own to see how people will, if given the chance, act irrationally in regards to their own best interest when making a decision.

The Hypothesis

As a formerly employed, commuting New Yorker, I am intimately familiar with the often convoluted, and always unsatisfactory, ways through which employers procure MTA Metrocards for their employees. In fact, my most recent employer outsourced their procurement operation to a company that would, if so authorized, garnish my pre-tax earnings to hold in escrow until I purchased my own monthly $89 Metrocard and submitted a receipt and voucher for reimbursement of my own pre-tax salary.

Despite the seeming simplicity of this operation, I often found myself in consternated frustration at having to “jump through hoops” on a monthly basis to receive my own money after filling out irksome paperwork. And doing it all just to save myself the taxes on $86 a month. In the end I often found myself leaving the money in my “Transit Account,” where it would just sit, doing nothing until I claimed it.

Effectively, I was often leaving my own money on the proverbial table despite being enrolled in a perfectly functional procurement program.

After reading Dan Ariely’s experiments, and seeing that the MTA will again increase the cost of a monthly Metrocard (this time to $104), I deduced an experiment of my own that I believed would demonstrate that other commuters will also fail to protect their own savings if given similarly convoluted choices, especially if one of them seems to take money “up front.”

Having learned in my Foundations of Finance class that “money paid out in the future is worth less than money paid today,” I created a scenario in which I acted as imaginary employer that offers employees two different options for procurement of their monthly Metrocards for a the week pre-dating the rise in cost from $89 to $104. One option was created to simulate “taking” the employees money up front, while the other was created to seem like a more gradual, less punitive garnishing of wages.

My belief was that given the choice, employees would choose the later, less-valuable option more often than the better, first option.

The Parameters

Option #1, “Pay Now”- My “company” will sell the employee a packet of six, monthly Metrocards at their face value of $534 before taxes. This amount will be garnished from your wages immediately.

The total savings for this option are $133.79 ($90 saved in avoiding Metrocard fare hike and $43.79 in saved sales tax)

Option #2, “Pay Later”- My “company” will garnish $104 in pre-tax wages, and provide a monthly Metrocard on the first Monday of every month. However, to offset the effect of the fare hike, we will add a taxable bonus of $15 to the employee’s paycheck at the end of every monthly pay cycle.

The savings in this option are approximately $20.38(Although $55.38 is saved in sales tax, roughly $35 would be paid in income taxes on the total of $90 in bonus). 

The Experiment

I used 10 friends, whom I know to be employed, commuting, New York City residents, as a sample group and pitched them the two options verbally.

I did not allow them to take notes, as I was interested in their “gut decision” to the choices presented.

After they considered the options for 2 minutes, I laid out the options on two index cards, withholding the actual amounts of savings that they actually provided, for 30 seconds. I then gave them another minute to consider the options.

After the time was up, I asked them to write their choices anonymously on scraps of paper and pass them back.

I then tallied the results.

The Results

Seven of the test subjects chose Option 1 while only three chose Option 2.

Frankly, I was pleased that I was able to prove my hypothesis, but I remain somewhat baffled by the margin on which I was able to do so.

I was also rather surprised by how much, in the aggregate, was lost in potential savings by the 10 respondents.

Should McDonald's Be Rooting for HIGHER Unemployment?

A few month back, The Washington Post published an article that linked a dip in fast-food breakfast sales to rising unemployment. The argument was made that with fewer people making morning commutes to their jobs, fewer and fewer breakfasts were being purchased at "drive-thru" windows.

While the argument holds some water in terms of data relating to breakfast purchases, the overall numbers, especially for McDonald's, are much less correlative. 

Since the article was published in February the US unemployment rate has, according to numbers published by the Bureau of Labor, stayed almost entirely consistent (9.7% in February, 9.6% in September) but McDonald's has reported two very strong quarters of earnings.

So, while the numbers in the mornings might be down, could an unstable economy and a high rate of unemployment be good "Mickey D's?"

Jeremy Baker, a finance manager at Websense in San Diego, says that it's hard to see how the company couldn't be somewhat buoyed by customers needs to 'cut-back,' "[McDonald's] is often times the most convenient, least expensive and most kid-friendly food option for most people."


This combination of factors viewed through the optic of stagnating recovery and stalled job growth could mean big business for McDonald's.

With more people trying to save, more potential diners should flow through the 'Golden Arches.'

"They're not going anywhere anytime soon," Baker says of the future outlook for Ronald & Co.

If only the same could be said for the unemployed.

