{"id":23996,"date":"2017-11-15T16:22:32","date_gmt":"2017-11-15T21:22:32","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/chipotle-balancing-sustainable-ingredients-with-a-sustainable-supply-chain\/"},"modified":"2017-11-15T16:22:32","modified_gmt":"2017-11-15T21:22:32","slug":"chipotle-balancing-sustainable-ingredients-with-a-sustainable-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/chipotle-balancing-sustainable-ingredients-with-a-sustainable-supply-chain\/","title":{"rendered":"Chipotle: Balancing Sustainable Ingredients with a Sustainable Supply Chain"},"content":{"rendered":"

Chipotle: Balancing Sustainable<\/em> Ingredients with a Sustainable Supply Chain<\/strong><\/p>\n

The term fast-casual has become synonymous with Chipotle\u2019s meteoric rise. Chipotle Mexican Grill cultivates a health-conscious, socially-responsible image focusing on a simple ingredient deck, low number of ingredients, no GMO\u2019s, and a focus on sustainability [1]. With 2,250 locations at year-end 2016 with plans to add approximately 200 more in 2017, maintaining intensive attention to an increasingly rigid set of ingredient specifications has riddled the company with supply-chain issues [2]. Because of Chipotle\u2019s dependence on niche vendors to supply an increasingly sprawling array of locations, it has been plagued by several highly-public supply-chain related problems, including food safety problems and supply shortages across many restaurants in recent years [3]. The problem of increasingly-complicated vendor relationships, coupled with rigid supplier standards, will become exacerbated by the impact of global warming in the coming years. \u00a0\u00a0Scientist project decreases in crop yields and difficulty in projecting demand, which will result in cost increases and a constrained marketplace for crops, the impact could be massive on both short-term costs and, in the case of food safety issues, long-term brand equity [4]. A bevy of crops affect its supply chain from end ingredients like rice, avocados, peppers, and animal products to feed crops like corn and barley [5].\u00a0 This exposure to a wide range of crops with very different growing patterns leaves Chipotle susceptible to the risks of climate change. \u00a0Chipotle is at a crossroads\u2014If it moves deliberately and swiftly, it can maintain the quality ingredients its customers expect, while limiting the risk that climate change poses to the restaurant\u2019s future.<\/p>\n

Chipotle\u2019s stated mission is commitment to \u201cfood with integrity,\u201d and \u201csourcing the very best ingredients we can find and preparing them by hand,\u201d [6].\u00a0 This includes using no added colors, flavors, or preservatives and meticulously sourcing ingredients from \u201cfarms rather than factories,\u201d [6].\u00a0 In 2013, Chipotle announced it would remove genetically modified organisms across its supply chain, and by 2015, it had [7].\u00a0 Chipotle has taken significant steps to lead consumers to make \u201cnatural\u201d and \u201chealthy,\u201d synonymous a strategy that\u2019s been replicated by competitors in what the Wall Street Journal calls, \u201cThe Chipotle Effect,\u201d [8].<\/p>\n

To procure ingredients that meet Chipotle\u2019s high standards, it predominately uses large national and regional suppliers complemented by a web of local suppliers [9].\u00a0 In 2015, the complication of its supply chain proved calamitous when, in a matter of months, it faced norovirus in California, salmonella in Minnesota, an outbreak of E. Coli across nine states, and 140 sick from a Boston College Chipotle [10].\u00a0 Due to the complexity of the supply chain, it was impossible for the company to determine where the tainted ingredients originated.\u00a0 Concurrently, an audit revealed that one of Chipotle\u2019s largest pork suppliers was not using sustainable practices, knocking out pork supply to over a third of its restaurants for nearly a year [11].<\/p>\n

Chipotle\u2019s issues with food safety and ingredient scarcity don\u2019t bode well for the company\u2019s future supply chain in the face of global warming. In 2013 and 2014, there were droughts across the US, which scientists predict will increase in severity and frequency in the coming years [12]. This caused a shortage of beef across Chipotle\u2019s supply chain, which was further amplified by the specificity of its standards [13].\u00a0 Chipotle can count on an impending collision between ever-stricter standards and a more difficult ingredient procurement environment.<\/p>\n

Management has taken public steps to combat impending supply-chain issues. In Chipotle\u2019s 2016 Annual Report, management discusses an increase of over 1% in food costs attributable to technological and supply-chain improvements to curtail the problems that recently plagued the business [14].\u00a0 For the past decade, Chipotle has pressed forward with sustainability initiatives, but has recently been noticeably silent concerning future plans. \u00a0There is speculation in the market that the company recognizes that its vast growth and size, coupled with its incessant drive toward sustainability, led to a collision between sustainability efforts and its supply chain. \u00a0Far ahead of its competitors, the company needs to understand that balancing sustainable<\/em> ingredients with a sustainable supply chain will define its success in the face of climate change. It\u2019s vital that Chipotle\u2019s management stay on the leading edge of the natural ingredient trend, while maintaining a supply chain that can survive stresses to the system that global warming will accentuate.\u00a0 If management wants to see the company\u2019s success continue, it needs to take a wholistic approach to sustainably procuring quality ingredients.\u00a0 If the company continues to ignore supply-chain ramifications, the recent incidents will appear trivial relative to future problems.<\/p>\n

