Foodservice: Fewer Constraints, More Possibilities

Food manufacturers traditionally peddle their products via the grocery channel--an expensive route, it turns out, where shelf space and slotting fees are often a matter of contention, promotion and retailing expenditures are costly, and the only way to profitability is through volume.

But the foodservice channel, which provides fresh prepared meals to both commercial (restaurants) and noncommercial (institutional) foodservice operators, offers an option, says Julie Zimmerman in Food Explorer Magazine. Foodservice has fewer rules than retail and has less financial risk. Packaging, for example, serves as a technical function, so there’s no compulsory need for eye-catching, pretentious graphics. "Also," says Zimmerman, "foodservice consumers are more willing to experiment since they purchase only one serving at a time." Additionally, there is not as much competition in foodservice as there is in retail distribution. A survey of 367 top R&D, 133 top marketing and seventy-five general managers or executives from food manufacturing companies conducted by Cahners Publishing’s Food and Lodging Service, revealed that "Only 10 percent of food manufacturers said they were not involved in foodservice."

So the foodservice channel has fewer restrictions and also is booming as the decade closes. A September 1996 McKinsey report predicted that by the year 2005 foodservice will capture "100 percent of all incremental food spending," particularly in the commercial arena--quick-serve and fine restaurants, fast food, airlines, retail, hotels, etcetera.

And it’s apparent that food manufacturers who develop hot and spicy products will have an edge in the foodservice market. The demand for ethnic dishes, Mexican, in particular, has mushroomed over the past five years, says U.S. Food Service Magazine.

With awakened taste buds, Americans are revved up to explore uncharted epicurean domains. No longer settling for frumpy old comfort food favorites, we are nursing a nascent desire for more racy and provocative fare, whether we dine in or out. Home pantries, especially those stocked by aging baby boomers with decidedly waning taste sensors, are piled with a melee of zesty and oft-feverous spices and seasonings, ranging from new regional to exotic ethnic. All of this would shock boomers’ mothers, who relied on radishes and vinegar to add zing to homespun meals. Additionally, time constraints, increased perceived wealth, and family obligations now compel Americans to dine out more often--another habit that would make mother shake her head in despair.

But these "mainstream" consumers are not alone in desiring hot and spicy--there are also increasing numbers of Asians and Latin Americans who continue to immigrate to the U.S. and then seek out foods more similar to those found in their native lands. And "hot" is often an integral part of their cultural cuisines.

But regardless of ethnic group, the U.S. consumer is now jaded. The standard ho-hum burger, pizzas, and deep-fried chicken simply don’t suffice. The foodservice industry has responded by designing fare tailored to fit the demands of all consumers, both ethnic and mainstream. Foodservice operators can vary their offerings, despite the rising expense of food stocks and the scarcity of physical space for storing and preparing "made from scratch" meals, because they’ve learned to depend on food manufacturers to provide hot and spicy products that require little or no preparation. "[Food manufacturers] are the driving forces behind this ‘kitchen-less’ restaurant trend," says Claudia Dziuk O’Donnell in Food Explorer Magazine.

In fact, no one has to convince the foodservice industry that hot and spicy is ‘in.’ It’s already sizzling with ethnic-charged products, confirms Jackie Haase, Vice President of Marketing for Nobel SYSCO Food Service based in Albuquerque. Although Mexican fare is Nobel SYSCO’s best seller, Asian products are also popular. "We have more than 200 hot and spicy products that are sold all over the country to restaurants and other foodservice operations such as schools, delis, and hospitals," Haase said.

Bueno Foods [El Encanto, Inc.], is a family-owned New Mexican food company that manufacturers and distributes more than 150 New Mexican food products--many of them hot and spicy--to restaurant and retail customers throughout the U.S., as well as the Grand Cayman Islands. Ana Baca, Director of Bueno’s Public Relations and Communications, says Bueno, which has been in foodservice for fifty years, has seen a steady increase in requests for their products. "We’re now looking to Spain for export opportunities in the future," she says. In the meantime, Bueno Foods, as well as their competitors, are concentrating on the Northwestern and Northeastern states, where hot and spicy products are just beginning to tease taste buds.

Despite the acknowledged growth of the foodservice channel, the individual entrepreneur has not easily found a niche.

Touch of South, based in Los Angeles, began operation in 1976, when Lillian and Paul Kidd, along with friend Michael Beatty, decided to manufacture and market their homemade barbecue sauce. Later they developed Touch of South Hot Sauce.

"We had our highs and lows. We went the grocery route but there were a lot of restrictions," recounts Beatty. "If a store didn’t have ‘x’ amount of dollar orders for our product, it wouldn’t order. Because of this, a lot of times the sauce was ‘temporarily out of stock.’ Then there are the introduction, advertising and promotional fees, which are sky high. It just doesn’t pay. You can’t afford it unless you’re a nationwide company like Frito Lay or Kraft. For them it’s a drop in the bucket," he continues. Faced with discouraging capital requirements, the partners opened two fast food restaurants but soon realized they had made a mistake and pulled out.

After learning about institutional foodservices, which are known to place large annual orders, Touch of South made a bid to the United States Department of Defense, who "placed a small order at first and then began placing larger orders," says Beatty. The most recent was for 6700 cases of hot sauce. Although DOD is their biggest client, Touch of South products are also distributed through A-1 International Foods, Inc., and SYSCO foods in California. "The trend for hot and spicy is nothing but up," Beatty offers.

