Reference no: EM13737966

Chipotle

Sink your teeth into this: a whole-wheat wrap bursting with seasoned black beans, salsas made that morning, and grilled, locally grown chicken marinated overnight in spicy chipotle pepper adobo sauce. Sound like something reserved for the menu of a trendy downtown restaurant? Not anymore. Fast food and "fast casual" are getting in on the game of fresh, local, and in many cases, ethical foods.

The fast food industry in the United States serves up $200 billion in sales annually, and its fast-growing sister is the "fast casual" restaurant. While the definition is still somewhat up for debate, the fast casual style appeals to "current customer needs" by offering "a cheaper alternative to more expensive restaurants while offering customization and quality ingredients," according to Franchise Direct.

In other words, for those folks watching their budget in tough times, yet who still have a hankering for good food without paying for the waiter and tablecloth service, the fast casual is the perfect in-between option. "The fast casual restaurant industry outperformed all other categories of the restaurant industry in 2009,"11 reported Franchise Direct, and this fact has not escaped the attention of more traditional fast food purveyors. Eager for a taste of the fast casual market's success, Taco Bell recently introduced a "Cantina Bell" line developed by celebrity chef Lorena Garcia, with more upscale ingredients like black beans, fresh avocados, and cilantro dressing. Have a taste for an Angus beef burger smothered in aged cheddar? Prefer sea salt on your hand-cut fries, and an iced latte to wash it all down? Menu items like these are popping up with regularity on the menus of fast food stalwarts like Burger King, McDonald's, and Wendy's.

Pundits have speculated that the new direction of Taco Bell and others may put the heat on fast casual pioneers such as Chipotle, which is based in Denver and boasts a store opening almost every other day. Yet the latter offers something that Taco Bell (for now) does not: a conscience. Somewhat unusually, the company does all its advertising with an internal team, whose research indicated that "75 percent of its 800,000 daily customers came for the taste, value, and convenience of its food." While these numbers are encouraging, what's to say that customers can't find "taste, value, and convenience" elsewhere-especially with the traditional fast fooders stepping up their game? Chipotle needed something more; something that would earn not only dollars, but loyalty.

So Chipotle developed a marketing campaign that targets the soul as much as it does the stomach, emphasizing not just the healthful but ethical aspects of one's food choices. It's been introduced across an array of interesting media: an iPhone and Android game Pasture Pandemonium, currently in development; large-scale sustainable food festivals in cities like Chicago; and a two-minute animated film, Back to the Start, which portrays a family farmer deliberating between factory farming and a more sustainable approach and the wide-ranging ramifications of each choice (the theme song of which is Willie Nelson's rendition of Coldplay's "The Scientist," downloadable on iTunes, with proceeds benefiting Chipotle's Cultivate Foundation). The narrative "humanized the devastating statistic that hundreds of families quit working their farms in the United States every week due to competition from big agriculture," wrote Danielle Sacks in Fast Company. Philanthropy has also played an important role. Jamie Oliver's Food Revolution and the Nature Conservancy are two recipients of over $2 million that the company has doled out in grants. In 2011, the foundation presented its first major award of $250,000 to Farm Aid, which was founded in the 1980s by Nelson and other celebrities to promote family farms.

In 2011, Chipotle's annual revenue rose to $2.2 billion, yet 2012's numbers were not quite as palatable, falling short of Wall Street's lofty expectations despite a quarterly profit increase of 20 percent from a year earlier. Just like the rest of us, Chipotle is struggling with rising food, beverage, and packaging prices, which may force the company to raise prices, a dicey decision during an economic downturn. And Chipotle's aggressive positioning as the sustainable, family-farm friendly alternative to fast food does not allow it to tinker with production costs as much as a Taco Bell or McDonald's might. "Today, even with 30,000 employees, the crew will come in the morning and see all this fresh produce and meats they have to marinate, rice they have to cook, and fresh herbs they have to chop," said CEO Steve Ells,

Many ingredients figure into Chipotle's recipe for continued success: consumer interest in the sustainable food movement, stiff competition from the Taco Bells of the world, and the economic climate within which all these uncertainties marinate. But the scent of change is in the air; some observers have argued that Chipotle's ethical model may put pressure on its competition to follow suit.

QUESTIONS FOR DISCUSSION

1. Is Chipotle a socially responsible organization? Why or why not?

2. Some would argue that Chipotle is not socially responsible because its menu is full of very high-fat, high-calorie items, which encourages obesity. How would you respond to such critics?

3. If you were the CEO of Chipotle, what other socially responsible actions could you take to ensure the success of Chipotle in the long term?