MONEY wall street

Burger King Wants to Cut its Exposure to Hamburgers, Not Just Taxes

While all the focus is on the tax savings Burger King could enjoy through a Canadian inversion, the real benefit of buying Tim Hortons is boosting breakfast and coffee sales.

The initial media reaction is that Burger King is turning its back on America by reportedly seeking to buy the Canadian coffee-and-doughnut chain Tim Hortons. After all, it can move its headquarters to Ontario to pay less in taxes.

In reality, Burger King BURGER KING WORLDWIDE INC BKW 3.9326% may be more interested in turning its back on the hamburger.

The $11 billion burger chain is in talks to buy Tim Hortons TIM HORTONS INC THI 0.7583% , Canada’s biggest fast-food chain with a market value of around $10 billion. The deal would reportedly involve a so-called inversion, where Florida-based Burger King would for tax purposes be headquartered in Canada, where the top corporate tax rate is 15%, versus 35% in the U.S.

But as The New York Times pointed out, Burger King’s tax rate is actually closer to 27%, and this inversion really wouldn’t cut its taxes that much because the majority of its revenues are generated in the U.S. Even if it moved to Canada, BK would still be on the hook for U.S. taxes on sales made on American soil.

No, there’s something else driving this deal, and it could be that Burger King wants to abdicate its rule over burgers and switch kingdoms.

As Americans’ tastes have changed, burger sales, which have long dominated the fast-food landscape, have started to stall. Last year, for instance, revenues at Burger King restaurants in the U.S. that have been open for at least a year fell 0.9%, while U.S. same-store sales at McDonald’s slumped 0.2%. By comparison, Starbucks STARBUCKS CORP. SBUX -0.5526% reported an 8% rise in comparable store sales in fiscal 2013 while Dunkin’ Brands DUNKIN BRANDS GROUP DNKN 0.4593% , the parent company of Dunkin’ Donuts, enjoyed a 3.4% rise in revenues.

This isn’t just a short-term problem. Analysts at Janney Montgomery Scott recently noted that while three of the five biggest fast-food chains in the U.S. are still hamburger joints (McDonald’s, Wendy’s, and Burger King), by 2020 that number should drop to just one: McDonald’s.

Meanwhile, coffee chains Starbucks and Dunkin’ Donuts are expected to move up the ranks. And McDonald’s is itself doubling down on coffee, pushing more java not just in its restaurants but also on supermarket shelves.

Noticing a common theme here?

In the fast food realm, there are three buzzy trends right now. There’s the rise of the higher-end “fast-casual” restaurants such as Chipotle Mexican GrillCHIPOTLE MEXICAN GRILL INC. CMG -0.2929% . There’s the explosion of cafe coffee shops, which according to the consulting firm Technomic was the fastest-growing part of the fast-food industry last year, with growth of 9%.

Darren Tristano, executive vice president at Technomic, recently noted that “the segment continues to be the high-growth industry leader with Dunkin’ Donuts and Tim Hortons rapidly expanding.”

He added:

[The] coffee-café segment competition will heat up, and new national chain, regional chain and independent units will increase major market penetration. Smaller rural and suburban markets will be getting more attention. Fast-casual brands in the bakery-café segment like Panera Bread, Einstein Bros. Bagels and Corner Bakery will also create new options for consumers as more locations open. Quick-service brands like McDonald’s will provide lower-priced, drive-thru convenience that provide value-seekers with a strong level of quality that is also affordable.

And the third area of growth in fast food is breakfast. According to The NPD Group, while total “quick serve” restaurant traffic fell by 1% at lunch and dinner time in 2013, business at breakfast time rose 3%.

“Breakfast continues to be a bright spot for the restaurant industry as evidenced by the number of chains expanding their breakfast offerings and times,” says Bonnie Riggs, NPD’s restaurant industry analyst.

Now, while Burger King isn’t really positioned to go after the Chipotles of the world, the acquisition of Tim Hortons could quickly make it a bigger player in the coffee and breakfast markets, where it has languished far behind McDonald’s and Dunkin’ Donuts.

