{"id":8872,"date":"2016-11-03T20:17:21","date_gmt":"2016-11-04T00:17:21","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/chipotles-guacapocolypse\/"},"modified":"2016-11-03T20:17:21","modified_gmt":"2016-11-04T00:17:21","slug":"chipotles-guacapocolypse","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/chipotles-guacapocolypse\/","title":{"rendered":"Chipotle\u2019s Guacapocolypse"},"content":{"rendered":"<p><strong>Creating a &#8220;better&#8221; fast-food<\/strong><\/p>\n<p>In March 2014, amongst the many companies announcing their earnings, news came out that devastated me to my core \u2013 Chipotle, one of the only fast food places where you can get decent guacamole, may no longer sell my favorite food due to the rising price of avocados [1].\u00a0 The executives of the company cited climate change (a.k.a. my new worst enemy) as the culprit.\u00a0 While this \u201cnews\u201d may have been blown out of proportion by the internet, it showed how climate change could impact one of America\u2019s most popular fast casual restaurants.<\/p>\n<p>Chipotle\u2019s business model was built upon creating high-quality fast food using the best ingredients possible [2], under the mission of \u201cfood with integrity\u201d.\u00a0 This promise to customers led Chipotle to shift its sources of produce and meats towards sustainable, animal-welfare-oriented suppliers [3].\u00a0 Not only did the Company wish to ensure the quality of its raw materials, it also pledged to work towards supply chain reform.\u00a0 Following through on that promise, in 2015, Chipotle became the first national restaurant chain to completely remove genetically modified organisms (\u201cGMOs\u201d) from its supply chain [4]. \u00a0They also worked to shorten the overall supply chain, which helped reduce environmental impact, by showing preference towards local famers [5].<\/p>\n<hr \/>\n<p><strong>The Start of the Guacapocolypse<\/strong><\/p>\n<p>Chipotle\u2019s commitment to creating healthier food for their consumers is one of the reasons it has been so successful.\u00a0 However, the stringent qualifications it places on its supply chain make it susceptible to the impacts of climate change.\u00a0 There are two main impacts the company will face from climate change:<\/p>\n<ul>\n<li>Decreasing yields from core crops: For example, avocados, the main ingredient in Chipotle\u2019s famous guacamole which they use 97,000 pounds <strong>per day<\/strong> of, are expected to see yield decreases of 15-20% by 2020 (below) [6]. On a more short-term basis, the Company has seen significant increases in the price of beef due to droughts in 2014 and 2015 [7].<\/li>\n<\/ul>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-03-at-6.49.12-PM-1.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-8863 aligncenter\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-03-at-6.49.12-PM-1.png\" alt=\"screen-shot-2016-11-03-at-6-49-12-pm\" width=\"811\" height=\"213\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-03-at-6.49.12-PM-1.png 876w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-03-at-6.49.12-PM-1-300x79.png 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-03-at-6.49.12-PM-1-768x202.png 768w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Screen-Shot-2016-11-03-at-6.49.12-PM-1-600x158.png 600w\" sizes=\"auto, (max-width: 811px) 100vw, 811px\" \/><\/a><\/p>\n<p style=\"text-align: center\">Source:\u00a0Ann Parker, \u201cClimate and Agriculture: Chnge Begets Change,\u201d Lawrence Livemore National Laboratory (S&amp;TR March 2007), https:\/\/str.llnl.gov\/str\/March07\/pdfs\/03_07.3.pdf, accessed November 2016.<\/p>\n<ul>\n<li>Increasing prevalence of GMO acreage: As farmers look to technology to reduce the impact of highly variable weather caused by climate change, they are increasingly relying on GMOs [8].