CEO Stew Leonard Talks Thanksgiving Costs

Key Concepts

• Customer Perception vs. Reality: Discrepancies between perceived price increases (e.g., 40%) and actual price stability for key items like Thanksgiving meals.
• Cost Pressures: Rising costs in packaging, labor, and energy (kilowatt hours up 30%) impacting profit margins in the food business.
• Premium vs. Value in Food Choices: The ongoing debate about consumer willingness to pay for premium offerings like organic turkeys versus the demand for value.
• Organic Food Standards: Regulations for organic products, including no added hormones or antibiotics, and free-range practices.
• Cooking Techniques: The importance of proper preparation and cooking methods (e.g., butter under the skin) for achieving a desirable outcome, regardless of product quality.
• Emerging Beverage Trends: The rise of THC-infused beverages (e.g., sparkling water with 5mg THC) as an alternative to alcohol.
• Private Label vs. Brand Labels: A shift towards private label products, driven by the need for quality and cost savings, with retailers like Trader Joe's and Costco heavily utilizing this strategy.
• Cost-Saving Strategies for Consumers: Suggestions for reducing food bills, including guests bringing dishes, utilizing store prep services, avoiding impulse buys, and staying away from in-store demonstrations.
• Competitive Landscape: The increasing competition from various supermarket formats (Aldi, Lidl, Costco, Wegmans) and the impact on established businesses.
• Competition as a Catalyst for Improvement: The perspective that competition, while challenging, drives innovation and enhances product/service quality.
• Product Highlights and Price Fluctuations: Specific examples of products and their price trends, such as jumbo lobsters (same price as last year), tomahawk steaks, eggs (down $1/dozen), and butter (down).
• Tariff Impact: The relaxation of tariffs on coffee potentially leading to price reductions.
• Viral Food Trends: The influence of social media (TikTok) on product popularity, exemplified by the "butter cone" ice cream trend.

Summary

Consumer Sentiment and Economic Pressures

The discussion begins by addressing a perceived disconnect between customer sentiment and actual pricing. While some customers feel increased pressure and perceive prices as higher, the speaker notes that target prices for key items like Thanksgiving meals are the same as the previous year, and general ratings from other retailers are also consistent. The origin of a reported 40% price increase is questioned, suggesting it might be an arbitrary figure.

Significant cost pressures are identified as impacting the food business. These include rising expenses in packaging, labor, and particularly energy costs, with kilowatt hours reported to be up by 30% year-over-year. These factors contribute to "razor-thin profit margins" for family businesses, creating a reluctance to raise prices.

Thanksgiving Meal Trends and Consumer Choices

The Thanksgiving meal is highlighted as a time when consumers can become particularly focused on their choices. An anecdote is shared about family members driving to farms for "organic turkeys" that receive special treatment. This leads to a discussion about the current consumer obsession with avoiding ultra-processed foods and the continued importance of organic options.

The speaker clarifies the standards for organic products: the feed is strictly regulated, there are no added hormones or antibiotics, and the animals are typically free-range. These attributes contribute to a higher cost for organic turkeys. A specific example is given of a turkey supplier in L.A. that has been a partner for 30 years, known for award-winning breeds and allowing turkeys to roam and forage on grass, which imparts great flavor.

However, the importance of proper cooking is emphasized, with the advice that even the best turkey can be ruined if cooked incorrectly, leading to dryness. A "secret" from Martha Stewart is shared: sliding butter under the skin to enhance flavor and moisture.

Emerging Beverage Trends: THC-Infused Drinks

A significant trend discussed is the rise of THC-infused beverages. The speaker notes that they can now sell sparkling water containing 5 milligrams of THC, and this category is "exploding." This trend is seen as a potential alternative to alcohol, especially for individuals who need to drive, with products like "Cycling Frog" being mentioned. The trend is described as "huge" and "very controversial."

Private Label vs. Brand Labels

The conversation shifts to the dynamics between private label (or white label) products and national brand labels. There is a clear "shift to private label right now," provided that quality is maintained. Retailers like Trader Joe's are cited as being "hugely private label," and Costco also offers a significant amount of private label options. The speaker explains that private label products often use the same manufacturers as national brands, allowing consumers to save up to 40% on their bills.

Consumer Strategies for Saving Money

Several practical tips are offered for consumers looking to save money on their food expenses:

• Ask guests to bring food: This directly lowers the host's food bill.
• Utilize store prep services: Stew Leonard's offers chefs who can do the prep work, making home cooking easier.
• Avoid impulse items and demonstrations: The speaker advises staying away from in-store demos, as they often lead to increased purchases and higher food bills. This advice is humorously rejected by the interviewer, who intends to sample all demos.

Competitive Landscape and Business Philosophy

The increasing competition in the supermarket sector is a major topic. The presence of discounters like Aldi and Lidl, along with the expansion of chains like Costco and Wegmans, is noted. Despite the closure of some smaller stores, the overall competitive environment is described as "heating up."

The speaker's perspective on competition is that while it can be challenging ("You don't like it"), it is ultimately "good for you" as it drives improvement and innovation. The company has a history of over 100 years and has operated without major competitors like Whole Foods in its early days. A direct comparison of a turkey dinner for eight with a major competitor is mentioned as a way to ensure they are "better." The company also highlights having "better cooking instructors."

Product Highlights and Price Fluctuations

Specific product examples are used to illustrate price trends:

• Jumbo Lobster: The price is the same as last year.
• Tomahawk Steak: A premium cut, sourced from ranchers in the Midwest.
• Eggs: Prices are down by approximately $1 per dozen.
• Butter: Prices are down, attributed to increased usage and the relaxation of tariffs on coffee (though the connection to butter prices is not explicitly clear, it's mentioned in the context of price decreases).
• Coffee: Tariffs have been relaxed, potentially leading to price reductions.

Viral Trends and Unique Offerings

A notable viral trend discussed is the "butter cone" ice cream, which gained popularity on TikTok. The speaker describes it as an ice cream cone dipped in butter, sprinkled with salt, offering a "big, crunchy outside, really smooth, great ice cream" with a salty tang. A senator is scheduled to "pardon" one of these cones, highlighting the intersection of food trends and public events. The speaker humorously expresses concern about the cholesterol implications of such a treat.

Conclusion

The overarching theme is the resilience and adaptability of a long-standing family business in a dynamic and increasingly competitive food retail environment. The speaker emphasizes a commitment to quality, customer value, and continuous improvement, even amidst rising costs and evolving consumer preferences. The discussion highlights the importance of understanding customer perceptions, managing operational costs, and staying attuned to emerging trends, from premium food choices to novel beverage categories and viral social media phenomena.