How can Chipotle balance the brand equity it\u2019s built with the consumer as healthy fast-casual, while streamlining the supply chain to account for future shocks to the system?\u00a0 Would slowing down sustainability efforts affect the likelihood that you eat at Chipotle in the future? (793 words)<\/p>\n

[1] Chipotle Mexican Grill, \u201cFood with Integrity,\u201d https:\/\/www.chipotle.com\/food-with-integrity<\/a>, accessed November 2017.<\/u><\/p>\n

[2] <\/u>Chipotle Mexican Grill, 2016 Annual Report, p. 8, http:\/\/www.annualreports.com\/HostedData\/AnnualReports\/PDF\/NYSE_CMG_2016.pdf<\/a>, accessed November 2017.<\/p>\n

[3] Brad Tuttle, \u201cChipotle Pulls Pulled Pork from 600 of Its Restaurants,\u201d Time, January 14, 2015, http:\/\/time.com\/money\/3667333\/chipotle-pork-carnitas-shortage<\/a>, accessed November 2017.<\/p>\n

[4] Risky Business Project, Risky Business: The Economic Risks of Climate Change in the United States<\/em> (2014)<\/p>\n

[5] \u201cCorn and Other Feed Grains Background,\u201d United States Department of Agriculture Economic Research Service, September 14, 2017, https:\/\/www.ers.usda.gov\/topics\/crops\/corn\/background.aspx<\/a>, accessed November 2017.<\/p>\n

[6] Chipotle Mexican Grill, \u201cFood with Integrity,\u201d https:\/\/www.chipotle.com\/food-with-integrity<\/a>, accessed November 2017.<\/u><\/p>\n

\u00a0[7] Stephanie Strom, \u201cChipotle to Stop Using Genetically Altered Ingredients,\u201d New York Times, April 26, 2015, \u00a0<\/u>https:\/\/www.nytimes.com\/2015\/04\/27\/business\/chipotle-to-stop-serving-genetically-altered-food.html<\/a>, accessed November 2017.<\/u><\/p>\n

[8] Jay Cheshes, \u201cThe Chipotle Effect: How Chefs Are Reinventing Fast Food,\u201d The Wall Street Journal, February 6, 2015, <\/u>https:\/\/www.wsj.com\/articles\/the-chipotle-effect-how-chefs-are-reinventing-fast-food-1423258757<\/a>, accessed November 2017.<\/p>\n

[9] Anita Balakrishnan, \u201cLocal sourcing: Chipotle\u2019s double-edged sword?\u201d CNBC, December 22, 2015, https:\/\/www.cnbc.com\/2015\/12\/22\/local-sourcing-chipotles-double-edged-sword.html<\/a>, accessed November 2017.<\/u><\/p>\n

[10] Kevin O\u2019Marah, \u201cChipotle Lessons: Supply Chain Visibility and Higher Prices,\u201d Forbes, December 16, 2015, https:\/\/www.forbes.com\/sites\/kevinomarah\/2015\/12\/16\/chipotle-lessons-supply-chain-visibility-and-higher-prices\/#19508bde332b<\/a>, accessed November 2017.<\/u><\/p>\n

[11] Roberto A. Ferdman, \u201cWhy Chipotle\u2019s pork problem is a bad sign for its future,\u201d The Washington Post, January 14, 2015, https:\/\/www.washingtonpost.com\/news\/wonk\/wp\/2015\/01\/14\/why-chipotles-pork-problem-is-a-bad-sign-for-its-future\/?utm_term=.0301830d5ccf<\/a>, accessed November 2017.<\/u><\/p>\n

[12] Intergovernmental Panel on Climate Change (IPCC), Climate Change 2014: Impacts, Adaptation, and Vulnerability \u2013 Summary for Policymakers<\/em> (2014)<\/p>\n

[13] Susanna Kim, \u201cChipotle Says Don\u2019t Worry, Your Burrito Bowls Are Safe From Climate Change,\u201d ABC News, March 5, 2014, http:\/\/abcnews.go.com\/Business\/chipotle-climate-change-risk-disclosure-end-guac-salsa\/story?id=22781199<\/a>, accessed November 2017.<\/u><\/p>\n

[14] Chipotle Mexican Grill, 2016 Annual Report, p. 27, http:\/\/www.annualreports.com\/HostedData\/AnnualReports\/PDF\/NYSE_CMG_2016.pdf<\/a>, accessed November 2017.<\/p>\n

Picture: https:\/\/i.ytimg.com\/vi\/qCXqaQjdEsI\/hqdefault.jpg<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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