Chocolate Chess Games: Nestle ups the ante in India after Kraft acquires Cadbury

With Kraft foods recent acquisition of English chocolate giant Cadbury, Nestle SA is moving quickly to improve profits in what is currently their most profitable market.

Cadbury's British pedigree and strong presence in India, both historically and financially, signify a threat to Nestle, but the Swiss conglomerate apparently has a plan in place to ameliorate that empirical significance.

The Times is reporting that Nestle has announced plans to create and R&D facility on India where it will experiment with local flavors towards the goal of creating products that will establish their already strong sales position in one of the globe's most populous nations. 

According to the The Times, Nestle saw a 20% rise in profits throughout their Indian market last year and openly estimates that, over the next 10 years, 45% of their sales will be made in "emerging markets" like India.

Interestingly, Nestle overall is reporting an 18% rise in earnings (EBIT) from last year in the half-yearly earnings report that they released this August.

While it woud be a jump in reasoning to assume that India alone created the almost $1.2 billion difference in earnings for Nestle from last year to this one, it is not so hard to posit that Kraft's purchase of Cadbury has spurred a sudden need for Nestle to reinvest in a market that has provided sales figures of such numeric significance.

We can only hope that this bold R&D move by Nestle will provide American shoppers with a mass-marketed, microwaveable Chicken Tikka Masala, basmati rice and Hot chocolate meal available at supermarkets in the near future.

Or do we?

UPDATE: "Fish Wars" Episode II: Attack of the Salmon Clones

As the FDA's hearings on AquaBounty's genetically modified fish kicked into high gear this week, new and more vociferous arguments were made on both sides of the issue.
CNN.com's "Eatocracy" blog (which has been doing the best reporting on this story) has a story positing the argument from both sides of the scientific perspective.
While many of the arguments discussed in the story that are bing made against AquaBounty's case are presented in our previous post, some scientists make the case that the inherent containment of farming the new strain will prevent any future damage to the eco-system. It's an intriguing point that will have to be explored by the FDA, who plan to announce their ruling in a matter of weeks.

From our perspective though, the question remained as to what the effect would be at restaurants and supermarkets should the FDA approve AquaBounty's request or allow the EU to begin marketing it's genetically altered bluefin internationally.
So, last week we spoke to a local chef, and future host of her own show on The Food Network, Anne Thornton (who admittedly is our cousin) about her take on serving any version of genetically altered fish. As bluefin is a much more hot-button topic amongst NTC restaurants due to its higher marketability, the chef was very keen to discuss it;

"A chef is only as good as her/his ingredients, so I would only use the highest quality ingredients in my food. Farm raised blue fin tuna have been pumped full of hormones so that they reproduce at astronomical levels. I don't use fish, fowl or meat that has been pumped full of hormones or antibiotics. Blue fin is not an unexchangeable good. I think that the food industry should respect the fact that Bluefin in the wild are endangered, and create a demand  for other fish that are similar in taste and texture and can be found in abundance such as Atlantic Char."

Her take is clearly akin to the one voiced by Rick Moonen on salmon last week and goes a step further by identifying other market-worthy fish that would alleviate the burden on North Atlantic salmon and tuna.
So now we have to ask the question, who has the more potent ability to establish new trends in retail "fishmongering" and commercial fishing; chefs and restauranteurs or the FDA?
I guess we'll find out soon...

(Ed note; Ms. Thornton asked that we also mention her TV show "Dessert First with Anne Thornton" debuts Sunday, October 24th at noon on The Food Network. So... check your local times and listings)

New Advances in Genetics and Farming Might Give Atlantic Fish Like Tuna the Actual "Blues"

In late August, Scientists for The EU announced that an experiment, conducted with the Spanish Institute of Oceanography, into breeding Atlantic bluefin tuna in captivity had yielded the successful creation of a genetically modified species.

This new advancement makes bluefin easier to produce, breed to size and cheaper at market allowing the new strain of bluefin to be bigger and cheaper than the popular tuna we know. 


As most of bluefin's appeal has gone beyond its taste to the its relative scarcity and the resulting cachet of its high price both at market an on tables in fine-dining restaurants, it was inevitable that this breakthrough would meet with some resistance.


In reality, The EU's announcement has been a large metaphorical stone thrown into the waters of a scientific and gastronomic argument that is already rippling with growing negativity towards farmed, and often genetically-altered, fish.


A few weeks ago, The New York Times devoted a portion of The Week in Review to an explication of what the ability to farm bluefin will do to the environmental sustainability of commercial fishing throughout the Atlantic. 


