This Week in Food and Restaurants
by Aristotle Munarriz (MF Edible)

Miami, FL (March 7, 1997) -- Shareholders of HEINZ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HNZ)") else Response.Write("(NYSE: HNZ)") end if %> probably can't get that Carly Simon song out of their heads. You remember, the one from the old Heinz 57 spot where the ketchup slowly rolls out of the bottle as Carly belts out "Anticipation." Next week the company will announce a worldwide restructuring of its operations. The company will meet with analysts on Friday in San Francisco where it will share with the public the restructuring plans. Speculation in the last few months has it that Heinz is going to get thinner, with or without its Weight Watchers division.

The troubled diet food subsidiary has been rumored to be on the auction block for some time now. The resignation of the president of the division just two months ago has further fanned the flames. The weight loss itself will be minimal since Weight Watchers accounted for just 7% of the company's sales last year but that is just one of the rumored divestitures.

I was at the Western Frozen Food Convention earlier this week and everybody was certain that Ore-Ida would also be a casualty. It has not been the kindest of years to be a french fry plant. J.R. Simplot, the privately held potato giant, reportedly lost $40 million last year. Semiconductor stock investors may recognize the company namesake, Jack Simplot, as the most influential investor on the board of MICRON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MU)") else Response.Write("(NYSE: MU)") end if %>. Consolidation and financial ruin has shrunk the french-fried potato industry from about 20 companies a few years ago to a half-dozen today, so there would not be a lot of surprise if Heinz does sell part or all of its Ore-Ida brand name. (One rumor has the company keeping the name but selling the processing plants). As probable suitors like McCain Foods, Aviko or possibly even Simplot (in that order) line up, it may be useful to reflect that back in December, they broke off talks to acquire Bumble Bee. Heinz already owned Starkist and just when the world thought they would be the undisputed tuna king they sent Bumble Bee a "Sorry Charlie" letter.

What else will Heinz give up? The company has its fingers in everything from soups to pet food. Analysts are still warm to the company, even before any spin-offs and divestitures are revealed, if there are to be any at all. Analysts expect earnings to rise to $1.91 a share this year, from $1.75 last year. The question is, still, as Carly kicks into the chorus once again, how many "Varieties" will Heinz be holding by the end of next week?

THE EDIBLE EIGHT

March finds us a little lower but still clinging to a paltry 0.1% gain for the year. Sure beats having to whip out red ink, but things could be better. There were two new entries this month and both BERTUCCI'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BERT)") else Response.Write("(NASDAQ: BERT)") end if %> and QUALITY DINING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QDIN)") else Response.Write("(NASDAQ: QDIN)") end if %> are leading the pack on the downside over the first four trading days of the month.

There were a few news items on E8 stocks this past week, the first being that Rainforest Cafe <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RAIN)") else Response.Write("(NASDAQ: RAIN)") end if %> will be taking a charge for the development costs incurred with the now all but dead proposed units at Stratosphere and Donald Trump's Taj Mahal Casino in Atlantic City. The after-tax charge of $.07 a share was not necessarily news. Everyone knew that the Stratosphere was in dire financial straits and zoning red tape at the Taj Mahal site was shredding away at the eventual unit economics. The units were slated for a 1998 opening and the company announced that another 1998 restaurant, at Aventura Mall in North Miami, had been bumped to a late 1997 opening. With at least 10 new units scheduled to open this year on the company's present base of only six, the growth looks extraordinary for a company selling at 17 times next year's earning estimate.

Quality Dining, fresh from completing the Bruegger's Bagels acquisition the year before, announced that, with the transition all but complete, two of the founders of the bagel chain would be leaving the board of directors to pursue business interests (which includes running a few Bruegger's). The company, which was trading close to $40 a share last year at the height of the bagel craze, and at $20 just a few months ago, is an interesting value consideration. Then again, we always consider value round these parts.

1997 Returns To Date:
The Edible Eight        +0.1%
NASDAQ                  +1.9%
S&P 500                 +7.8%
Fidelity Sel: Food      +8.4%
IBD: Restaurants        -4.3% (as of Friday)

Until next week, Digest Foolishly,

MF Edible

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