Every quarter it seems Chipotle Mexican Grill (NYSE:CMG) ups the ante on its "Food With Integrity" promise. Culturally, the burrito chain that was once owned by McDonald's Corp. (NYSE:MCD) now seems like its polar opposite. Just months ago, Chipotle became the first major restaurant chain to eliminate genetically modified ingredients from its kitchen, and earlier this year it made the surprising move to remove its carnitas pork dish from many restaurants after discovering that one of its suppliers was not compliant with its animal care standards.
Since Chipotle's break with McDonald's, the company has striven to constantly increase quality, whether that means freshness, treating animals humanely, or removing artificial ingredients from its products. Now it seems that eliminating preservatives is Chipotle's next hurdle to overcome on its quest to serving the most natural food. Preservatives are found only in its tortillas and tortilla chips.
As in many restaurant kitchens, bread is a particularly susceptible target for food complications at Chipotle because of its short shelf life; the company says tortillas in particular, because they are thin and moist, easily attract mold. In addition, the tortilla must have strength and flexibility so it doesn't break when made into a burrito, making it particularly difficult food to strip of enhancers.
Chipotle's tortillas include preservatives such as sodium metabisulfite and the dough conditioner monocalcium phosphate, but the company is seeking to reduce its number of ingredients from 11 to just 4: whole-wheat flour, water, oil, and salt.
For a chain that serves nearly 1 million tortillas a day, this is easier said than done, but it's what separates Chipotle both from traditional fast-food chains and other fast-casual newcomers.
Not just food with integrity
Along the way to thousands of restaurants, it's easy for a brand to lose its cachet. Early adopters might see a once-edgy brand as going mainstream or selling out, while others believe the company will inevitably sacrifice the ideals that made it independent in order to grow.
At Chipotle, the opposite seems to be true. As the company has grown, its standards for quality have gotten higher, and management seems even more obsessed with the Food With Integrity platform. Founder Steve Ells might have had his "a ha" moment on a trip to one of McDonald's chicken farms, which he described as "the most disgusting thing" he'd ever seen, and today Chipotle's sourcing of meat from humanely treated animals is just one of the ways it stands out from competitors.
McDonald's, meanwhile, is struggling to distance itself from that image in part because of Chipotle's success, which has born out Ells' philosophy that the best food comes from simple, natural ingredients.
Chipotle's success and commitment to responsibly raised foods is a reminder of what separates the company from challengers such as Yum! Brands' Taco Bell, which seems to be increasingly imitating Chipotle, first with its Cantina Bell lineup and now by testing store redesigns and serving alcohol. Still, it remains unlikely that the chain known for its orange-dusted Doritos Locos Tacos is going to co-opt Chipotle's Food with Integrity image anytime soon.
Like Amazon.com and other tech companies known for persistent innovation, Chipotle is constantly pushing the envelope and disrupting the restaurant industry in new ways. The chain is already tops in restaurant-level operating margin in the fast-food industry, and demand continues to grow even as it adds hundreds of new locations each year. With its mission to keep raising the bar on food quality and its industry-leading financial metrics, Chipotle looks poised to deliver healthy returns to investors as well.
Jeremy Bowman owns shares of Apple and Chipotle Mexican Grill. The Motley Fool recommends Amazon.com, Apple, and Chipotle Mexican Grill. The Motley Fool owns shares of Amazon.com, Apple, and Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.