And it's not good...


Environmentalists argue that farming bluefin is not only deeply harmful to the ecology of fishing in the ocean but also harmful to the quality of the farmed fish as well. As bluefin will be ranched with other popular species that require different patterns of movement and temperatures, health factors like waste and overfeeding could arise throughout a plethora of farmed fish species.


And bluefin isn't alone. 


A small company named AquaBounty Technologies Inc. based in Waltham, Ma is currently waiting for approval from the Food and Drug Administration to sell their genetically altered Atlantic Salmon species to market. 


AquaBounty's fish has a shorter, multi-seasonal growth period and would be a cheaper alternative at market to salmon that is fished for in the less reliable North Atlantic.


Pressure has been on The FDA from both sides of the decision and the argument to AquaBounty's approval has a lot in common with what is being said against the new species of bluefin.

An instance of the opposition from the restaurant world is celebrity chef Rick Moonen, an authority on seafood ecology in the US and chef/owner of his own seafood restaurant in Las Vegas, who has written an excoriation of AquaBounty and the FDA for cnn.com's "eatocracy" blog. 


Moonen takes an almost vitriolic stance against the FDA's apparent approval of AquaBounty's Atlantic salmon, and even terms the new species "Frankenfish," while warning strongly against the appeal of cost and accelerated growth rate of genetically modified fish;

"In those conditions it becomes necessary to use antibiotics on an already unstable fish in order to control bacterial infections and other diseases -- and to protect the investment of carnivorous fish farming. The byproducts of all this -- a wonderful stew of feces, unconsumed fish food and dead fish called, sweetly, "effluent" -- create a suffocating blanket that spreads across the ocean floor, resulting in a massive dead zone surrounding the farming area. It kills clams, oysters, eel grasses -- where young fish feed and grow -- and more."

Moonen's opinions are echoed throughout the restaurant and retail food industries. 


Most recently, Whole Foods Markets unveiled a color-coded "Sustainability Rating System" for every species of fish that is offered in their seafood sections. Species in the "Red" category are, according to a company press release, described as "suffering from overfishing, or... current fishing methods (that) harm other marine life or habitats." 


Whole Foods is also hoping to use their new rating system towards achieving their (concurrently announced) goal of not having any "Red Rated" fish for offer by Earth Day 2013. 


As the major criticisms of both AquaBounty and The EU's genetic modification programs seem to fit perfectly in Whole Food's "Red Rating" criteria, it appears that the FDA will have a lot of decisions to make before April 22nd, 2013 for Whole Foods and chefs like Moonen to see a turn for the better.

A Looming War Over Yogurt?

According to a story in today's Minneapolis St. Paul Business Journal (it's also been picked up by the AP), General Mills is prepared to fight hard over their right to license the Yoplait yogurt brand that its had the rights to since 1977.
A French company named Sodima, that actually owns and produces Yoplait, is attempting to use what they believe is an "out-clause" in their contract with General Mills and terminate their relationship, effectively ending the Minneapolis-based food giant's ability to market and sell the popular yogurt.
While General Mills will apparently petition with the SEC to hold up the requested divorce, I think it's fair to expect a much lower profile for Yoplait on supermarket shelves in the coming weeks as conglomerates like General Mills have strong ties and agreements with food retailers that allow their brands to be presented more prominently. Without any stake in Yoplait's future "Point of Purchase" sales, General Mills will more than likely allow the yogurt to be moved out of prime eye-lines on shelves throughout the country (if Sodima even finds a way to distribute it all).
It's more than conceivable that devotees of "French Yogurt" will have to look harder for their fix.
Let's just hope the Greeks don't get as combative as the French and pull Fage Yogurt from the coolers as well...
International intrigue indeed.

Welcome to The Gastro Business...

In the coming months we hope to use this space as a place to examine how socio-economic realities and business decisions in financial markets have causal effects, both large and small, on what we eat. Whether we shop for a meal to cook at home for ourselves or choose to have one placed on a table in front of us at a restaurant, our tastes and limitations of choice are being dictated to us by a subtle deluge of market forces that, at first glance, would seem entirely unrelated to the business of food.
Our palates, perceptions and pocketbooks are impacted daily by world events that could have occurred months, or even years, previously.
Or ones that occurred that morning.
By tracking these events and their effects, we can watch them seep inevitably onto our dinner tables from a much more informed perspective.
We hope you'll join us.
-The Editors

Welcome