In order to beef up its breakfast offerings, IHOP, one of
)'s breakfast oriented brands, recently collaborated with The
Quaker Oats Company to develop a new blend of oatmeal. This new
breakfast item will be launched in October, featuring three
different types of oats in exclusive flavors.
Chicago-based Quaker Oats has been owned by
) since 2001. This the first time Quaker Oats formed an alliance
with a Family Dining restaurant chain to create a branded item.
Breakfast has accounted for nearly 60% of the U.S. restaurant
industry and remains a key driver of traffic growth in recent
years. Thus, both DineEquity and Quaker Oats plan to capitalize on
their respective product development talents to create a
differentiated line of oatmeal within the burgeoning healthy
We believe that the deal is strategically positive for the parties.
Breakfast is considered to be IHOP's forte as consistent with its
brand identity "Everything You Love About Breakfast." This
indicates that both the companies operate almost under the same
While the deal enables Quaker Oats to leverage IHOP's
industry-leading positioning at breakfast, IHOP will also reap the
benefits from Quaker's more than 100 years of experience in healthy
breakfast service. Further, the association paves the way for
Quaker Oats to present itself through a different business segment.
In addition to this Oatmeal blends, DineEquity has been striving
persistently to give the American breakfast experience at IHOP a
new meaning through menu innovation, strategic advertisement,
technology and operational improvements.
On the menu front, management is discarding underperforming items
and opting for value and innovative breakfast options. It is
presently on a test phase with new menu items, some of which will
likely hit the market later this year. We believe that the new
oatmeal offerings are one of them.
DineEquity currently carries a Zacks #3 Rank, which translates into
a short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock.
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