Tim Horton’s already controls 75% of the Canadian market for caffeinated beverages sold at fast-food restaurants, according to Morningstar, and more than half the foot traffic at the key morning rush hour.

Morningstar analyst R.J. Hottovy noted recently that same-store sales throughout the chain are expected to rise 3-4% over the next decade, which would be a marked improvement over the same-store declines that Burger King has been witnessing lately.

Even though Burger King is a bigger company by market capitalization, it generates less than half the $3 billion in annual revenues that Tim Hortons does. This means that by buying the Canadian chain, Burger King will be able to buy the type of same-store growth that it could not muster with hamburgers and fries.

So the next time you go to Burger King, don’t be surprised if they ask you “would like some coffee to go with that?”

SLIDESHOW: Burger King’s Worldwide Journey To Canada

 

 

TIME Innovation

Five Best Ideas of the Day: August 21

1. Perspective matters: To tell the stories of Ferguson, America needs black journalists.

By Sonali Kohli in Quartz

2. After James Foley, America’s policy against paying ransom to kidnappers deserves a public debate.

By David Rohde at Reuters

3. To keep American democracy alive, citizens need to use their voice and their votes.

By Robert Reich in Guernica

4. Climate change will make the coffee of the future bitter and pricey.

By Jessica Leber in FastCo.Exist

5. Business school students have much to learn from the “Market Basket” family-corporate feud.

By Judith Samuelson in Huffington Post

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Diet/Nutrition

You Asked: Is Coffee Bad For You?

Illustration by Peter Oumanski for TIME

For years, your morning joe got a bad rap from health experts. But newer research suggests coffee may actually be good for you—if you follow the rules

“I gave up coffee” is a refrain of the health conscious. But should it be? The idea that coffee is a dangerous, addictive stimulant springs mostly from 1970s- and 1980s-era studies that tied the drink to higher rates of cancer and heart disease, explains Dr. Rob van Dam, a disease and nutrition expert at Harvard School of Public Health who has examined coffee and its health effects. According to van Dam, that old research didn’t do a great job of adjusting for a person’s cigarette habit or other unhealthy behaviors.

But newer, better-designed research paints a more benign picture of your favorite eye-opener. Van Dam and his colleagues analyzed health and diet data on roughly 130,000 adults spanning 24 years. They found no evidence that drinking coffee increases your risk of death from cancer, cardiovascular disease, or other causes. That was true even for people who knocked back 48-ounces of coffee a day. In fact, there was some indication that regular coffee drinkers might enjoy a slight drop in mortality risk, van Dam says.

The idea that your java could actually deserve a health halo would have shocked doctors a few decades ago. But van Dam’s study is only one in a wave of new research sure to please coffee fans. Coffee has been linked to lower rates of type-2 diabetes, a reduced risk for some cancers, and protection against Parkinson’s disease. Other research links coffee to improved memory, mood and energy levels.

The drink could even help shield you from a deadly form of skin cancer. How? The caffeine in coffee may interact with a type of “repair gene” that plays a role in the development of basal cell carcinoma, says Dr. Jiali Han, a disease researcher at Indiana University, Indianapolis, who coauthored the coffee-and-skin cancer study. Han says it’s also possible that coffee’s antioxidant compounds could account for the drink’s anti-cancer benefits—an explanation you’ll come across a lot when reading about coffee’s benefits.

But before you start swigging your java by the gallon, van Dam warns that there remain reasons to be careful. There’s evidence that pregnant women might want to limit morning caffeine fix because of an admittedly small correlation between coffee intake and miscarriage. (There is research showing that moderate coffee drinking is perfectly safe, making it a judgment call for expecting moms.) There are also reports hinting that people with cholesterol issues may have more problems if they drink some kinds of coffee. Compounds called cafestol, present in coffee beans, appear to raise LDL cholesterol—though paper filters eliminate most of those compound, making it more of a concern with French press and espresso-style brews. And of course, if you’re drinking so much that you’re unable to sleep or your heart races, that’s a bad thing too, van Dam adds.

