Not only is Chipotle‘s food tasty and affordable, but the company is a leader in sustainability – from local, organic food purchasing to green building practices coupled with healthy sales and margins, Chipotle caught my eye. How do they do it? What is Chipotle doing that others in the food industry should learn from? I spoke with Chris Arnold, company spokesman, to find out.
I am always hearing of Chipotle’s advances in sustainability practices. But the first thing Arnold told me was, “We don’t have a sustainability initiative. All we do is ingrained in the way we run the business.” What? A leader without trying. Nine years ago a menu item wasn’t selling so well, so they switched to Niman Ranch naturally raised pork simply to help it sell better. Steve Ells, founder, CEO and head chef, visited some of Niman’s farms and loved what he saw; plus pigs raised well taste better. “When we switched to Niman we had to increase the price by $1, which changed carnitas from the cheapest to most expensive item on the menu at the time… our sales doubled,” Arnold told me. “We learned that people are willing to pay more for better food.”
“We had an epiphany that if you’re going to serve the best food, fresh is not enough, just a starting point.” This is how Food With Integrity came about – “a philosophy that we can always do better in terms of the food we buy. And when we say better, we mean better in every sense of the word- better tasting, coming from better sources, better for the environment, better for the animals, and better for the farmers who raise the animals and grow the produce.”
Nine years after the first Niman Ranch purchase, all Chipotle pork, chicken (served in US restaurants), and 60% of beef is naturally raised; 35% of beans are from organic farms; dairy comes from cows free of added hormones; and produce is sourced locally when seasonally available.
Additionally, Chipotle has a sustainable building program, which began in 2003 when they opened their first green certified restaurant in Austin, Texas (certified by the city). All buildings built since then incorporate elements of sustainable building, including low VOC paints, Energy-Star kitchen equipment, light controls that adjust based on natural light levels, and more. Chipotle is seeking LEED certification for the three restaurants they opened in 2008. Furthermore, Chipotle purchases environmentally friendly products (bowls made of recycled newsprint, gift cards made with corn-based plastic, napkins made from unbleached paper) and they are always striving for improvement, an inherent part of the Food With Integrity program. Upcoming improvements include increasing supply of naturally raised meat, organically grown beans, and locally sourced produce, and a movement to pasture raised dairy.
“It’s a journey, not a destination – we are never going to be there. When we get to 100% naturally raised beef, then maybe we want to look at grass fed beef, and free range chicken. There will always be improvements to be made,” Arnold told me.
Stepping back a bit, what does this all mean for the bottom line? Arnold reported that business has grown at a robust pace since Chipotle’s founding. In 2007, Chipotle celebrated 10 consecutive years of same store sales growth, and revenue has grown exponentially. Chipotle’s food is priced competitively with comparable fast food items but provides the quality of higher end restaurants. Chipotle makes good food accessible. Chipotle invests in its food – Arnold told me they spend more money on food as a percent of revenue than competitors in the fast casual segment and across restaurant categories.
But Chipotle is profitable, maintaining margins near 20% even in 2008 which was a terrible year for restaurants. The key is efficiency gained in other areas – while Chipotle over-invests in tasty ingredients, they cut costs by running small restaurants with lower rent and utility bills, providing a streamlined menu (a result of a CEO/head chef who believes when you do fewer things, you do them better) and streamlined operational hours (open for lunch and dinner, so only two shifts).
What’s more shocking to me is that Chipotle has no VP of Sustainability or equivalent post. This is everybody’s charge. Sustainability is ingrained in the culture. But if you’ve ever eaten at Chipotle, you’ll notice their sustainability strategy is not overstated. “A minority of our customers know what we do – they come because they like the food…when people learn about our high quality ingredients, they find it is just one more reason to eat at Chipotle. We care about ingredients and that deepens the trust of our customers,” Arnold explained. On a recent visit to Chipotle in San Francisco, I inquired about where the pork came from (undoubtedly Niman Ranch, which is brag-worthy as far as I’m concerned). Not a single employee could answer my question.
What do you think? Should Chipotle do more to emphasize its sustainability in-store? Have you noticed other restaurants making similar efforts?