While Chipotle prides itself in the quality of the ingredients used in its restaurants, the burrito chain admitted it has “struggled” to get all of the beef it needs from cattle raised without use of antibiotics or added hormones, during its conference call with investors on July 21, 2014 to discuss its second quarter results.
Where’s The Beef?
The nation’s beef supply is at a 60-year low, while demand continues to rise.
Chipotle has even had to temporarily fill that gap with conventionally raised beef and post notices in restaurants so customers were aware of the change.
Australia: Food With Integrity
One solution to its ‘beef problem’ is sourcing some grass fed beef from Australia– a country that is ideally suited to raising beef cattle entirely on grass.
Chipotle said, “all this beef meets or exceed the protocols we apply to our domestic responsibly raised beef, including that the animals are raised entirely without antibiotics, added hormones or other growth promoters and by ranchers whose practices are aligned with our standards for humane animal husbandry.”
Meanwhile, Chipotle is hoping the strong demand for grass-fed beef will help provide an opportunity for more U.S. ranchers to adopt a grass-fed program and help term grass-fed beef into a more mainstream product in America.
To help offset the ‘beef problem’ Chipotle expanded its menu in various markets to offer Sofritas, which is its vegan item made with braised organic tofu. Chipotle said its aim was to create a dish that would appeal to not just vegan and vegetarian customers but all of our customers.
Looks like that strategy is working. The chain said Sofritas currently account for about 3.5% of the entrees sold in the restaurants where it’s available– and its found they’re being ordered by people who normally eat meat.
Right now, Sofritas are available in about 1,000 restaurants, and barring any supply limitations, Chipotle said it expects to roll out Sofritas nationwide, by the end of 2014.
Due in part to the beef shortage, Chipotle raised prices for customers, and they aren’t coming down anytime soon.
The chain said, “beef prices will remain elevated for the foreseeable price, steak prices were raised by about 9% on average, while chicken prices were only raised about 5%.”
In turn, it said some customers are “trading down” from ordering steak items to chicken items, and it’s watching to see if there’s any resistance to the price hikes, or fewer customer visits in the near future.
Although the company has a ‘beef problem’ on its hands right now, overall revenue for the fiscal second quarter still increased 28.6% to more than $1 billion.
Jack Hartung, Chief Financial Officer said, the second quarter was “one of our strongest sales comps as a public company, second only to the first quarter of 2006, our very first quarter as a public company.”