But if you’re in good shape and enjoy coffee? “For most people,” van Dam says, “black coffee is a healthy, non-caloric beverage choice.” And it should go without saying that the benefits conferred to coffee do not extend to mocha-flavored “coffee drinks” or other sugar-loaded concoctions.

“Coffee is a highly complex beverage with hundreds of compounds,” van Dam says, which means it affects people differently. Van Dam doesn’t recommend people who don’t already drink the stuff start now, but if you love it, can tolerate it, and it isn’t messing with your sleep? Bottoms up.

TIME Diet/Nutrition

Your Coffee Might Have Wheat or Twigs Hidden in It

Man on desk holding cup of coffee, close up
Monica Rodriguez—Getty Images

Scientists are developing a way to identify counterfeit coffee

Do you think your morning cup of joe — before you put the cream and sugar in, anyway — is pure unadulterated ground beans? Think again.

Coffee shortages caused by climate change have increased the likelihood that the coffee grounds we use have “fillers” in them like wheat, soybean, brown sugar, barley, corn, seeds, and even stick and twigs — which, in addition to being misleading could also cause allergic reactions in people who are sensitive to the undeclared fillers. When ground up and mixed with coffee, it can be difficult to tell there are foreign objects.

A team of Brazilian researchers is developing a process to detect counterfeit coffee, since some estimates have shown that 70% of the global coffee supply could run out by 2080, with Brazil losing out big time. According to the researchers, Brazil usually produces about 55 million bags of coffee every year, but projections for 2014 put them at only 45 million.

To identify fillers in coffee that may be added on purpose, the researchers use liquid chromatography, which sensitively separates components within a mixture for identification. Since coffee is made up of carbohydrates, the researchers believe they could create what they refer to as a “characteristic fingerprint,” which would identify what’s coffee, leaving behind the fake stuff.

“With our test, it is now possible to know with 95 percent accuracy if coffee is pure or has been tampered with,” said study author Suzana Lucy Nixdorf of State University of Londrina, in Brazil, in a statement.

The research is still under development, but the team is presenting their findings at the 248th National Meeting & Exposition of the American Chemical Society.

TIME technology

This Alarm Clock Wakes You Up by Brewing a Fresh Cup of Coffee

steaming coffee
Getty Images

Um, yes please

Wouldn’t you hate your alarm clock so much less if it woke you up with a steaming hot cup of joe? Like, you’d still hate it a little, because waking up is the worst, but you’d have fresh-brewed coffee waiting for you inches from your face!

That’s the idea behind Barisieur, an alarm clock/coffee brewer hybrid engineered by London-based industrial designer Josh Renouf. The base is just an average digital alarm clock — but the important part is what’s resting on top. It looks like a mini version of those chemistry sets nerds play with in movies — you know, when they’re doing “experiments” in their bedrooms instead of developing social skills or whatever. Anyway, here’s how it works, according to PSFK:

The sleek device has stainless steel ball bearings inside a bespoke hand blown glass beaker that boils water through induction heating. The boiling water is pushed out of the beaker through a slim glass tube and is poured over the ground coffee which is placed in a sustainable stainless steel coffee filter. The coffee then drips through the filter and into a glass cup. In the middle of the tray is a small glass container that holds the milk or cream.

Renouf is now in the process of developing the Barisieur for commercial use. The estimated retail price is between £150 and £250 (or around $250 to $420).

So basically, this thing wakes you up with the gentle sounds of metal clinking against glass paired with the aroma of coffee. It’s trying to ease you into a state of awakeness rather than aggressively force you into it like most alarms. Plus, it’s a very safe way to wake up to a nice smell. Remember that time on The Office when Michael burned his food trying to wake up to the smell of crackling bacon?

