From Starbucks to Smoothie King, restaurants seek to cash in on consumers' protein frenzy

Restaurant chains are strategically capitalizing on a surge in consumer demand for protein, driven by health consciousness, GLP-1 drug usage, and social media trends, to enhance revenue and profitability. This involves introducing premium protein-rich menu items, as seen with Starbucks' protein cold foam and Dutch Bros' protein coffee, which has already fueled strong sales growth for some. The significant increase in "protein" callouts on menus (from 5.9% a decade ago to 28.4% currently) underscores a sustained industry shift towards higher-margin offerings that cater to evolving dietary preferences amidst a challenging consumer spending environment.

Analysis

Restaurant chains are strategically leveraging a significant and sustained increase in consumer demand for high-protein foods to drive revenue and enhance margins in a challenging spending environment. This trend is fueled by health-conscious younger demographics, social media, and the dietary needs of consumers using GLP-1 drugs. The scale of this shift is evidenced by Datassential figures showing that consumer preference for high-protein options rose from 24% to approximately 33% over three years, while the term "protein" on menus surged from 5.9% a decade ago to 28.4% currently, with a projection to exceed 40% by 2029. Companies are employing two primary strategies: introducing new premium-priced products and re-marketing existing offerings. Dutch Bros (BROS) and Sweetgreen (SG) exemplify the success of the former, with Dutch Bros attributing strong same-store sales growth to its protein coffee and Sweetgreen growing its dinner business from 35% to 40% of sales with its "protein plates." In contrast, Starbucks (SBUX) is reactively launching a protein foam add-on amidst a period of shrinking U.S. sales, making its future impact less certain. Other firms like Chipotle (CMG) and Panda Express demonstrate a lower-risk approach by repackaging existing items into protein-focused meals, avoiding operational complexity while still catering to the trend.

Key Decisions for Investors

• Investors should differentiate between companies with proven success from this trend, such as Dutch Bros and Sweetgreen, versus those like Starbucks that are adopting it reactively from a weaker competitive position.
• Evaluate the capital efficiency of each company's strategy, as firms like Chipotle that re-market existing items may achieve margin expansion with lower operational risk than those investing in entirely new product development.
• Consider that companies with menus inherently aligned with the protein trend, such as First Watch Restaurant Group, may benefit organically with minimal additional investment, representing a lower-risk way to gain exposure.
• Monitor for signs of trend saturation, as the projected proliferation of protein callouts to over 40% of menus by 2029 could eventually erode the premium pricing power and competitive advantage it currently offers.