New coffee to pop up at Jack in the Box

Burger King grabbed the headlines this week with its agreement to start serving Seattle’s Best Coffee, Starbucks’ secondary brand. But Jack in the Box hinted yesterday that more coffee news is percolating.

While the regional burger chain is experimenting with new flavors of shakes and smoothies, “We’re also looking at our coffee program,” CEO Linda Lang told stock analysts. “More news on that later.” She was responding to a query about how the burger brand might respond to initiatives like the one that had been disclosed by BK.

“Would you consider a branded product or do you need a branded product?” the questioner pressed.

“I don’t think you necessarily need a branded product,” responded Lang. But she wasn’t providing details. “we’ve looked at the different options and will be talking about that soon.”

During the conference call, Lang also acknowledged that Jack’s Southwest Chicken Bowl, introduced late in 2009, bowl wasn’t exactly a hit.

“That was not one [of] our stronger products,” she noted, according to a transcript of the call provided by SeekingAlpha.com.

Lang explained that the item, an extension of an older line of rice-based meals in a bowl, was priced at $4.29, and many franchisees charged “significantly” more than that. She suggested going above $4 in the current environment is not prudent, adding that Jack’s just-introduced grilled sandwiches have been much better received. The sandwiches are priced at $3.99.

That prompted more head scratching by Robert Derrington, the restaurant analyst who’d asked about coffee. “Given that your company generally is pretty sophisticated about testing products before you roll them out, did you know in advance that the Southwest Bowl wouldn’t do as well, and if so why did you proceed with it?” asked Derrington, who tracks restaurant stocks for Morgan, Keegan.

Lang countered that the bowl was a niche product, and noted that new products are always tested in “limited markets,” not in a full-blown dress rehearsal.

Other revelations concerned the relatively stronger performance of Qdoba, Jack in the Box’s secondary franchise chain. The smaller but more expensive brand posted a comp-store sales decline of 1.7% for the quarter ended Jan. 17, compared with an 11.1% freefall at company-operated Jack outlets.

“:We’ve seen reports of a boost in confidence among the more affluent segment of the population while consumer confidence among those with lower income levels have remained depressed,” said Lang. “We think this helps explain the divergence in sales trends at Qdoba verses Jack in the Box.” Qdoba has the better-heeled clientele, she suggested.

Starbucks offers Brits a new coffee. Are we next?

Starbucks is trying a new sort of hot coffee drink across the pond, according to CEO Howard Schultz. He mentioned U.K. operations' new Flat White to U.S. investors recently, but didn't divulge details. A query to the chain's offices across the Atlantic brought this description:

Starbucks Flat White is a small strong coffee made with two shots of 100% Fairtrade certified espresso in an 8 fl oz cup topped with creamy, steamed whole-milk. The milk is given a velvety texture by being "stretched and spun", which allows the espresso shot to rise through the milk. Patterns or "foam art" can be made in the top of the cup with the contrasting colours of the coffee and milk. The Flat White has become increasingly popular in cities throughout the UK in recent times, although its origins are in Australia and New Zealand.

By "stretched and spun," Starbucks apparently means that steam is injected deep into a pot of milk and the bubbles that rise are mixed with a spoon back into the less-aerated portion of the liquid, judging from other sources. The bubbles rise again, "stretching" the creamer. The milk poured over the espresso is taken from the bottom of the pot, where you have no froth and the least aeration. Hence the "flat" descriptor.

Aficionados say the process gives the milk a silky quality. They note that whole milk has to be used, rather than the 2%-fat variety that's Starbucks' staple.

Starbucks U.K. noted that "this is the first major addition to our UK and Ireland espresso-based drinks line-up since we entered the UK market in 1998."

Another cutting edge promo for McDonald's coffee

Inside McDonald's new design

I'm sitting in McDonald's new prototype restaurant in the Chelsea section of New York City, watching the arriving guests do a double take. This is the first U.S. outlet of the chain to get the new look, which has apparently been greenlighted already in Europe.

It's so different that it's eliciting a lot of pointing and head nodding as patrons comprehend the changes. But the points of departure actually started outside, with a banner that could be the biggest sacrilege of all to hardcore Mickie D's fans. The flag sports--brace yourself--a new color scheme for the logo.

The Arch in the design is still golden. But it's on a black background, with a bar of red underneath. For traditionalists, this is jarring stuff.

