Chipotle is a restaurant chain that does extremely well serving fresh food fast. I was going to call it fast food, but that seems a bit denigrating to what Chipotle offers. Writer Tom Roston went so far as to say “comparing a Chipotle taco to one from Taco Bell is like comparing apples to Apple Jacks.”
So is their approach to sustainability just as fresh? Mr. Chris Arnold, Chipotle’s Communications Director, explains what is remarkable about Chipotle’s approach to green. Arnold has a terrific story, one which will give your head a turn and make you consider a whole new angle on sustainability.
In a nutshell, Chipotle has a product that is leagues ahead of most fast food restaurants in terms of responsible sourcing and organic content. But until recently the majority of their customers didn’t care. They just came for the great taste.
Actually, this isn’t hard to understand. One look at OgilvyEarth’s Mainstream Green study confirms the vast majority of Americans think green is synonymous with high-priced elitist fare that will single you out as a hippie or snob. Definitely not the persona of the average fast feeder.
“To tell the truth, we never sourced healthier, organic, local ingredients as part of a marketing platform” confirms Arnold. “It just made better tasting food. No great insight there.” Arnold’s challenge was, in his own words, “… to let consumers in on the secret, and educate them on why this matters — without freaking them out.”
Chipotle’s solution has been to make nutrition and sustainability information available for customers who want it. At the same time, the company takes the occasional stab at less healthy alternatives in their advertising, including this truly inspiring TV commercial that managed to grab headlines — even getting chatter on traditionally anti-sustainability networks like Fox.
As Arnold explains it, this slow convergence of Chipotle’s practices and communication have followed the journey of food enlightenment we seem to be on. “People have become more aware, books are coming out, movies are coming out — we’re all starting to add ‘sustainable’ to our grocery list.”
At the same time, Arnold is quick to emphasize that it’s still a balancing act. Chipotle’s needs to be very careful about how much sustainability to serve up to its mainstream customers . If It Pays, Keep Doing It. The formula has proven itself financially.
As Arnold says “We went public in 2006, and our ‘good food tastes better’ ethos was embedded into the offering. If our earnings slip a bit, our shareholders understand that ingredient quality will not be compromised.”
That said, even during the recession, the company never went same-store negative. In fact, it has posted same store sales growth the past seven quarters.
“We have an efficient real estate model, we don’t franchise, and we don’t do quick-hit promotions that drain resources” says Arnold. “What’s more, we hire for the long-term, not just to put bodies behind the counter. It takes us longer to find the best people, but when we do, their performance and loyalty make them incredible assets.”
Chipotle’s model echoes the innovative thinking that companies like Ford are engaged in. In both cases, a higher price for environmentally friendlier product was offset by creative business model thinking.
1. Green makes sense, even if consumers don’t care — To Chipotle, fresh, organic, local ingredients made for better food. Consumers are slowly starting to appreciate the sustainability aspect of Chipotle’s offering, but it isn’t something the company relied on for marketing.
2. Higher cost can equal higher profit… if you inject creativity — Chipotle has the highest profit in the industry, despite carrying higher costs. It all comes down to finding innovative ways to offset the investment. In Chipotle’s case, with better hiring and smarter real estate decisions.
DKNA: Here some information about what Chipotle’s history looks like: Steve Ells, founder, chairman and co-CEO, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Through our vision to improve the quality of the food we serve, Chipotle is seeking better food from using ingredients that are not only fresh, but that where possible are sustainably grown and raised responsibly with respect for the animals, the land, and the farmers who produce the food. A similarly focused people culture, with an emphasis on identifying and empowering top performing employees, enables us to develop future leaders from within. Chipotle opened with a single restaurant in 1993 and currently operates over 1,400 restaurants.
In 1998, McDonald’s made an initial minority investment in the company. By 2001, the company had grown to be Chipotle’s largest investor. The investment from McDonald’s allowed the firm to quickly expand, from 16 restaurants in 1998 to over 500 by 2005. On January 26, 2006, Chipotle made its initial public offering (IPO) after increasing the share price twice due to high pre-IPO demand. In its first day as a public company, the stock rose exactly 100%, resulting in the best U.S.-based IPO in six years, and the second-best IPO for a restaurant after Boston Market. The money from the offering was then used to fund new store growth.
In October 2006, McDonald’s fully divested from Chipotle. This was part of a larger initiative for McDonald’s to divest all of its non-core business restaurants – Chipotle, Donato’s Pizza, and Boston Market – so that it could squarely focus on the main McDonald’s chain. McDonald’s invested approximately $360 million into Chipotle, and took out $1.5 billion. The company currently trades on the New York Stock Exchange. (source www.wikipedia.org)
On April 1st 2013 its stock (CMG) was traded on NYSE at 321.06 US$.
Source: Original article, 5 July 2012, by Mr. Marc Stoiber, posted here with his kind permission.