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TALES OF THE TAPE: Maytag,TurboChef Cook Up High-Speed Oven
By Janet Morrissey
NEW YORK (Dow Jones)--When Manhattan chef Charles Brucculeri watched a demonstration of a revolutionary oven that cooks with the speed of a microwave and the quality of a regular oven, he was hooked.
"Over the past 20 years (working as a chef), I've seen a lot of equipment that people claimed was new - and I'd always seen it before. But this was different," said Brucculeri, whose restaurant, Bryant Park Grill on 40th Street, purchased two of the ovens last June following the demonstration. "I was really impressed."
For the busy midtown Manhattan restaurant, which seats 200 inside and 800 outdoors in the summer, the ovens couldn't have come at a better time. By speeding up cooking times without jeopardizing quality, the restaurant was able to serve that bustling noon hour crowd faster and turn over tables at a lightning pace during those steamy summer days.
Two companies are now banking that a residential version of this oven, whose model name is draped in secrecy, will transform the way people cook, which, in turn, will translate into big bucks for the firms beginning in the year 2000. TurboChef Technologies Inc. (TRBO), which designed the technology, has teamed up with Maytag Corp. (MYG) to manufacture and roll out the appliance in 1999. They're betting that, like Brucculeri, ordinary families consider time a valuable commodity and will be willing to dig deeper into their pockets to pay for it.
Developed in 1994 by Dallas engineer Earl Winkelmann, the cooking technology combines high-powered microwaves, which cook the food from the inside out, with 60-mile-an-hour hot air blasts that brown and crisp the food from the outside in. A shroud forms around the food to ensure even cooking, and a filtration system prevents flavors of different foods from mixing during the cooking cycle, said Sean Upton, TurboChef's director of investor relations.
"This will be the first real innovation to cooking since the microwave," said Prudential Securities Inc. analyst Nicholas Heymann. He added that he expects the appliance to be "very, very accretive" to Maytag's earnings in 2000.
Based on discussions with Maytag, Heymann said, he expects the first high-speed ovens to hit the market in mid-1999. He estimates the price tag at $2,000 to $3,000.
Heymann speculates 500,000 residential units and 20,000 to 30,000 commercial units will be sold in 2000, which could boost earnings projections that year. Heymann pegs Maytag's earnings at $3.00 a share for 1998, $3.40 in 1999 and at least $4.00 a share in 2000.
Over the past year, TurboChef's shares have fluctuated from a 52-week high of 13 7/8 hit last May to a low of 3 3/4 set in September. They recently changed hands at 7.
Maytag, whose stock has climbed from the low 20s in early 1997 to a 52-week high 60 1/8 last week, has built its reputation on bringing innovative additions to standard appliances.
"TurboChef has some very, very exciting cooking technology that we hope to adapt to our home and commercial cooking appliances," said Leonard Hadley, Maytag's chairman and chief executive, at a recent meeting in New York. "There will be no material earnings impact from TurboChef in 1999," he said, but it could be significantly accretive in 2000.
TurboChef, which has posted losses since going public in 1994, expects the Maytag alliance to help move the firm from a development stage company to a commercially viable one.
"We think this is a radical technology that will put the market on its ear," said TurboChef Chief Financial Officer Dennis Jameson. "And the Maytag alliance has the potential to make our company quite profitable." He declined to give a timeframe on when he expects TurboChef to be out of the red.
TurboChef will receive royalties for all commercial and residential units sold in North America, but will retain rights to sales of all units outside North America. Efforts are under way to find alliance partners in Europe and Japan.
Analyst Alen Smith of Allen C. Ewing & Co., which makes a market in TurboChef, said he expects TurboChef to turn a profit by the end of 1999. He said how quickly the company becomes profitable will likely depend on how soon the TurboChef/Maytag oven hits the market.
So how revolutionary is this technology? A 15-pound turkey with all the trimmings, which would normally take about six hours in a conventional oven, can be cooked in less than two hours, said TurboChef's Upton.
