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Chipotle Proves Sustainable Food Sourcing Is Profitable

Food

By any measure, the Chipotle Mexican Grill chain of fast casual restaurants has been a huge success. Founded in 1993 with one restaurant in Denver, it now has nearly 1,800 outlets across the U.S., Canada and Europe, opening 192 new locations in 2014 alone. Its stock has been trending steadily upwards for the last decade, while more traditional fast food chains like McDonald's, a former investor in Chipotle which divested in 2006, have been experiencing sales drops.

The Chipotle chain is proving that using sustainable, humane food sources doesn't conflict with being profitable.
Photo credit: Shutterstock

At the same time, it has been more conspicuous than virtually any other major food chain in touting its sustainability efforts. It released a mission statement in 2001 called Food With Integrity (FWI), which launched its journey to using more organic produce, pasture-raised dairy, and hormone- and antibiotic-free meat raised humanely as well as sourcing more of its food from family farmers in the area where each restaurant is located.

In January, it demonstrated its commitment to the program when it removed pork from the menus of hundreds of its restaurants after an audit of its supply chain showed pigs raised in confined quarters. That's in violation of the statement on Chipotle's website that says, "There are farmers whose pigs are raised outside or in deeply bedded pens, are never given antibiotics and are fed a vegetarian diet. It's the way animals were raised before huge factory farms changed the industry. We call this style of farming and ranching naturally raised, and since 2001, Chipotle has sourced 100 percent of our pork from producers who follow these guidelines."

In its earnings call this week, chain founder and CEO Steve Ells said that although that decision could cost the company $2 million in sales, he did not believe it would hurt the company in the long run.

"Recently we’ve seen strong evidence that our commitment to sourcing sustainably raised ingredients is resonating with many consumers," said Ells. "In January we decided to spend one of our pork suppliers after a routine audit reveal that they were not following all of our animal welfare protocols. Choosing to suspend the supplier meant that we would not be able to supply carnitas to about one third of our restaurants. While we could have chosen to replace this supply with pork from conventionally raised pigs, we decided not to because most conventionally raised pigs are subjected to conditions that we find unacceptable. These conventional practices are unacceptable to us and we refuse to serve pork from animals raised in that manner."

"Since we made this decision, the majority of sentiment from our customers has been very supportive in the email and web comments along with social media posts," Ells continued. "Customers are applauding our commitment to our vision, thanking us for standing on principal, commending us for taking action against the inhumane treatment of animals and congratulating us for standing by our business values."

Chipotle makes no claim to being fully organic and humane in its food sourcing, but it has expanded its efforts over time.

"Organic is great, but it’s not always appropriate for the food we serve," the company says. "Sometimes we can find farmers who focus on responsible or sustainable practices but aren’t certified organic. We make that call market-by-market, ingredient-by-ingredient, always keeping the big picture in mind."

It points to its sourcing of a key Mexican food ingredient, beans.

"Currently, a portion of our beans is organically grown, which has a number of benefits including a reduction in chemical pesticide usage," according to the company's website. "We have been increasing our use of organically grown beans over the last few years and may use even more in the coming years."

In the earnings call, Ells also said that the chain had served 165 million pounds of responsibly raised meat in 2014, an increase of more than 20 percent over 2013. He promoted the chain's appeal to younger diners and said, "We believe that our popularity among these younger consumers is tied to our vision and the growing interest in issues related to food and how it is raised. Our own research shows that these issues are clearly becoming more relevant and important when customers choose where they will dine."

The company's commitment to organic produce and humane animal practices has to do both with providing better quality of food to consumers increasingly concerned with the source of what they eat, but also to protect the environment.

"Industrial ranching and factory farming produce tons of waste while depleting the soil of nutrients," says the company's Food With Integrity statement. "These seem like bad things to us. So we work hard to source our ingredients in ways that protect this little planet of ours."

That concern extends to recycling. The company also uses 100 percent recycled napkins, saying that that saves more than 2 million gallons of water annually. Its burrito bowls are made from 91 percent recycled materials and its aluminum lids are 95 percent recycled.

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On Thursday, the U.S. Drought Monitor said nearly 60 percent of the state was abnormally dry, up from 46 percent just last week, according to The Mercury News in San Jose.

The dry winter has included areas that have seen devastating fires recently, including Sonoma, Napa, Lake and Mendocino counties. If the dry conditions continue, those areas will once again have dangerously high fire conditions, according to The Mercury News.

"Given what we've seen so far this year and the forecast for the next few weeks, I do think it's pretty likely we'll end up in some degree of drought by this summer," said Swain, as The Mercury News reported.

Another alarming sign of an impending drought is the decreased snowpack in the Sierra Nevada Mountain range. The National Weather Service posted to Twitter a side-by-side comparison of snowpack from February 2019 and from this year, illustrating the puny snowpack this year. The snow accumulated in the Sierra Nevadas provides water to roughly 30 percent of the state, according to NBC Los Angeles.

Right now, the snowpack is at 53 percent of its normal volume after two warm and dry months to start the year. It is a remarkable decline, considering that the snowpack started 2020 at 90 percent of its historical average, as The Guardian reported.

"Those numbers are going to continue to go down," said Swain. "I would guess that the 1 March number is going to be less than 50 percent."

The National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center forecast that the drier-than-average conditions may last through April.

NOAA said Northern California will continue deeper into drought through the end of April, citing that the "persistent high pressure over the North Pacific Ocean is expected to continue, diverting storm systems to the north and south and away from California and parts of the Southwest," as The Weather Channel reported.

As the climate crisis escalates and the world continues to heat up, California should expect to see water drawn out of its ecosystem, making the state warmer and drier. Increased heat will lead to further loss of snow, both as less falls and as more of it melts quickly, according to The Guardian.

"We aren't going to necessarily see less rain, it's just that that rain goes less far. That's a future where the flood risk extends, with bigger wetter storms in a warming world," said Swain, as The Guardian reported.

The Guardian noted that while California's reservoirs are currently near capacity, the more immediate impact of the warm, dry winter will be how it raises the fire danger as trees and grasslands dry out.

"The plants and the forests don't benefit from the water storage reservoirs," said Swain, as The Mercury News reported. "If conditions remain very dry heading into summer, the landscape and vegetation is definitely going to feel it this year. From a wildfire perspective, the dry years do tend to be the bad fire years, especially in Northern California."

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