‘Pork situation’ takes lead on Chipotle conference call

Feb 11, 2015
<p>Customers support company&rsquo;s decision to suspend supplier, despite <em>carnitas</em> shortage</p>

Forgoing the traditional financials-focused earnings call, Steve Ells, co-chairman and co-CEO of Chipotle Mexican Grill, this week dived straight into the animal welfare issues that saw the Mexican food chain face pork shortages last month.

Announcing a strong year and a successful fourth quarter – which saw 60 new restaurants opened and revenue of $1.07 bn, up 26.7 percent on the same period the previous year – Ells addressed what he called the ‘pork situation’.

The decision to suspend one of Chipotle’s pork suppliers over ‘animal welfare protocols… meant we would not be able to supply carnitas to about one third of our restaurants,’ explained Ells. ‘While we could have chosen to replace this supplier with pork from conventionally raised pigs, we decided not to because most conventionally raised pigs are subjected to conditions we find unacceptable.’

He continued to talk about the treatment of ‘conventionally raised pigs’, from a lack of outdoor access and bedding to the use of antibiotics ‘to stimulate growth and prevent illness from spreading due to harsh, crowded living conditions. We refuse to serve pork from animals raised in that manner.’

The shortages in Chipotle’s popular braised pork, which Jack Hartung, CFO, said would see the company hit with a $2 mn charge, led to some predictions that the company’s stance on animal welfare would hurt it in the long run.

But Ells spoke of Chipotle’s principles as a plus-point for teens, millennials and Generation X. He cited statistics that show just how popular the ‘fast casual’ chain is with these key groups, with the firm continuing to grow at a time when traditional fast food restaurants are stagnating. Chipotle’s growth has slowed, however, while rising food costs contributed to an impact on the NYSE-listed company’s stock price following the earnings announcement, though this has since recovered.

‘People care about where their food comes from and how it is raised,’ said Ells, adding that all of Chipotle’s ‘responsibly raised meat comes from animals that are raised in more humane ways and without the use of antibiotics or added hormones.’ Because such meat represents only a small portion of the overall supply chain, he also acknowledged that the firm would see disruptions ‘from time to time’.

‘But these disruptions just reinforce and strengthen our commitment to continue to look for ways to increase the supply available to us,’ he continued. ‘We have made it our mission to change the way people think about and eat fast food. We believe this is the new fast food model.’

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