Hi-Co Western Products’ route to the foodservice channel was more direct. Hi-Co manufactures its own dry spice mixes, co-packs, and custom blends in small packages or bulk ("your recipe or ours"). Andy Housholder, a co-partner, says the grocery channel proved inefficient for Hi-Co. "The cost of getting a product into a supermarket is high. We couldn’t afford it ourselves," he says. Rather, it was the samples that Hi-Co offered at an Albuquerque National Fiery Foods Show® that got the company "in the door." A representative from Dave’s Gourmet, which manufactures and distributes hot sauces in San Bruno, California, took the taste test and was sold on Housholder’s Hogg Wild products. Dave’s now distributes Mr. Hogg’s Wild Hot and Mild Chili, and Red and Green mixes. A-I International in Los Angeles also distributes Hi-Co’s products. "We’re now selling gallon jars and bulk packages to restaurants. Bulk is in," Housholder continued. "There are all kinds of opportunities in selling bulk, such as to institutions." Hot shops also market their product. In the meantime, Hi-Co is working on a "K-Ration shake"--a chile hot seasoning they hope to market to prisons to "spike up" the rather mundane fare.

Hi-Co’s latest news is that Denny’s and Black-Eyed Pea Restaurants plan to add Hogg Wild Red Chili to their menus. The chili will be served in a sourdough chile-empowered bread bowl, which is currently being developed by a Colorado baker.

Yet selling exclusively through foodservice isn’t necessarily essential for profitability if food manufacturers can lure potential clients with product samples. Take Bronco Bob’s Cowboy Brand, for example. The company, which began as Lady Walton’s Cookies, has, over six years, added fiery food products in response to customer demand, says Fred Alford, sales manager. Bronco Bob’s manufactures grilling sauces and condiments, including Chili Mix and Dip, Smoked Jalapeño Cornbread, and Roasted Raspberry Chipotle Sauce. Alford attributes the company’s success to its Dallas location "where hot and spicy products reign," he says, although the company also has customers in Ohio and Minnesota. Bronco Bob’s sells directly to retail departments, specialty food gift stores, and gourmet, coffee, and hot shops. "Our best seller is the Roasted Raspberry Chipotle Sauce, which we can easily ship to stores for sampling. There’s no preparation required. They can taste it right away. Once we sell them on the sauce, they’re eager to sample the rest of our products." Alford points out, however, that foodservice is a very small part of their business. "Restaurants use the grilling sauce to top meat," he says.

The bottom line is that manufacturers need to decide which distribution channels are best-suited for their products, their companies, and their lifestyles. While the thought of institutional sizes may evoke unpleasant memories of "mystery meals" in the school cafeteria, foodservice, for many different products, is nevertheless becoming the "sexy place to be in the food industry," according to the vice of president of foodservice for a top U.S. food company, who was recently quoted in Food Explorer Magazine.

Indeed, the possibilities are pretty exciting. As the restaurant business continues to boom, consumers demand more varied flavors, and institutions such as hospitals and airlines spice up their menus to help attract more clientele, the niche for hot and spicy products in foodservice will become even more established.

Sunny Conley is an award-winning writer and desktop publisher. Her book, Cafe Hopping in the Southwest: 100 Charming Places to Eat, Plus Tips for Tourists, received a 1997 New Mexico Press Women’s Book Award.

John Randall, Vice President of product development at KFC Corp. in Louisville, Kentucky, proposed in Food Explorer Magazine these ten commandants to prospective food manufacturers, especially those considering the highly competitive quick-service restaurant business where food trends often begin:

1. Consumers. Who are the customers that are targeted and what are their needs? Are they children or adults? Are they weight or health-conscious?

2. Concept. What is the concept behind the restaurant? What menu occasion(s) do they serve?

3. Taste. The food must look great first, then smell great, and then taste great every time.

4. Ease of preparation. Fewer preparation steps mean more consistency. The product should tolerate variances in food preparation.

5. Versatility/multiple use. Consumers want variety, although variety can cause complexity in both "the back and the front end" of a foodservice operation.

6. Flexibility in cooking. A product’s quality must be the same regardless of which cook platform is used.

7. Price/value. The product’s serving size, price, and margins should be pre-determined.

8. Higher cook efficiencies. Look at the ratio of time-to cook over holding time. The smaller the ratio, meaning, the less preparation time and the longer the holding time over which a product retains quality, the better.

10. Shelf life. Can the facilities support fresh, frozen or refrigerated products? For example, what is the refrigerator capacity? How many deliveries per week will they need?

Jackie Haas, VP Marketing Nobel Sysco Food Service Co. 601 Comanche Rd. NE Albuquerque, NM PH: (800) 347-3663	Ana Baca, Public Relations Director El Encanto, Inc. P.O. Box 293 Albuquerque, NM 87103 2001 4th St. SW Albuquerque, NM 87102 PH: (800) 952-4453
Touch of South Michael Beatty, President 4 Pine Court Inglewood, CA 90302-2930	PH: (310) 672-0700 Sessions Savories Elaine and Paul Sessions P.O. Box 3436 Miltion, FL 32572 PH: (850) 623-4533
HI-CO Western Products' Andy Housholder 1452 East Main Street Mesa, AZ 85203 PH: (602) 834-0149