Study: Chains boost sales by cutting calories

Among some of the largest restaurant chains in the U.S., lower-calorie foods are increasingly key growth drivers.
That's according to a study released by policy research group Hudson Institute, funded by the Robert Johnson Wood Foundation. In other words, chains that serve more lower-calorie foods and beverages have better business performance.

The report, called "Lower-Calorie Foods: It's Just Good Business," analyzed 21 of the largest chain restaurants in the country including McDonald's, Burger King, Wendy's, Taco Bell, Arby's, Panera, Olive Garden, Applebee's, Red Lobster and Outback Steakhouse. Between 2006 and 2011, lower-calorie foods and beverages were the growth drivers for the chains analyzed, and in 17 of the 21 chains, lower-calorie foods and drinks outperformed items that were not lower-calorie. The report did not detail individual company information.

Of the 21 chains, nine increased the number of lower-calorie items sold from 2006 to 2011; those nine averaged a 5.5% same-store sales increase. Meanwhile, 12 chains did not increase the number of lower-calorie items sold; those chains averaged a 5.5% same-store sales decline. The chains increasing the number of lower-calorie servings also recorded an increase in traffic, while the others declined.

Traditional fast-food items such as french fries are on the decline in the U.S. at fast-food chains that have more than $3 billion in sales, according to NPD Group. From 2006 to 2011, french fries as a total share of the food sold declined to 24.1% from 24.8%. At the same time, lower-calorie beverages have increased as a share of the total food sold, up to 34.1% from 32.4%.

The report did not measure success by number of lower-calorie items offered, it measured by the number sold. Lower-calorie entrees and sandwiches were defined as those that have no more than 500 calories. Beverages with 50 or fewer calories were considered lower-calorie, and side dishes, appetizers and desserts with 150 calories or fewer were considered lower-calorie. Even items that the chains may not promote as low-calorie or diet items can fall into the criteria simply because of calorie count, and what's considered lower-calorie item for the study does not necessarily mean the item is perceived as healthy. A McDonald's cheeseburger with 300 calories, for example, would make the cut, but an Angus and bacon cheeseburger at 790 calories, or an order of small fries, at 230 calories, would not.

Advertising Calories

Some of the chains monitored have been advertising food by calorie count in recent years. Applebee's, for instance, advertises a number of dishes as under 500 calories. McDonald's in July, as part of its Olympics marketing, launched a Favorites under 400 Calories menu.

Hank Cardello, lead author of the report and director of the Hudson Institute's Obesity Solutions Initiative, estimated that in the U.S. individuals often consume upwards of 2,600 calories daily, compared to 2,000 in 1970. Ultimately, he said, it's calories contained in food that need to be counted, because they're an indicator of other concerns such as saturated fat -- the higher the calorie count, the more likely the food is to have additional unhealthy factors.

"What went up must come down," Mr. Cardello, a former executive with Coca-Cola, General Mills, Anheuser-Busch and Cadbury-Schweppes, told Ad Age. "It's a calorie issue. If you consume fewer calories, you take in less saturated fat. ... It's a simple way of dealing with the problem. The restaurant chains can execute against it."

He added that consumer-advocacy groups will sometimes go after individual food items, typically ones that tend to be the most profitable for the companies in question. Ultimately, institutions have little incentive to make any real change, particularly to their most popular and profitable items, especially if they're publicly traded companies that have to answer to shareholders.

Last year, Rand Corp. released a study that found that a whopping 96% of entrees sold at top U.S. chains exceeded the daily limits for calories, sodium, fat and saturated fat recommended by the U.S. Department of Agriculture. But according to Mr. Cardello's study, consumers appear to be moving toward lower-calorie options.

"This report suggests that the smart [chains] will get it and be more aggressive" in including and selling lower-calorie items. The report said that "emphasizing lower-calorie foods and beverages is a proven pathway to improved servings, traffic and sales" and "public health officials and policymakers need to heed core restaurant chain business metrics in order to most effectively work with [the] industry to address the obesity epidemic."