MONEY stocks

Dunkin’, Mickey D’s, or Starbucks? The Surprising Winner of the Coffee War

Coffee spilling
Gazimal—Getty Images

McDonald's and Dunkin' Donuts' push into premium coffee was supposed to hurt Starbucks. Turns out, the two chains may be firing on one another, leaving Starbucks unscathed.

When Dunkin’ Donuts began selling lattés and other premium coffee drinks around a decade ago, it was viewed as a direct attack on StarbucksSTARBUCKS CORP. SBUX -0.5526% , the nation’s leading specialty coffee chain.

Then five years ago, another front broke out in the java wars when McDonald’s formally launched its McCafé line of premium coffee drinks. At the time, Mickey D’s entry into this brewing battle was called “a game changer” — and not in a good way for Starbucks.

The pincer moves were seen as a real threat to the Seattle-based java juggernaut, especially given the economics of the time. In 2009, the economy was still mired in a recession stemming from the global financial crisis. And with unemployment hovering near 10%, conventional wisdom said that cost-conscious consumers were likely to make a shift away from Starbuck’s pricey menu toward more cost-conscious offerings found at McDonalds or Dunkin’.

Research, in fact, showed that while coffee purchases were relatively recession proof — if you have to have your morning fix, you have to have your fix — the amount of money consumers were willing to spend per visit was likely to fall in economically troubled times. Hence, McDonald’s and Dunkin’, which both cater to working- and middle-class households, saw an opening.

Yet if the past five years have taught us anything, it’s that conventional wisdom was wrong.

As the chart below shows, over the past five years, Starbucks’ same-store sales — that is, revenues at locations that have been open for more than a year — accelerated and far outpaced those of Dunkin’ BrandsDUNKIN BRANDS GROUP DNKN 0.4593% , parent company of Dunkin’ Donuts.

Starbucks vs Dunkin

This point was reinforced when Starbucks announced its latest quarterly results on Thursday, which showed better-than-expected profits, and an 11% jump in overall revenues versus the same period last year.

What gives?

Well, class may indeed be playing a role in the coffee wars — but not in the way that you may have assumed. Earlier this year, Ted Cooper at The Motley Fool made an astute point:

McDonald’s may be able to sell coffee, but it will never come close to replicating Starbucks’ menu. McDonald’s best shot at becoming a coffee destination is to go after the price-conscious coffee crowd…

And who owns that crowd? Dunkin’ Donuts, of course, which despite its name generates nearly 60% of its revenues from coffee and beverage sales, not doughnuts.

The fact that Dunkin’s same-store sales growth pace has sunk precipitously ever since McCafés hit the market — even as the economy improved — is likely due to McDonald’s marketing push for bargain-seeking coffee drinkers. In many markets, in fact, McDonald’s is offering any size hot coffees for $1, which is more than half off what Dunkin’ charges for a hot regular cup of Joe.

Not surprisingly, investors have caught onto the fact that McDonald’s and Dunkin’ may be hurting one another — and not Starbucks — as evidenced by recent moves in Starbucks (SBUX), Dunkin’ (DNKN), and McDonald’s shares:

SBUX Chart

SBUX data by YCharts

The Economy Strikes Back

Meanwhile, the premium status that Starbucks maintains is likely to work to its advantage as the economy improves.

For instance, Dunkin’ Donuts recently announced that it will have to raise its prices slightly to address skyrocketing coffee bean prices in the commodity market. It remains to be seen how those price hikes will affect its consumer’s purchasing habits.

At Starbucks, it’s already known how consumers will react. When the company announced a price hike in 2013, comp-store sales remained strong as consumers cherished the brand enough to pay up, even in a so-so economy. The company announced another price hike in June, which is likely to add to overall revenues going forward.

The Empire Strikes Back

Ironically, the difficulties that McDonald’s and Dunkin’ Donuts have run into in their attempts to strike at Starbucks has created an opening for Starbucks to attack those competitors where they live — in food sales.

Starbucks’ chief financial officer Troy Alstead noted that in the company’s recently ended quarter — when same store sales rose 6% globally and 7% in the U.S. — two percentage points of those comp sales growth was attributable to food sales.