\u00a0 Although total GMO acreage decreased in 2015, this is due to a decrease in overall acreage planted, not a reversal of the trend seen below [9]. \u00a0Given Chipotle\u2019s commitment to the removal of GMOs from their ingredients, the decrease in the amount of non-GMO land puts them at risk of facing increasing food prices.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Picture1-11.png\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-8869 aligncenter\" src=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Picture1-11.png\" alt=\"picture1\" width=\"562\" height=\"335\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Picture1-11.png 562w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2016\/11\/Picture1-11-300x179.png 300w\" sizes=\"auto, (max-width: 562px) 100vw, 562px\" \/><\/a><\/p>\n<p style=\"text-align: center\">Source:\u00a0Clive James, <em>ISAAA Brief 51-2015<\/em> (International Service for the Acquisition of Agri-Biotech Applications), p.1, <a href=\"http:\/\/www.isaaa.org\/resources\/publications\/briefs\/51\/pptslides\/default.asp\">http:\/\/www.isaaa.org\/resources\/publications\/briefs\/51\/pptslides\/default.asp<\/a><\/p>\n<hr \/>\n<p><strong>Defending the food supply chain<\/strong><\/p>\n<p>Despite causing panic by listing climate change as a risk in their 10-K, Chipotle isn\u2019t backing off from their \u201cfood with integrity\u201d mission.\u00a0 In fact, they\u2019ve taken some strong steps to combat the risks listed above:\u00a0 First, they created the Cultivate Foundation in 2011 [10].\u00a0 This foundation focuses on creating long-term change for Chipotle\u2019s supply chain by promoting sustainable practices for its farmers.\u00a0 By partnering with organizations such as Farm Aid, FamilyFarmed.org, and the Niman Ranch Scholarship, Chipotle is able to support small farmers as they institute sustainable farming practices, which is often difficult, especially with rising competition from corporate farms [11].\u00a0 The foundation also encourages the use of pasture-based systems for animal production, which uses lower amounts of energy [12].\u00a0 To further this mission, Chipotle gave $10 million to help local farmers in February 2016 [13].\u00a0 The Company realized that its high standards are costly to comply with and donated this money to help offset the costs.<\/p>\n<p>These efforts are noble, but they are primarily dependent upon monetary donations, not direct changes to the ecosystem.\u00a0 In order to ensure the lasting availability of its supply chain, Chipotle needs to go directly to their partner farmers.\u00a0 While some investors may want Chipotle to look for new, non-local suppliers or back off of their non-GMO approach, relying on current partnerships will help them invest in the long-term while maintaining their brand ethics.\u00a0 In the near term, Chipotle should continue to help farmers invest in infrastructure that makes it easier for them to meet Chipotle\u2019s high quality standards and mitigate the impacts of drought, given that much of the supply chain comes from California. Longer term, they should continue to partner with organizations that are invested in making farming more sustainable and less subject to the effects of climate change.\u00a0 Doing this will ensure a more solid supply chain, maintain the brand ethos that drew its customers in, and, hopefully, avoid the next guacapocolypse.<\/p>\n<p>Word count (excluding citations): 711<\/p>\n<p>Sources:<\/p>\n<p>[1] Amrita Jayakumar, \u201cDon\u2019t panic. Chipotle\u2019s guacamole isn\u2019t going anywhere (for now),\u201d March 5, 2014, \u00a0<a href=\"https:\/\/www.washingtonpost.com\/news\/wonk\/wp\/2014\/03\/05\/dont-panic-chipotles-guacamole-isnt-going-anywhere-for-now\/\">https:\/\/www.washingtonpost.com\/news\/wonk\/wp\/2014\/03\/05\/dont-panic-chipotles-guacamole-isnt-going-anywhere-for-now\/<\/a>, accessed November 2016.