Tuesday, July 10, 2012

The phenomenon of the restaurant-supplier restaurant

From very different sectors of the country come two very similar news developments. In Smithfield, Va., home of restaurant supplier Smithfield Foods, you can now grab a sandwich or box lunch from Taste of Smithfield, a restaurant opened by the company to showcase its meats.

Meanwhile, up where fast-walking people talk with a different sort of accent, you can now treat yourself at midday to a “yogurt-infused” sandwich or salad at The Yogurt Culture Co., a new venture of Dannon Co. The featured yogurts: Dannon’s, of course, but small-batch versions rather than the familiar mainstream types you’d buy in a supermarket or deli. The place is geared to grab-and-go business and, befitting its location in a major New York business center, is open only for breakfast and lunch.

There’s always been crossings of the line between supplier and restaurant or supermarket. Lawry’s, the seasoning, was a creation of Lawry’s the restaurant. Toll House Cookies started as a restaurant product, then became a product of Nestle, and are now being featured in a chain of restaurants called Nestle Toll House Cafes.

You no longer have to use mail order to get Omaha Steaks, thanks to the Omaha Steak House, and you can skip a trip to the supermarket or big-box club and get a Bubba Burger at one of that company’s new fast-casual restaurants.

The prime example remains Pepsico Restaurant Group, known today as Yum! Brands. Its main brands, Taco Bell, Pizza Hut and KFC, were once holdings of the corporate giant. The objective was not so much to market Pepsi soft drinks, but to move more fountain business through a major channel. Those foodservice operations sell a lot of sodas, and the margins are incredible, especially when you’re buying from yourself.

PRG, of course, is also the most pointed cautionary tale. Because its chains were so large and such keen competitors for share of stomach, many other restaurants balked at carrying Pepsi products. The reasoning was, why strengthen the competition?

Yesterday’s entrants in the supplier-turned-restaurateur field clearly won’t have that problem, since both are single outlets.

Yet, interestingly, both were touted as “firsts,” which suggests others could follow.

I guess the Pepsi problem would be a good one to have.

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