Forbes, NY
12-21-06
Trans Fat War Threatens Restaurants
Cheap man-made vegetable oil in foods is a killer. Health professionals blame it
for causing coronary heart disease, which kills or disables 730,000 Americans
annually.
But banning these so-called trans fats could kill something else--restaurant sales
and profits. Tobacco was the scourge of the 1990s. The latest populist health
cause is banishing trans fat--the cheap hydrogenated vegetable oil that browns
foods and makes them taste great.
A fight is shaping up nationally over trans fat. Lawmakers are attacking the $510
billion (sales) restaurant industry. New York fired the first shot. The city outlawed
trans fats earlier this month, giving restaurateurs 18 months to change their
cooking oils or face a $2,000 fine per violation. The 60,000-member National
Restaurant Association is considering filing a lawsuit to overturn the ban, says
spokesperson Sue Hensley.
Chicago and half a dozen other American cities are contemplating bans on trans
fats. And just this week, a Massachusetts lawmaker introduced a bill banning the
artery clogging oils, making the state the first to consider prohibiting the use of
oils that contain high levels of trans fats. California's majority Democratic
legislature also appears poised to approve a bill within the year phasing out trans
fats in restaurant kitchens.
A trans fat is made when manufacturers add a hydrogen atom to vegetable oil, a
process called hydrogenation. This simple chemistry prolongs shelf life and
boosts flavor. It's what makes Oreo cookies creamy, McDonald's French fries
crispy and Campbell's tomato soup so rich. Food makers are hung up on the
challenges of replicating with healthier oils the tastes and textures familiar to
consumers.
Restaurant owners also love hydrogenated oil because it's cheap--the industry
standard soybean oil sells at 31.5 cents per pound. This compares to the upward
of 60 cents per pound for heart-healthy alternatives. The problem is the oil raises
so-called "bad" LDL cholesterol and reduce levels of HDL or "good" cholesterol,
elevating the risk of heart disease.
Some $2.2 billion was spent on cooking oil in 2005. That figure is likely to double
by 2008 as restaurants, consumers and packaged food companies seek
replacements. Most of the increased cost will probably be passed on to
consumers by raising prices 5% to 10%.
The biggest users of the oil are fast-food restaurants, a sector where profit
margins and top-line growth are already under pressure. Analysts say it could
prove difficult to pass these costs onto customers.
National chains like McDonald’s (nyse: MCD - news - people ), Burger King
(nyse: BKC - news - people ), Darden (nyse: DRI - news - people ) and Yum
Brands (nyse: YUM - news - people ) are already undertaking efforts to change
their cooking fats. Burger King is testing trans-fat fries during the next 90 days in
response to New York City’s recent ban.
“The price of oil is your biggest expense,” says Dennis Lynch, spokesman for
Wendy’s, whose menu is 80% oil-based. “Finding a replacement … was quite a
challenge.”
Wendy’s spent two years researching alternatives before switching the oil at its
6,746 restaurants this past August. The eateries now use a proprietary blend of
corn and soybean oil. The blend actually costs less than what Wendy’s was
previously using, Lynch says, but since the oil has a shorter shelf life, it needs to
be replaced more often.
Most of the resistance to switching from traditional trans fats is coming from the
thousands of smaller, privately owned independent restaurants throughout the
U.S., which complain the shift is simply too costly.
Plus, switching does solve a larger supply chain issue, says former Ohio
Restaurant Association President Cameron Mitchell.
“Our French fries are blanched in oil as part of the manufacturing process. It’s not
a simple solution--manufacturers have to go trans-fat free,” says Mitchell, who
operates 29 restaurants in Columbus, Ohio, and estimates the switch will cost
him $500,000 annually.
Even if restaurants want to switch, certain canola, cottonseed, sunflower and
corn oils are in short supply. Most the food oil manufacturing is geared toward
making hydrogenated soy oil, the past industrial standard. Some 85% of the
roughly 22 billion lbs. of edible oils Americans consume each year come from
soybeans.
Chefs say preparing baked goods without the artery-clogging stuff has also
turned out to be tricky. They prefer hydrogenated oils because they produce
flaky, light crusts and a nice brown complexion.
Archer Daniels Midland (nyse: ADM - news - people ) has pumped money into
research on changing the molecular structure of the soybean--the most widely
available commercial crop--to hold up better in baked goods, but solution is
costly and still years away.
Iowa State University is developing a canola oil that should be as stable as
hydrogenated oil for widespread commercial use. But it will exceed commercial
soybean oil in price by at least 30%. And it still may not work as well as good-old
Crisco, a Smuckers (nyse: SJM - news - people ) product.
Then, there is the old food industry adage in the food industry: Taste trumps
health. Customers may talk less fat, but that’s not what they necessarily eat.
In 2002, McDonald’s experimented with replacing the vegetable oil used to cook
its iconic French fries with a trans-fat free version. Customers frowned. The fries
were soggy and pallid, so McDonald’s quickly switched back to hydrogenated oil,
vowing not to change the recipe until the fries tasted just like those coated in
artery-clogging trans fat.