Starbucks’ momentum in food has recently been driven by increased lunch offerings, but going forward, the full effects of the company’s 2012 purchase of La Boulange bakery should start showing their effects.

In a conference call with analysts Thursday, CEO Howard Schultz noted that La Boulange branded baked goods are now available in more than 1,000 Starbucks stores in California and the Pacific Northwest. By the end of this summer, that number should jump to more than 2,500 stores, he said, as La Boulange food items will be sold in stores in New York, Los Angeles, Chicago and Boston.

TIME Coffee

Starbucks Unveils First Location in Colombia

Inside A Starbucks Store And The "Returning Moms" Program Ahead Of International Women's Day
Bloomberg/Getty Images

And will open 50 more within the next 5 years

Starbucks is spreading its corporate empire to a country already known for the strength of its coffee.

After 43 years of roasting and selling Colombian coffee, Starbucks opened its first store in Bogota, fully aware that it will have to compete with a number of domestic chains in a country with one of the world’s most vibrant coffee cultures. The new coffeehouse is bigger and more fancy than your typical Starbucks—the three-floored café has comfortable armchairs and elaborate wall art. The new branch will be the first anywhere to sell exclusively locally-sourced Starbucks coffee, the company said in a statement.

Starbucks “is looking to achieve a leadership position in the [Colombian] market,” said a statement by Nutresa, one of the two Latin American companies Starbucks is partnering with in the new venture.

The U.S. company’s main competitor will be Juan Valdez, a multinational chain that also sells 100% Colombian coffee. Juan Valdez seems to welcome the competition, though; Alejadra Londono, head of international sales, told the New York Daily News that “there’s room in the market for us both.”

Yet with Starbucks planning to open 50 stores in the market within the next five years, it remains to be seen whether Londono’s assured words will stick.

TIME Breastfeeding Wars

What Starbucks Tells Employees About Breastfeeding Customers

PraxisPhotography—Getty Images/Flickr RF

A young male barista comes to the defense of a nursing mother winning accolades and some criticism as the story goes viral.

A Starbucks employee who defended a woman’s right to breastfeed in the coffee shop was not acting under instructions from head office, but on his own, according to the company.

In a sign of how supercharged the emotions have become about public nursing, a Canadian midwife’s tale of nursing her baby at a local Starbucks in Ottawa went a little viral in early July, getting picked up by news outlets around the globe. The story was, to many, a heartwarming one: after a woman complained to a young, male barista that another woman was breastfeeding without a modesty shield, the barista said he’d take care of it. However, instead of telling the nursing mom to cover up, he just brought her an extra coffee for having to deal with the unpleasantness.

This is not actually Starbucks’ official policy. In fact, Starbucks doesn’t have an official policy on breastfeeding, according to spokeswoman Laurel Harper. The cappu-chain does have an official policy about making customers feel welcome, Harper noted (several times). “We empower our local partners to reach a decision about how best to make a customer’s experience a positive one,” she says. (Starbucks calls its employees partners, because they all get stock in the company.) It was up to the employee to decide which customer in this case was going to have a less-positive experience.

The company also doesn’t have a policy on what to do if a customer comes and exposes different, less nourishing body parts, either, but does expect “partners” to be familiar with local law.

Not all of the reactions to the story, which was first picked up by woman behind the Canadian website PhD in Parenting, have been of the “Awww, good for him” type. For many people, public breastfeeding is akin to indecent exposure. They can’t understand why they have to be confronted by nudity. “I know it’s just life for the nursing mom, but seeing something partially exposed isn’t normal for everyone around them,” was one of the more moderate comments. “I’ve been in a few situations where I just happened to turn my head and my gaze caught sight of something I didn’t want (or mean) to see.” For others it’s an inoffensive as watching someone drink, say a Venti iced skinny hazelnut macchiato with an extra shot and no whip. It’s not their beverage of choice, but it’s not a big deal.

