Where's the Beef? How Inflation is Hitting the Food Industry

If Clara Peller were still with us, she’d be called back into the service of American consumers who wonder just what they’re getting when they order a hamburger. Peller was, of course, the one who perfected the signature line “Where’s the beef?” in Wendy’s commercials during the 1980s.

Over the past several weeks, lawyers have asked that question of McDonald’s (MCD), Wendy’s (WEN) and Burger King (QSR), filing suit against each company for using advertising photos that make their hamburgers up to 35% bigger. One of Wendy’s photographers also noted that she used undercooked patties in her work because fully cooked burgers looked less appetizing.

Ironically, the lawsuits against McDonald’s and Wendy’s claim that exaggerating the beef diverted consumer purchases away from competitors, basically asking the court to answer Clara Peller’s haunting question: Where’s the beef?

So Hot it Leaves Grill Marks

Photographic evidence notwithstanding, making “the beef” disappear is actually becoming an increasingly popular move in the food industry, albeit with a bit more transparency.

Climate change, the Russian invasion of Ukraine, and the continued impact of COVID all have driven food inflation to a rate that is higher than any time over the past generation — and higher than at any time during the working lives of most food professionals. That’s not likely to change as the ongoing megadrought in the Western U.S. is also leading cattle producers to shrink their herds in the face of higher costs for animal feed. 

In response, restaurants are choosing to shrink “the beef,” as well as the chicken and pork.

Both Domino’s and Burger King cut back on the number of wings in an order from 10 to eight, a 20% reduction. Subway also cut back on the portion size of rotisserie chicken in sandwiches and wraps. A host of grocery store products have lost a little weight or become a few items smaller.

Insider restaurant industry publications like Back of House are also asking chefs to thoughtfully adapt their portion sizes. Does a serving of meat need to be 16 ounces, or could it be 14 ounces, they pose. Or will a diner notice an ounce less of cheese on the plate? Hopefully the lawyers aren’t looking too closely when their meal is served. Cocktails may serve as a distraction.

Chefs aren’t the only ones playing this game. In response to rising menu prices, diners also are ordering fewer items, about 1/3 an item less per order for the typical diner, according to the NPD Group, a market research firm.

Finally, They Got My Order Right

Restaurant companies are trying to make these changes as unnoticeable as possible knowing that getting less for the same price isn’t a great deal for customers. But raising prices is an even bigger turn off for diners.

What’s missing from the playbook of too many companies is the one consumers seem to want, which is to change up recipes to include slightly smaller portions of meat and slightly larger portions of other ingredients, many of which happen to be less expensive. For about 40% of American consumers, that’s actually the best combo deal.

According to research Changing Tastes conducted earlier this year, 39% of adult American consumers want to eat less meat in the coming year, with more than 1:15 Americans making that choice since the COVID response began. Their number one strategy for doing so is simply eating smaller portions of it.

Imagine the surprise to find that best solution for restaurant companies to manage food inflation is the one their diners actually want.

For a key demographic — Millennials and GenZers — it’s an even more attractive offer. Our research found that 60% of them would be willing to make modestly different food choices if it reduced the environmental footprint of what they ate or helped to address climate change. Slightly less than half of older consumers (above the age of Millennials) said the same.

That may explain why a few restaurant companies have started to make the move to change up their recipes — a culinary strategy — rather than shave off ounces.

Jack in the Box’s Del Taco (JACK) epic burritos now feature crinkle-cut French fries as a filling in their scale-tipping one pound epic burritos. Noodles and Co. (NDLS) is now introducing a high protein offer that includes protein-rich, lower carb noodles but not more meat, chicken or shrimp. Wendy’s also surprised the market by introducing a strawberry salad as a limited-time summer menu option, rather than a sandwich or burger, which offers a much larger sized meal with the same protein as a single chicken sandwich. The promotional photos look delicious. But as we were reminded by one of Wendy’s own photographers, advertising shots can be misleading.

What Looks Good

There’s no clear winner right now, just examples of good tactical moves. For now, that’s not great news for investors, as food inflation is running roughshod over supply chain strategies and business models.

But as the restaurant industry continues to navigate an unprecedented business environment, culinary innovation and highlighting the role of the chef seem like the best approach. Just like over the past two centuries, the basic questions of what’s available, what looks good, and what we can afford can all guide our choices if restaurant companies can make them fast enough before the next shoe falls.

With summer now here, and temperatures as hot as inflation, those are the same questions I’ll be asking when I figure out what to throw on the grill this weekend.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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