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Chipotle Doubles Down on Organic

Chipotle Mexican Grill (NYSE: CMG  ) has always sought to distinguish itself from the typical fast-food competition. Unlike rivals such as McDonald's or Yum Brands! (NYSE: YUM  ) , which rely on industrialized methods to prepare food, Chipotle cooks its meat using the refined sous-vide technique, and its restaurants have no freezers, microwaves, or can openers. The company has also avoided the schlocky marketing and store design typical of the industry, but it most proudly stakes its identity on its support of organic and local food, and sustainable farming methods.

Is this the future of sustainable food? (Photo by author.)

The stores' menu boards highlight its "Food With Integrity" motto, touting the naturally raised standards the company has for its meat, dairy, and produce. Over the years, Chipotle has become the United States' largest restaurant buyer of local produce, the largest buyer of naturally raised pork, and the largest restaurant seller of all naturally raised meat. Founder Steve Ells regularly discusses the company's organic initiatives and milestones on earnings calls and has made that patronage a central focus of the brand.

A scarecrow with a brain
In the past couple of weeks, Chipotle has stepped up its efforts to promote a natural, sustainable food supply, separating itself even more so from its competitors. Most notably, the company took the unique step of creating a video game for the iPhone and iPad, accompanied by this short film.

The video portrays a dystopian world where the food supply is dominated by Crow Foods, a corporation that injects its meat with hormones and other fillers. Crow appears to be the inevitable future of the food supply until a renegade scarecrow sees a pepper growing from a tree and breaks away from his employer to start his own sustainable farm.

The game follows a similar track as the objective is essentially to fight the Crow Foods factory farm by moving animals to open pastures, growing diverse produce, and serving sustainable food. Reaction to the video has been mostly positive, as critics have called it "amazing," though there also seems to backlash from members of the agriculture industry and others who consider the portrayal to be grossly inaccurate or simply propaganda. Regardless, the marketing campaign certainly has garnered attention for Chipotle and aligned it further with sustainably raised food and against conventional methods.

Then, on Thursday, Chipotle announced its support of Washington state's GMO labeling bill, which will be on the ballot Nov. 5 and would ensure that all genetically modified food is labeled appropriately. Ells said about Chipotle's endorsement: "We are changing the way people think about and eat fast food, and a big part of that is understanding where our food comes from and how it is raised or grown."

It's an interesting move to see a restaurant chain delving into politics like this, but the decision makes sense for Chipotle. It's just a natural extension of its mission. GMO labeling laws are pending in several states currently, and, while only Connecticut and Maine have passed such laws, the movement seems to be gaining favor. Already, 64 countries, including nearly all of the developed world, have passed GMO-labeling laws, so it seems like only a matter of time until this issue reaches a tipping point in the United States.

Sustainable food and a sustainable competitive advantage
Chipotle's stance not only seems to put it on the right side of the ethical and environmental debates surrounding food, but it also makes its numerous competitors -- including Yum! Brands' Taco Bell, Jack in the Box's Qdoba, and Ruby Tuesday's Lime Fresh Mexican Grill -- look like pretenders. Vulnerability to imitations such as Taco Bell's Cantina Bowl lineup has long been a refrain of Chipotle bears, but this campaign reinforces why its business has been so successful in the first place. The "Food With Integrity" promise is not only a major brand differentiator, putting an ideological ocean between it and more traditional fast-food chains, but the sourcing, be it local or naturally raised, is a big part of what makes the burrito chain's food taste so good, and that is a competitive advantage not easily duplicated.

The company is smart enough off keep business ahead of politics, but the momentum gaining for GMO labeling laws will only solidify its brand strength in the long run. Like Whole Foods Market, Chipotle seems to be pushing in the direction of becoming a "movement brand." Its customers may be lining up to feed their bellies, but supporting sustainable agriculture on the side certainly won't upset anyone's stomach.

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7/26/2016 10:22 AM
CMG $432.55 Down -8.98 -2.03%
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