6 Things This Start-up Knows About What You Eat
"Big data" is a term thrown around more and more these days, even though most business leaders don't know what it is or how to use it.
Even so, loads of start-ups are cropping up that help other companies benefit from their ability to use lightning-fast computer processors to analyze billions of data points in an instant, and from an almost unfathomable amount of digitally stored information.
Consider Food Genius, a Chicago-based start-up that has created a big data research tool for the food industry, giving consumer packaged goods companies, food distributors, and restaurants insights on industry trends. Food Genius was the first company to emerge from design firm IDEO's start-up-in-residence program.) Its cloud-based dashboard, called Food Genius Reports, analyzes billions of restaurant menu ingredient and item combinations, by tracking more than 22 million menu items, 300,000 restaurant locations and 100,000 unique menus.
Here's what Food Genius founder and CEO Justin Massa says his company is seeing, based on all that data.
Some cuisines have strong "standards of identity," some don't.
Indian cuisine, for example, has a very strong standard of identity, meaning most Indian restaurants serve the same dishes. In fact, the top 10 dishes on Indian menus are on more than 75 percent of all menus in the category.
In contrast, French restaurant menus vary widely. The top 10 dishes are only on 36 percent of all menus in the category.
The vast majority of trends are pretty niche.
For instance, did you know ricotta is one of the most common cheeses on pizza?
"There are actually things that have significant market share, that when you first hear them it's like 'No, that can't be the case.' [Ricotta is] actually on a lot of pizzas around the country and of large chunk of pizzas in New York," Massa says.
Many trends identified by the foodie press are biased and don't reflect actual market adoption.
Massa calls these "zombie predictions" and says the best example is poutine, a Canadian dish that tops fries with cheese curds and gravy.
"We've found press references to it being a trend as far back as 2007, and I can tell you poutine has never been a trend," he says. "I think it's something that food writers really like to write about because it's kind of this decadent, delicious, filthy pleasure, but it's just not a trend." The numbers don't lie--Food Genius has found poutine is on less than 1 percent of menus and in less than 1 percent of locations.
Word choice on menus affects perceived value and pricing.
Because big chains have overused words like "premium" and "gourmet" to describe lower cost items, they've driven down the standard of identity for menu items that use those descriptions. Another one: "Angus" for burgers.
"You'd think a Black Angus burger [is] a better burger, but it actually has a pretty significant impact on dropping the price down," Massa says.
It's the same thing with "fresh," an adjective that has been overused to death and doesn't do much to help sell a menu item.
On the flip side, consumers are more willing to pay up to 30 percent more for something described as "artisan"--usually some kind of bread, such as a pizza crust, pretzel roll, bun, or flatbread.
"It's far from a magic bullet because if you call something 'artisan' and it arrives at the table and it doesn't really have an artisan feel you could have some perception issues. But if it's genuinely an artisan product you really should describe it as such because you're either going to give the consumer this impression of a lot of value or you could actually charge a little bit more," he says.
National chains and independent restaurants do things differently.
Restaurants with only one location often create a menu based on the creativity of a chef or the identity of the owner and typically back into how they're going to price menu items by knowing that food costs should be 15 to 30 percent of the price of the dish.
The chains use a different model.
"They have a much more sophisticated and nuanced understanding of language on menus and pricing strategies and they're able to be more aggressive with their own food costs," he says.
Another interesting tidbit: Independent restaurants are more likely to use applewood smoked bacon compared with chains, which are more likely to offer hickory smoked bacon.
"I can't tell you why, but I can tell you that's definitely the case," Massa says.
Big data can help figure out the most profitable food combinations.
While Food Genius Reports runs around $18,000 per license, making it too expensive for most small restaurant operators, the distributors and food manufacturers selling to them can take advantage of the Web-based platform and pass the knowledge they garner from it onto the little guys, sort of like a menu consultant.
Another way kitchens can use the data is to figure out which food combinations will be most profitable, Massa says.
"You can actually have a premium burger on your menu and maybe you put it on brioche and all the sudden you've taken what's a $7 item and turned it into an $11 item, but only adding maybe $0.50 of food costs. For a small operator that can have a really big impact," he says.
Massa says his company closed $1.4 million in Series A financing last September. FoodGenius counts among its customers large grocery chains, brands including Kraft, one of the four largest food distributors in the country, as well as a couple of large restaurant chains with a total of more than 35,000 locations in the U.S.
Want to know more about consumer spending in the food industry? Check out my previous article on 5 hot opportunities for start-ups, which not only gives hard numbers showing people are spending more on groceries and going out to eat but also profiles several start-ups taking advantage of the fact that food is hot.