Chipotle Mexican Grill (NYSE: CMG) isn't just one of the most successful fast food chains -- it's trying to save the world.
On Monday, the Denver-based restaurant chain announced that it would give free food to customers who buy a recycled lunch bag from its online store before April 14, in advance of Earth Day on April 22. A percentage of proceeds going to the Chipotle Cultivate Foundation, a non-profit that promote sustainable agriculture.
The recycled bags are made up of old billboards that carried Chipotle's outdoor advertisements and carry cards -- made of paper derived from recycled limestone -- that can be redeemed for a free menu item.
“We are changing the way people think about and eat fast food,” said Steve Ells, founder, chairman and co-CEO of Chipotle. “For us, that starts with serving food made with better ingredients from more sustainable sources, but that same idea impacts all facets of our business.”
By marketing its food as a healthier alternative to greasy burgers and fries, Chipotle has emerged as a distinct brand -- and one that's continued to sell $8 burritos, despite consumers' recent economic woes.
The company had compound annual growth rate of 19 percent in the last three years, making it No. 583 on the annual IBTimes1000 list, a proprietary compilation of the world's fastest growing publicly traded companies. Its 2011 revenue rose to $2.1 billion, up from $1.2 billion in 2008.
Chipotle's fourth quarter 2011 earnings rose 24 percent to $596.7 million, beating expectations from analysts surveyed by Reuters, alotgh its earnings per share missed expectations at $1.81 per share, compared to $1.83 per share. Chipotle's comparable-restaurant sales growth rose 11 percent in 2011, while this year's guidance is mid-single-digit growth.
Ells, the chef that founded Chipotle, grew the company from a single Denver location in 1993 to over 1,200 restaurants in the U.S. and Canada, along with a handful of stores overseas. McDonald's Corp. (NYSE: MCD) was an early investor and had majority ownership, but spun off the Mexican food maker in an initial public offering in 2006 and sold its stake shortly afterwards.
The company has outpaced rivals including Yum! Brands Inc. (NYSE: YUM), owner of KFC, Pizza Hut and Taco Bell, and Jack in the Box Inc. (NASDAQ: JACK), owner of Qdoba Restaurant Corp.
It also caused a stir during the Grammys, when it aired Back to the Start, an advertisement with cartoon-like landscape filled with farmers and animals. The ad contrasted the idyllic existence of a family farm with the grim conditions and pollution of a factory farm, with the farmer ultimately choosing organic farming and sending his wares to a truck emblazoned with a Chipotle logo.
But reality is more complex. Like all restaurants, Chipotle faces rising commodity costs, and such expenses have tested its commitment to organic and drug-free meat, a practice that is more expensive and difficult compared to conventional food.
It can take longer to identify and secure relationships with suppliers meeting our criteria, and there are higher costs and other risks associated with purchasing naturally raised or sustainably grown ingredients, said Chipotle in its 2010 annual report, citing increased growing time and losses associated with drug-free animals and produce.
Given the costs associated with natural and sustainable farming practices, and recently due to decreased demand as a result of the weak economic environment, many large suppliers have not found it economical to pursue business in this area, the company said, noting that it must balance our interest in advancing Food With Integrity with our desire to provide great food at reasonable prices.
Finding this balance will be crucial for Chipotle's financial future, and be a stringent test of its ideals.
Shares of Chipotle were down $2.62 to $422.08 in late Tuesday trading.