It’s just past noon on a freezing New York City Monday and I’m in the mood for treating myself. It’s lunchtime and I am hungry so I take an online visit to Chipotle, my favorite purveyor of fast-but-good food, or “fast casual” as this sector is known.
Before I can fire off a mouse click, a message leaps off the page: “We’re sorry we’re out of pork carnitas today.” This is a shame for the many carnitas fans out there, but because I order the same boring-but-delicious veggie burrito bowl every time, I’m not heartbroken by the news.
However, the reason for the shortage is unusual: “We’re having trouble with our supply of responsibly sourced pork.” My reaction pivots from “supply-chain snafu” to “supply chain integrity” in a nanosecond.
It turns out the company suspended its buying from a pork producer when a routine audit found it did not meet their animal welfare rules. In doing so, Chipotle has taken the protein filling-of-choice off the menu in seven percent of dishes in a third of its U.S locations.
Good for you Chipotle! This is walking the talk of their “food with integrity” mission: foregoing revenue in order to keep the brand promise, put the trust of your customers first and position your brand as central to the way you do (or don’t) do business. While the decision seems to have resonated well with customers, who expressed support via social media, the courageous move comes at a short-term financial cost. On the back of the announcement the company’s share price fell and many analysts cut their first quarter 2015 forecasts.
The “no-carnitas” situation is an example of how a brand is tested, and the principles that define who you are and how you operate become the reason profits suffer. But there is much more at stake than a blip in the share price. Even if Wall Street temporarily blinks, the customers will keep coming and retail gurus are predicting that even die-hard pork disciples will substitute another meat while a new supplier is found.
Consider a second scenario that could have hit Chipotle had they ignored this supply chain issue and hoped no one would notice: a media expose highlighting poor conditions of thousands of pigs procured for a chain that’s made its name on the promise of “food with integrity.” This kind of conflict between operations and brand positioning could result in loss of customer trust and loyalty, and have a negative impact on both sales and growth (Chipotle’s double-digit same-store sales growth is among the highest in the industry). Wouldn’t that create more long-term risk than a short-term supply disruption?
Chipotle’s “food with integrity” position began in 1999. While looking for ways to improve the taste of the carnitas, Steve Ells the founder, Chairman and co-CEO, visited pigs kept in concentrated animal feeding operations or “industrialized farms.” He found them so horrific that he changed his sourcing to open-range pork suppliers. This caused a price rise in the carnitas burrito and, perhaps surprisingly, an increase in their sales.
In 2001, the chain released a mission statement that highlighted efforts to increase use of naturally raised meat and, where possible, source local and organic produce and dairy without added hormones. More than a tagline, “food with integrity” has become a principle for how Chipotle operates.
Of course there are risks in taking such a strong brand position in the fast-casual food industry, which has long been associated with poor quality produce, growth agents, antibiotics, high calories and low nutritional value.
There are detractors; Chipotle has been criticized for not using ALL organic or local produce, not banning GMO (present in some of their cooking oils), high levels of sodium or substituting some of its farm-raised chicken or beef with conventionally produced alternatives during supply shortages. You need to be prepared for the criticism that taking any sort of position will bring.
But the shades of gray here are significant. There are huge differences between companies that say they have a vision and those that back it up. Turning aspiration into reality gets harder to achieve as your company grows from a single restaurant into a chain of more than 1,800 locations with more than 45,000 employees. It takes commitment from all your people – not just the customer facing teams – to understand the brand mission and make it their purpose to deliver it. In this case (as in so many) the procurement team is actually one of the key drivers of the brand.
A powerful brand promise is a company’s long-term philosophy and organizing principle. When life inconveniently throws a wrench in the works, do you abandon the philosophy or do you make the tough decisions which may have short-term financial implications but in the long term preserve your brand equity and keep your reputation intact?
For now, going against the grain is undoubtedly the harder road, but Chipotle and others like it are beginning to redefine the world of fast food: meeting demand that’s out there as well as creating new customers.
By the way, I’ve just come back from picking up said boring-but-delicious burrito bowl, and as usual, the line was wrapped around the restaurant.
– Tina Orlando
Tina Orlando is co-founder and partner at Indelable, a strategic communications firm that helps companies with change management, employee engagement, competitive positioning, corporate citizenship and brand activation through stakeholder involvement.