Inside, the most noticeable switch from a conventional store has to be the seating. It's actually padded.

I'll let that sink in for a moment.

No more rock-hard molded plastic. Now the booths have upholstery both on the seat and the back uprights. Stools at the long common tables are also padded.

The lighting is far more muted, a pleasant break from the operating-room brightness of conventional units. And the colors are more Yuppie Modern than the brash, almost cartoonish colors of older stores. Lots of deep oranges, rich greens, and off-whites.

Much has been reported about the incorporation of flat screen monitors throughout the unit. There are at least two in the sizable dining room where I'm sitting, but no one seems to be watching, no doubt because you can't hear them. And one's a mere table away from me.

If the more-comfortable seats and more inviting color pattern are intended to foster more hanging out, the new look is an obvious success. A number of youngsters, apparently from a nearby high school, have parked themselves behind beverages of one sort of another (lots of lattes and sodas). There's a lot of conversation going on, as well as considerable munching and sipping.

There's a computer screen downstairs that I couldn't get near. I can't tell if it's a computer portal or some type of ordering device.

More on that in a follow up. Now it's time to finish my sugar-free latte and snoop some more.

My day at the Fancy Food Show

I’ve just come from the Fancy Food Show in New York, or the closest an adult can come to being locked overnight in a candy store. Next time I’ll know to bring my own toothpick, so I can move more quickly from booth to booth, spearing whatever sample is being featured. The choices fill a huge swath of the city’s main convention hall, the Jacob Javits Center.

Cheese was by far the most common product featured. But I tried everything from a Pisco Sour to velvet cake to a juice-infused gummy candy, wholewheat pancakes, all kinds of cured meats, and, perhaps best of all, real licorice.

The trends that were evident:

--Healthful snacks were definitely in abundance. What made them healthful varied widely. There was a ginger snap, touted as a hangover aid because it had triple the usual amount of ginger; any number of teas ascribed with healthful qualities or ingredients, like a mangosteen additive; confections loaded with nuts; plain old nuts; dairy-based drinks, like kefirs, marketed as snack options; and new types of yogurts, like the more-pudding-like Greek variety. Other examples were familiar products, like vegetable chips, packaged in what were hailed as “smart portions.”

--A number of cheese purveyors tried to put some fruit into their products. I tried a cranberry-studded mild cheese, and I could’ve had any number of selections that were recommended to be served with fruit jams, as they are in Italy. I also saw cheeses that were topped with fruit compotes or stewed fruits, sort of like cheesecakes.

--Aggressively showcased were teas, teas, and more teas. Sold loose-leafed, in tea bags, in cans, in bottles, in concentrates.

--There were probably a half-dozen small-batch soft drink specialists, featuring drinks in traditional (cola, orange) and unusual (espresso, pomegranite, carbonated lemonade) flavors.

--Consistent with the recent surge in foodservice licensing, several restaurants were on hand to promote products they hope to sell through supermarkets or other eateries. Included were Peanut, Butter & Jelly, the New York restaurant that features nothing but variations on the PBJ, touting its peanut butter; Patsy’s, the New York landmark that can boast of being Frank Sinatra’s favorite restaurant, promoting its pastas and sauces; Rao’s, doing the same; and Sarabeth’s, the bakery institution, looking to sell more baked goods through alternative channels.

--At least two booths featured speck, from regions a long plane ride from Italy. One purveyor cured the pork-leg meat in Iowa. The other hailed from Asia.

Almost as telling was the lack of attention to products that were in the spotlight just a year or two ago: Coffees, unusual breads, craft beers, and alternative proteins, like ostrich or beefalo. There was some of each, but not as much as a sharp-eyed shopper might encounter at the National Restaurant Association show.

Okay, time to work off everything I ate during my three hours on the show floor. A 12-mile run should do it. Maybe.

Selling coffee by a different sort of cup

If you think a K cup is something for a Playboy model, you’re out of sync with the hottest trend in coffee selling.

The “K” stands for the Keurig, a single-cup coffee brewer that’s now a standard feature of corporate canteen areas. A user fits a sealed single portion of coffee grounds—a little package that looks like a larger-than-normal coffee creamer—into a receptacle inside the machine. The machine is closed, a button is pushed, and the coffee is brewed and dispensed.

Because the user’s discretion is removed, the cup of coffee tends to be of barista quality. You get the best of what’s in the little pre-portioned container, a.k.a. the K cup.

