Are Shareholders Benefiting From the Health Conscious Consumer?

For the first time since 1998, Burger King, the second largest hamburger chain behind McDonald’s (NYSE:MCD), has changed its french fry recipe. The new fries are thicker and contain 20% less sodium than competitors. The fries also contain a coating that makes them crisper and keeps them hotter longer. “We’re always trying to have the best menu possible.  French fries are a big seller for us and we want to make sure we’re always improving,” said Leo leon, vice president of innovation.

Burger King’s new french fries will be available in more than 7,000 North American locations by December 5. The move is seen as an attempt to keep up with competitors, and appeal more to the health conscious consumer. Rival burger chain McDonald’s (NYSE:MCD) is often considered to have the best tasting french fries in the industry. In the most recent Zagat’s annual fast food survey, where 6,000 people weighed in, McDonald’s took home the title of Best Fries. However, Burger King and Wendy’s (NYSE:WEN) placed higher than McDonald’s in the best burger category.

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At the end of last year, Wendy’s/Arby’s Group, Inc., the third largest fast food company in the United States, changed its french fries recipe for the first time in company history.  Wendy’s decided to leave the potato skin on, change cooking oils, and add sea salt to the fries.  Shares have responded with a near 7% gain year-to-date.

One of the great success stories with recipe changes involves Dominos Pizza Inc. (NYSE:DPZ).  In late 2009, the pizza company changed its recipe to 100% real mozzarella cheese, and added garlic-herb seasoning to its crust.  The following year, sales increased and the stock surged 90%.  Currently the stock is up over 100% this year, while rival Papa Johns (NASDAQ:PZZA) is up 36%.

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Going forward, companies will continue to adapt to the changing health habits of consumers.  For example, coffee giant Starbucks (NASDAQ:SBUX) announced in November that it is pushing into the health and wellness sector buy purchasing juice company Evolution Fresh for $30 million.  Evolution Fresh products will replace PepsiCo Inc.’s (NYSE:PEP) Naked brand juices in its coffee shops.  Even the Cheesecake Factory Inc. (NASDAQ:CAKE), which is known for its more than generous portion sizes, has introduced a new low-calorie menu option.

Investors looking for a health conscious consumer play, should also consider time tested favorites such as Chipotle Mexican Grill Inc. (NYSE:CMG) and Panera Bread Co. (NASDAQ:PNRA), which have gained 500% and 180% in the past three years.

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