Is Chipotle waging a war it can't win?

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, Feb. 17, 2014 - In its latest attempt to differentiate itself from other Mexican fast food chains, Chipotle Mexican Grill plans to launch a video series the company says “satirically explores the world of industrial agriculture.” Called “Farmed and Dangerous,” the initial four-episode season will be presented weekly on web-based Hulu and Hulu Plus, beginning Monday, Feb. 17.

 

"Farmed and Dangerous," a new original comedy series by Chipotle. (Photo: Business Wire)

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“Much of our marketing is aimed at making consumers more curious about where their food comes from and how it is prepared,” said Mark Crumpacker, chief marketing and development officer at Chipotle in a news release announcing the series.

“By making complex issues about food production more understandable - even entertaining - we are reaching people who have not typically been tuned into these types of issues.”

Chipotle says “Farmed and Dangerous satirizes the lengths to which corporate agribusiness and its image-makers go to create a positive image of industrial agriculture.”

Lets Talk Food

The first season focuses on the introduction of PetroPellet, a new petroleum-based animal feed created by fictional industrial giant Animoil.

Nevermind that petroleum products and bovines don't mix. Blowing up a dairy cow in a test lab makes for good theater and helps underscore's Chipotle's attempt to convey that “industrial” agriculture can't be trusted. Here's how the firm spins the series:

“PetroPellet promises to reduce industrial agriculture's dependence on oil by eliminating the need to grow, irrigate, fertilize and transport the vast amount of feed needed to raise livestock on factory farms,” the firm explains in its release. “Before its new feed formula can forever reshape industrial agriculture, Animoil's plans go awry when a revealing security video goes viral sending Animoil and their spin master, Buck Marshall of the Industrial Food Image Bureau (IFIB), into damage control mode."

Critics, including many trade groups supporting modern farming practices, suggest that this is just the latest example of a marketing plan that never bothers to let the facts get in the way of a good story.  The series follows Chipolte's previous release of short films which are critical of modern production practices, one called “Scarecrow” in 2013 and another, “Back to the Start” in 2011.

Chipotle's critical focus on “industrial agriculture” with the underlying theme that “big corporate ag” is bad, seems particularly disingenuous, considering that Chipolte is not exactly the small upstart that founder Steve Ells opened near the University of Denver in 1993. Many of the companies which source Chipotle's food can't make that claim either.

So in some respects, Chipotle's latest campaign raises broader questions: If “Big Ag” is “bad” and can't be trusted, what about “Big Food” or “Big Organic?”

Chipotle opened 185 new restaurants last year, bringing the total count to 1,595, according to the firm's year-end results. Revenue for the full year of 2013 was $3.21 billion, up 17.7 percent  from the prior year period.  

The chain's focus on sustainably grown and Responsibly Raised  ingredients often means higher prices for beef, dairy products and other basic ingredients - with food costs about 33 percent of revenue last year. But the firm also charges more for the typical burrito or taco, enabling it to achieve a hefty restaurant level operating margin of 26.6 percent for the full year 2013.

Of course, Chipotle does not enjoy the market penetration of sector leader Taco Bell, with about 5,000 locations already in the U.S. Taco Bell delivered its eighth consecutive quarter of same-store sales growth and plans to launch a new breakfast menu, according to parent company Yum! Brands, which also operates Pizza Hut and Kentucky Fried Chicken.

But Chipotle is still focused on growth and improving the bottom line, albeit with a more upscale customer base and its focus on “food with integrity.” The company has also taken on the issue of genetically modified organisms (GMOs) in food, becoming the first national restaurant company to not only disclose the use of GMOs in its food, but the first to announce plans to eliminate GMOs from the ingredients it uses.

It's a path that Ells, a graduate of the Culinary Institute of America, seems to have pursued after splitting with another fast food giant that helped fuel his company's early growth.

McDonald's first took a minority share in Chipotle in 1998 - back when Chipotle had only 14 stores - and gradually increased ownership to more than 90 percent of the company. But by 2006, McDonald's decided to spin off the company in an IPO, even though it continued to own some stock for several additional months. Chipotle now trades as an independent company on the NYSE.

In media interviews, Ells frequently describes his early interest in sustainability stemming from a visit to a Niman Ranch-branded farm in Iowa. California-based Niman Ranch also started small, but grew into a cooperative of growers focused on sustainable agriculture.

In 2009, a financially struggling Niman Ranch merged with an affiliate of its largest shareholder, Natural Food Holdings. NFH also markets the Sioux Preme trade brand and the Prairie Grove Farms consumer brand, which it claims is antibiotic and hormone free but raised conventionally.

But Natural Food Holdings does not exactly fit the description of a small company either. Although financial data is not publicly available, in 2011 the private equity firm LNK Partners invested $68 million in Natural Food Holdings and several of their team members serve on the NFH board, including Phil Marineau, a former president of Quaker Oats, former president of Dean Foods and former CEO of Pepsi North America.

In what is perhaps another ironic twist - and perhaps the basis for another video series - the original founder of Niman Farms, Bill Niman, told the San Francisco Chronicle in a 2009 profile that, since the takeover resulted in changed production practices, he refuses to eat products from the food empire that he built.

Perhaps Chipotle's new series will prompt a broader discussion about the fact that there is no “one size fits all” way of producing food and fiber in the U.S., similar to discussions recently hosted by the U.S. Farmers and Ranchers Alliance.

Yet, some farmers are still scratching their heads about why a company like Chipotle wants to place blame on other family farming practices instead of simply promoting its own.

For California farmer Ted Sheely, it's a classic case of what often happens in pursuit of profit.

“Chipotle wants to boost its sales. Farmed and Dangerous” is an expensive scheme to suggest that the act of buying burritos and tacos at Chipotle is morally superior to the act of buying them elsewhere,” writes Ted Sheely, a California farmer and board member of Truth About Trade and Technology in a recent blog.

“As a business decision, it may make sense. But let's not forget what this really is: propaganda. And it is intended to mock and discredit the honest work of farmers like me,” Sheely explained.

#30

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