<\/p>\n<p>[2] Chipotle Mexican Grill, \u201cCompany,\u201d <a href=\"http:\/\/www.chipotle.com\/company\">http:\/\/www.chipotle.com\/company<\/a>, accessed November 2016.<\/p>\n<p>[3] Chipotle Mexican Grill, \u201cFood with Integrity,\u201d <a href=\"https:\/\/chipotle.com\/food-with-integrity\">https:\/\/chipotle.com\/food-with-integrity<\/a>, accessed November 2016.<\/p>\n<p>[4] \u201cChipotle Becomes the First National Restaurant Company to Use Only Non-GMO Ingredients,\u201d press release, April 27, 2015, on Chipotle website, <a href=\"http:\/\/ir.chipotle.com\/phoenix.zhtml?c=194775&amp;p=irol-newsArticle&amp;ID=2040322\">http:\/\/ir.chipotle.com\/phoenix.zhtml?c=194775&amp;p=irol-newsArticle&amp;ID=2040322<\/a>, accessed November 2016.<\/p>\n<p>[5] Chipotle Mexican Grill, \u201cLocal Grower Support,\u201d <a href=\"https:\/\/chipotle.com\/localgrowersupport\">https:\/\/chipotle.com\/localgrowersupport<\/a>, accessed November 2016.<\/p>\n<p>[6] Ann Parker, \u201cClimate and Agriculture: Chnge Begets Change,\u201d Lawrence Livemore National Laboratory (S&amp;TR March 2007), https:\/\/str.llnl.gov\/str\/March07\/pdfs\/03_07.3.pdf, accessed November 2016.<\/p>\n<p>[7] Chipotle Mexican Grill, 2015 annual report, p.18, http:\/\/phx.corporate-ir.net\/External.File?item=UGFyZW50SUQ9NjI5NzQ3fENoaWxkSUQ9MzMyODA4fFR5cGU9MQ==&amp;t=1.<\/p>\n<p>[8] Gene J. Koprowski, \u201cGM farmers, acres growing globally,\u201d <em>Agri-View<\/em>, April 9, 2015, <a href=\"http:\/\/www.agriview.com\/news\/crop\/gm-farmers-acres-growing-globally\/article_5e8e016f-076a-547c-8a91-5b109babe0ea.html\">http:\/\/www.agriview.com\/news\/crop\/gm-farmers-acres-growing-globally\/article_5e8e016f-076a-547c-8a91-5b109babe0ea.html<\/a>, accessed November 2016.<\/p>\n<p>[9] Clive James, <em>ISAAA Brief 51-2015<\/em> (International Service for the Acquisition of Agri-Biotech Applications), p.1, <a href=\"http:\/\/www.isaaa.org\/resources\/publications\/briefs\/51\/pptslides\/default.asp\">http:\/\/www.isaaa.org\/resources\/publications\/briefs\/51\/pptslides\/default.asp<\/a><\/p>\n<p>[10] Cultivate Foundation, \u201cAbout,\u201d <a href=\"https:\/\/www.cultivatefoundation.org\/about\">https:\/\/www.cultivatefoundation.org\/about<\/a>, accessed November 2016.<\/p>\n<p>[11] Cultivate Foundation, \u201cIssues: Family Farms,\u201d <a href=\"https:\/\/www.cultivatefoundation.org\/issues\/family-farms\">https:\/\/www.cultivatefoundation.org\/issues\/family-farms<\/a>, accessed November 2016.<\/p>\n<p>[12] Ann Perry, \u201cPutting Dairy Cows Out to Pasture: An Environmental Plus,\u201d <em>Agricultural Business Magazine<\/em>, May\/June 2011, <a href=\"https:\/\/agresearchmag.ars.usda.gov\/2011\/may\/cows\">https:\/\/agresearchmag.ars.usda.gov\/2011\/may\/cows<\/a>, accessed November 2016.<\/p>\n<p>[13] \u201cChipotle Commits $10 Million to Help Local Farmers,\u201d press release, February 8, 2016, on Chipotle website, <a href=\"http:\/\/ir.chipotle.com\/phoenix.zhtml?c=194775&amp;p=irol-newsArticle&amp;ID=2136570\">http:\/\/ir.chipotle.com\/phoenix.zhtml?c=194775&amp;p=irol-newsArticle&amp;ID=2136570<\/a>, accessed November 2016.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Climate change puts America&#8217;s favorite fast-casual restaurant&#8217;s mission &#8211; and famous guacamole &#8211; at risk.<\/p>\n","protected":false},"author":2522,"featured_media":8974,"comment_status":"open","ping_status":"closed","template":"","categories":[245,1403],"class_list":["post-8872","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-chipotle","category-sustainable-farming"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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