Patrick Martin has been an avid Chipotle burrito eater for close to a decade. Ever since eighth grade the Kansas City, Mo., native has averaged about one burrito a week. He enjoys Chipotle because it provides restaurant quality food at a fast food pace with reasonable prices.
“I always go to Chipotle because its cheap, it fills me up and the burrito is always high quality,” Martin explained.
That quality has increased over the last six years.
At Chipotle they call it “Food with Integrity”, a program started to introduce naturally raised pork, chicken and beef to its restaurants. Since 2001, Chipotle has gradually instituted naturally raised meat. They currently offer at least one natural meat in every state in which they operate. Kansas is one of the most recent areas to have all three natural meats in all restaurants. Chipotle’s business has increased greatly since the adoption of the “Food with Integrity” program as the company continues to increase the number of restaurants carrying natural meat. Even increasing burrito prices can not keep customers away.
The program stresses that no growth hormone or antibiotics be given to the animals. All animals are also vegetarian-fed with no animal bi-products. Around the country, all of Chipotle’s pork is naturally raised, along with 73% of all chicken and 46% of Chipotle’s beef.
“We hope to have all naturally raised meat within the next couple of years,” said Chris Arnold, Chipotle’s director of hype, hoopla and ballyhoo.
In 2002, Chipotle served only naturally raised pork. That same year, Chipotle began to integrate naturally raised chicken into a few restaurants. The company’s total revenue from 2002 was $204.6 million and it more than doubled in 2003, up to $515.3 million. .
“We think Food with Integrity continues to help drive business for us, and our business keeps growing,” Arnold said. “More and more people are finding food of this kind and the better restaurant experience very relevant.”
Chipotle first began serving naturally raised beef in 2003 in a New York restaurant. Since then, all restaurants in thirteen states now carry natural beef. Kansas was one of the more recent states to adopt natural beef, in early 2007. In that span of four years Chipotle’s revenue rose 42.7 percent and continues to rise in this fiscal year. The company saw a 33.9 percent increase in 2nd quarter revenue between 2006 and 2007.
The restaurants gross profit has also increased since the birth of “Food with Integrity”. A company’s gross profit is expressed as a percentage that explains how much total profit they made in a fiscal year. For example if Chipotle’s gross profit was 5 percent that means they made five cents from every dollar they sold.
Since “Food with Integrity” began Chipotle’s gross profit has risen steadily. In 2002, the year Chipotle introduced natural chicken to its restaurants, the company’s gross profit was 10.35 percent. That number rose to 14.6 percent in 2003 and 15.8 percent in 2004. The trend continued into 2006 with a gross profit of 20.55 percent. While the cost of the meat they purchase has gone up the company has seen a stable increase in its business since the adoption of “Food with Integrity”. The naturally raised meat costs more than the meat Chipotle used to get but the consumer has shown an interest in the higher quality product the restaurant provides.
Before food with Integrity was implemented, the meat used was lower quality than the naturally raised meat the restaurant uses now.
“It was higher grade than you'd typically get at a fast-food restaurant, but before naturally raised, it was commodity beef,” Arnold explained. The meat Chipotles in Kansas now use is from small, usually family owned ranches. One provider, Coleman Natural, has over 800 farms participating in the “Food with Integrity” program.
Even though the restaurant has more than doubled their revenue in the years since “Food with Integrity” began, burrito prices have risen in areas with naturally raised meat.
“There's always a price premium for this better meat,” Arnold said. “We've been able to raise our menu prices to cover that higher price, and consumers have demonstrated a willingness to pay more for food when they know we're using better ingredients.”
Chipotle’s “Food with Integrity” program was not designed for carnivores only. The restaurant purchases cheese from cows that are not given rBGH, recombinant bovine growth hormone, which increases milk production. In January 2007 Chipotle increased its percentage of organically grown black and pinto beans to 25 percent.
Some people might ask, from a straight business angle, has “Food with Integrity” been worth it? Many factors now affect Chipotle’s business that other restaurants don’t have to deal with. For example, there was a winter freeze in California in 2007 which affected the avocado crop. This freeze also affected the citrus crop, a main ingredient in Chipotle’s vinaigrette dressing for their salad. A restaurant that doesn’t have fresh products wouldn’t have been affected as much as Chipotle.
The ethanol initiative has also affected Chipotle’s business. The company explains this in their Second quarterly report from 2007; “Due to increased demand for ethanol the cost of corn has increased substantially… This has led to upward pricing pressures on many of our raw ingredients including chicken, beef and pork and we expect that pressure to continue for the remainder of 2007 and into 2008.” Corn is a main ingredient in the all vegetarian feed that Chipotle and its meat providers require the animals to eat. The rise in ethanol production has led to an increase in the price of corn, increasing Chipotle’s food costs.
“When we add these better ingredients, we have to raise the prices to offset. Our customers don't mind. They're willing to spend a little more money for better food.”
This hasn’t stopped the customers from coming in. With more restaurants than ever boasting naturally raised meet, Chipotle’s first quarter revenue in 2007 was $49.1 million more than the first quarter of 2006.
Now in its fifth year of “Food with Integrity”, Chipotle strives to continue its natural meat initiative. The only problem in the company’s way is the supply of naturally raised meat in the United States.
“It'd would be great if the supply were available and we could be serving all naturally raised meat and organically grown produce today,” Arnold explained, “but the supply isn't there. The point of ‘Food with Integrity’ is that the work is never done. It's a process.”
I asked Martin if he knew about “Food with Integrity” at Chipotle. He said he saw “FWI” on a cup once while he enjoyed his steak burrito. He also recalled a billboard he saw in Kansas City, Mo., this summer.
The billboard read “Meat from Farms. Not Big Pharm.”
“It was nice to see that a big company like Chipotle is looking out for the little guy,” Martin said.
Chipotle has done a great deal to give the consumer a better product. They spend more money to ensure the quality of the restaurant’s meat and other products. Chipotle has been forced to increase prices marginally but have seen willingness from customers to pay for a better product. The company spends more money, as does the consumer, but everybody is willing to help out if it means a humane life for our countries animals.