But perhaps because of the very primal urge mothers feel to feed their children, emotions run very high whenever the subject comes up and the right to breastfeed has become something of a cri de couer for mothers—and others—and Nurse-In protests are becoming more popular. One the most recent was at a Connecticut Friendly’s in June. If the actions of the young Starbucks “partner,”are any indication, the culture is tipping in the moms’ favor.

As for the 19-year-old barista in question, he hasn’t been named. Although you might be able to find him by looking for the mom in Ottawa with the biggest smile on her face and working back.

TIME Diet/Nutrition

A Chemical In Coffee, Fries, and Baby Food Linked to Cancer, Report Says

187326070
Getty Images

The research isn’t conclusive. But lab evidence suggests a type of chemical found in starchy foods cooked at high temperatures—as well as coffee and some baby foods—could promote the growth of cancer cells

The crispy brown crust that forms on your french fries or toast? Those are hot spots for a chemical called acrylamide, which forms when the sugars and amino acids found naturally in foods like potatoes and cereal grains are cooked at temperatures above 150 degrees. It’s present in cookies, crackers, coffee and some baby food that contains processed bran. And according to a new report from the European Food Safety Authority (EFSA), it’s a public health concern.

So should you worry?

Here’s what scientists know now: Lab studies involving animals have shown that diets loaded with acrylamide can cause DNA mutations that increase the risk of tumor growth and the spread of cancer cells. But studies involving people have produced “limited and inconsistent evidence” when it comes to the ties between acrylamide and cancer, the EFSA says.

While people exposed to the chemical in an industrial setting have suffered from nervous system issues like muscle weakness or limb numbness, that has little to do with your diet. “That was through inhalation and skin exposure to high levels of acrylamide at the work place, not food consumption,” stresses Marco Binaglia, a scientist who helped draft the EFSA report.

Binaglia says that, for now, it’s not possible for him or other health scientists to make diet recommendations. “We’ve identified a possible model of action that explains how acrylamide could damage DNA in a way that leads to cancer-producing cells.” But more study is needed to produce specific dietary guidelines, he adds.

For example, Binaglia says the EFSA’s coffee research only looks at acrylamide content, and does not take into account all the other possibly beneficial chemicals and compounds found in your morning joe, for instance. “A lot of questions cannot be answered right now,” Ramos adds. Similarly, the American Cancer Society (ACS) says that, based on available research, “It is not yet clear if acrylamide affects cancer risk in people.”

Despite all the unknowns, if you want to reduce your potential risk by cutting out the chemical from your diet, the ACS recommends boiling potatoes, which results in less acrylamide formation than roasting or frying. They also suggest lightly toasting your breads—no dark spots.

And as for acrylamide in coffee, says Luisa Ramos, another researcher who helped draft the report: “It’s usually found at higher levels in light roasts because it forms during the first minutes of roasting and then degrades as the roasting process continues.”

Ramos says choosing darker coffee roasts may lower your exposure. And, for concerned parents, baby foods that don’t contain processed cereal grains should have lower levels of the chemical.

TIME Food & Drink

These Are the Most Popular Starbucks Drinks Across the U.S.

Quartz

People in Portland really love eggnog lattes, apparently

The United States is a nation of enthusiastic coffee drinkers, and this map created by Quartz reveals what types of Starbucks coffee drinks are most popular throughout the country.

The map is based on data from hundreds of millions of Starbucks transactions across the U.S. Though the most popular beverages across the board were basic brewed coffee and lattes, certain cities showed an affinity for more specific, unique drinks. (We’re looking at you, Memphis and Portland.)

Quartz also noticed a sort of “cold-hot axis,” meaning that typically warm states like Florida, Texas, New Mexico and Hawaii order more iced coffee than hot coffee overall. Another divide that’s a bit harder to explain is dark vs. light. Cities like Chicago and Philadelphia opt for light roasts, whereas cities like Boston and Seattle go dark.

Other conclusions: people from southern California really love their Frappuccinos, and people from Seattle (Starbucks’ home city) are really into espresso.

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