Quality aside, the machines are proving popular because there’s little maintenance. Someone has to empty a bin that catches the used K cups. But there’s very little additional work to be done by the host site.

No wonder the Keurig unit has made such inroads into the coffee-service market. But it’s also winning home-brewers, too. Green Mountain Coffee Roasters sold 771,000 of the units during the 2008 year-end holidays. Walmart has struck a deal with the company to sell Keurigs in 3,000 of its outlets. Clearly it’s the gadget of the moment.

And that’s orgasmic news for coffee processors who put their grinds in K cups. Once you have a machine, you have to buy the cups. It won’t work otherwise. It’s selling razor blades, so to speak.

Yet the phenomenon has landed roasters with retail outlets in a Catch 22. Players like Starbucks could sell a lot of K cups because of the brand appeal. But might they be undercutting themselves in the long run?

Rick Aristotle Munarriz, a frequent contributor to the The Motley Fool financial website, estimates that a K cup could be sold by Starbucks for 40 cents. It would deliver a cup of coffee close to what a café customer would have to pay $2 to get. How long would that disparity be tolerated, even with the delivery of the mystical Starbucks Experience that Howard Schultz is always crowing about?

So Starbucks isn’t selling K cups. Nor, apparently, is Peet’s, a brand with limited retail operations. Nor Dunkin’ Donuts. Or McDonald’s/McCafe. You won’t find Tim Hortons grinds or BK Joe in a K cup, either.

But Caribou sells its coffee that way. Coffee People, too. Diedrich sold its Gloria Jeans concept last week. But it held on to the K cup part of the business. The secondary brands seem to have shrugged and decided, What do we have to lose?

Which makes you stop and wonder: Are the big coffee brands missing an opportunity? Would there be a way to exploit the booming K cup market without cannibalizing walk-up café sales?

You know it’s a question that’s consuming the marketers in Seattle, Oakbrook and Canton, Mass.

The coffee (plot) thickens

You have to get up pretty early in the morning to get the jump on Dunkin’ Donuts, a concept that once advertised how ridiculously early it arises to make the doughnuts.   

McDonald’s is rolling its McCafe line-up of beverages into the Greater New York area. Starbucks announces that it’ll be selectively reducing prices in some markets, which means some stores in the Tri-State Area could be among the discounters. So what’s Dunkin’ doing? Rolling back its latte prices in a pre-emptive strike.   

The chain announced today that it’ll be permanently discounting the prices of “all sizes, flavors and varieties” of latte drinks by about 15%. No reason was given in English for the haircut, though there was some corpo-blather about the changes being consistent with the current “You ‘kin do it” ad slogan.  

Check out what's happening in hotels

Staying in a hotel may feel a little different in the not-too-distant future.

For one thing, Marriott said Monday that it would stop delivering newspapers to guests’ doors unless the daily dose of news is requested.

Then Dunkin’ Donuts announced today that it’s mounting a campaign to put its coffee and donuts within reach of more inn sleepers. The chain explained that it’s developed an array of new sales stations that could be slipped into hotels, motels or resorts, from the sort of shop you might expect to see streetside, to self-serve coffee stations that could be nestled in a gift shop.

The statement noted that the donuts and other baked treats would be made within the kitchen of the host property, using “some simple equipment” from the franchisor. Curiously, the announcement stresses the business advantage of being able to match baked-good supply with demand and thus “manage product inventory.” Wouldn’t that arrangement also allow the site to offer fresh product throughout the day?

In disclosing the new expansion push, Dunkin’ said it’d already put one of its hotel prototypes into the Great Wolf Lodge in Concord, N.C. The outlet features Dunkin’s low-cholesterol flatbread breakfast sandwiches as well as donuts, coffee, muffins and cold drinks.

IHOP tries new drinks-focused cafe concept

IHOP is following Burger King’s lead by experimenting with a trendier, downsized take-off that focuses on a few signature products—in the case of the IHOP Café, silver dollar pancakes and coffee drinks.

The prototype for the new concept, first reported by Chris Wolfe on Fohboh, is located in the suburbs of San Antonio. IHOP has already set up a web page, IHOPcafe.com, to tout the venture.

The coffee-heavy menu also extends to smoothies and milkshakes. Food offerings include wraps and sandwich melts.