At a recent demonstration of the commercial version of the high-speed oven at TurboChef's midtown Manhattan office, a thick-crust 16-inch pizza, which would likely take 15 to 20 minutes in a conventional oven, took only 73 seconds to cook. Roast asparagus was done in 15 seconds and a porterhouse steak was on the table in just under six minutes.
Even a live lobster, still clawing as it was put into the oven, was cooked to perfection in 1 minute and 40 seconds.
"Hey, would you rather be nuked instantly or thrown into boiling water?" said Upton as he placed the lobster onto the oven tray.
Having a dinner party at 7 p.m. and you don't get off work until 5 p.m.? No problem, quipped Upton. You could bump into your dinner guests while picking up groceries on the way home and still have the spread ready for the earliest arrival, he said.
For the savvy Manhattan crowd, whose see-and-be-seen motto is stretched to the limit and where dinner parties and exchanging business cards are requisites to professional success, the high-speed oven could quickly become a household necessity.
Even outside New York, where dual income households are on the rise, time-constrained families could also reap benefits, the companies reason.
Prudential's Heymann cited the speed and quality of the TurboChef technology as well as the computer system that will automate cooking times as features that consumers will be willing to pay extra for.
"People will be able to download cooking instructions by modem" and program the oven in such a way that "people who are not gourmet cooks will be able to cook gourmet food," he said.
Though TurboChef has held patents on the high-speed cooking technology dating back to 1994, and began selling the commercial version for about $15,500 a pop in the U.K. three years ago, the tiny manufacturing company lacked the marketing expertise and slick distribution network needed to promote the technology en masse. Enter Maytag, a company with a powerful name, reputation and distribution network in the appliance world.
Maytag's Hadley said the technology will be introduced in the second half of 1999.
Under an alliance formed in September 1997 and beefed up last July, Maytag is paying TurboChef $425,000 a month to develop a home appliance using its patented high-speed cooking technology.
Maytag will manufacture, market and distribute the ovens, likely under the Jenn-Air name, in North America in both the home and commercial markets. TurboChef will receive a royalty on sales, although the company declined to disclose the amount.
Merrill Lynch & Co. analyst Jonathan Goldfarb said Maytag's stock price has been escalating in recent months over speculation about the oven. He said the appliance company has a reputation for coming up with innovative additions to appliances that people are willing to pay more for. He cited the success of the Neptune washer, which is quieter and uses less water and energy than traditional washing machines, as an example.
"Who would have thought that a $1,000 washing machine would become a cult item, when you can buy a machine that washes pretty well for $399," said Goldfarb.
Still, the analyst cautioned that the oven's price tag may help determine its success.
Although another company, Thermador, of Huntington Beach, Calif., will roll out a similar high-speed oven in March 1999, Heymann said, it doesn't have the distribution network that Maytag boasts. Maytag distributes to about 65% of all appliance buyers while Thermador distributes to less than 10%, he said.
One of the glitches that hampered sales of TurboChef's commercial version was a slight reluctance among chefs to learn a new way of cooking, said TurboChef's Upton. But he said most chefs were easily trained. Bryant Park Grill Chef Charles Brucculeri said most of his staff were up to speed by the time the trainers completed the three-day workshop.
Another hindrance has been foot-dragging by major fast food chains, such as Pizza Hut and Domino's Pizza, in North America. Each is waiting for the other to go first, Upton said, but he expects once one goes, they'll all take the plunge. He expects the Maytag name to boost efforts in this area.
Smith, the Allen C. Ewing analyst, opened a French restaurant called deFrance in Tampa in May 1997 that relies solely on TurboChef ovens. He said the high-speed appliance lowers a restaurant's labor, insurance and general waste costs.
And no food is wasted, he said, since food is cooked only after it is ordered.
"Do you have any idea how many chickens a restaurant like Le Cirque in New York would have to throw out each day?" he said, pointing out the restaurants cook food in advance based on expected sales for the day.
Smith expects the high-speed oven to get a toasty reception.
"This is not like some home bread-maker that nobody uses," he said. "This will change the way people cook. It will be the appliance people will have to have."
- Janet Morrissey; 201-938-2118 |