The IHOP Café came to light just a two weeks after BK unveiled its new Whopper Bar. It, too, is a scaled down, modernized riff that focuses tightly on the chain’s hallmark products.

Caffeine capers on the rise?

It’s a weekday morning and you’re waiting for your chai latte with the other sleepy Starbucks customers crowding around the pick-up counter. Finally, the barista shouts, “John, chai latte.” A fellow a few yards over utters a “Right here!” and picks up the drink. A coincidence, sure, but not exactly one for Ripley’s.

So you wait and wait. Finally, you approach someone behind the counter. The drink was served up long ago, they explain. Someone else took it. And there’s not another chai latte for John on order.

That sequence of events has been happening frequently enough to prompt Starbucks outlets at the University of Tennessee to start checking a customer's receipt before handing over a drink, according to a website run by the school’s journalism program.

Given the economy, does anyone doubt it’s a mild scam that’ll soon be on the rise?

A good Starbucks rant, completely wasted

I was set to unload on Starbucks for embracing tea as its next big thing when a Jimmy Stewart moment took hold. My inner O’Reilly wanted to fume, “A coffee company doing tea? C’mon, folks, this is the dumbest thing I’ve ever heard! Why not just roll a keg of Budweiser behind the counter?” But the more I considered how McDonald’s and Dunkin’ Donuts kicked Starbucks in the beans by adding comparable brews, the more I wanted to say with a charming stutter, “Now wait a gosh-darned minute here. I love tea! Everyone loves tea! And now you won’t be able to get the really good stuff anywhere but Starbucks. It’s a brilliant idea, I tell ya!”

Which, of course, leads to two surprising conclusions: Jimmy Steward could’ve stomped Bill O’Reilly’s any time, even if Sean Hannity joined in. And the next major point of differentiation for a chain synonymous with coffee may indeed be exotic tea-based drinks like infusions and tea lattes. The concoctions sound far too complex for quick-service places to whip out along with chicken nuggets and snack wraps.

Ah, you counter, wasn’t that once said about lattes and other coffee-based craft drinks? And doesn’t even the local bowling alley now offer cappuccinos?

Sure, anyone can prepare those drinks today. All you do is push the button on the automated dispenser. But would you want a Vanilla Rooibus Latte or a Berry Chai Infusion coming out of an idiot-proofed machine, three steps from a deep fryer? It’s like grabbing a martini in a plastic bottle from a C-store’s cooler. The experience is just different.

Vanilla Rooibus, for the record, is a hot combination of caffeine-free “botanicals,” including rooibus, an exotic red tea that’s only grown in a pocket of Africa. When the world’s ready for McRooibus, Starbucks would probably need to embrace the next drink line.

The Berry Chai Infusion consists of aronia berry and black currant juices blended with the now-familiar flavors of chai.

There’s also an Apple Chai Infusion, a Black Tea Latte, and a London Fog Latte, incorporating lavender and bergamot, a pear-shaped Asian citrus fruit.

Are drinks of that complexity and ambition really going to show up soon on the menu boards of Jack in the Box, 7-Eleven or McDonald’s?

Of course, it’s an assumption that Starbucks can cultivate a market for those beverages.

On a recent visit to my local unit, I was the fourth person in a row to order a chai latte. I’ll bet most people never heard of chai until they saw it listed on a Starbucks board. Now I can choose from four varieties in my neighborhood King Kullen (go for Good Earth or Stash, by the way).

So I’m betting that, yes, it can.

A run on Starbucks?

If the U.S. government can spend $20 billion for a stake in Citigroup, why shouldn’t Colombia and other coffee-growing nations invest a piddling $300 million to buy a controlling interest in Starbucks? That’s the notion that was aired yesterday, apparently in all seriousness, by the director of the National Federation of Coffee Growers, according to a Reuters report.

Gabriel Silva reportedly explained to the Latino newspaper El Tiempo that the purchase would be a way of seizing the U.S. coffee pipeline and thereby ensuring it’s filled with members’ brews, presumably at an attractive price. The move would merely be a dash of vertical integration sprinkled with some emerging-world socialism.

But there’s of course one big, big problem: $300 million, the high end of what Silva estimated would be needed to secure control of Starbucks, probably wouldn’t cover some patrons’ latte bills. Even in a depressed stock market, the coffee chain’s market cap is hovering around $6 billion.

Perhaps Silva’s federation could team up with the biscotti bloc and make a real run on the company.