CASE STUDY

Chipotle /
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ETHICAL EATS

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CASE STUDY
Chipotle / ETHICAL EATS

Chipotle opens a new restaurant nearly every

'Chipotle has been
really progressive and
pushed the socio-political
agenda Steve Ells is like
the Steve Jobs of food'
Jesse Coulter, CAA Marketing
other day serving burritos, salads and tacos,
freshly filled with humanely-farmed food and
made to order for each customer. Its Cultivate
brand platform has been busy sharing the
companys story and ethos through short films,
music, a loyalty programme and events. It also
promotes Chipotles Cultivate Foundation, which
supports farming communities across the US.
So just how has a fast food company which
has shunned traditional advertising made
sustainability such a hot topic?

Brand DNA
Founded /
By Lucy Aitken
1993
HQ /
Denver, Colorado
Restaurants:
1,300
Employees /
30,000
Product /
Mexican fast food
Promise /
Food With Integrity
WHY CONTAGIOUS /
Improving fast food
Marketing with meaning
Content-led communications strategy

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 case study /chipotle /

Think fast food restaurants and

what comes to mind? Happy Meals?
Buckets of chicken? Promotional
film tie-ins? Plastic toys?
What about the food itself and how it
is manufactured? Perhaps some of
the horrific factory-farming practices
exposed by Eric Schlossers 2001
Chipotle informs
bestseller Fast Food Nation: The
consumers about the
advantages of sustainable
Dark Side of the All-American Meal
over industrial farming
still haunt you?
Food With Integrity / Denver-headquartered Mexican food
chain Chipotle [Chi-POHT-lay] is challenging those asso-
ciations with one clear goal: to change the way people think
about and eat fast food. At the companys heart is its Food
With Integrity ethos, which pivots on serving high-quality food
that has been farmed humanely. That means it serves naturally
raised meats in its 1,300 restaurants, it buys dairy products
made from milk produced by cows that havent been pumped
full of growth hormones and crucially it informs consumers
about the advantages of sustainable over industrial farming.
This latter point poses a head-scratcher in terms of mar-
keting. How do you communicate to consumers the integrity
that forms the very DNA of your fast food chain without com-
ing across as pious, heavy-handed or judgmental of other
outlets that dont boast those same values? Its an issue that
has dogged many brands that have tried to tout their green
credentials only to end up with red faces.

Cultivate Foundation / The answer? A relationship with the

corporate arm of talent specialists Creative Artists Agency,
Los Angeles, which spawned Cultivate, a multi-faceted plat-
form including a loyalty programme that rewards knowledge,
not dollars spent, and a food, ideas and music festival. CAA
also helped create Back To The Start, a touching two-minute
animation directed by Johnny Kelly via Nexus Productions in
London, which documents the epiphany of a factory farmer
whos had his fill of livestock being pumped with injections
and packaged into boxes.
This powerful story, sound-tracked by country music leg-
end Willie Nelson covering The Scientist by Coldplay, left
audiences misty-eyed while its unequivocal message about
industrialised animal production pulled no punches. Awards
juries loved it: so far Back To The Start has netted a Grandy,
four Golds at the Art Directors Club, a Grand Clio in Film,
Best In Show at the AICP Awards and One Show Entertain-
ment and two Grand Prix at the Cannes Lions International
Festival of Creativity: one for film, and the first ever in Branded
Content and Entertainment, which recognised CAAs entire
Cultivate Programme. Jesse Coulter, co-chief creative officer
at CAA Marketing, reflects: The film category is the most
established category and in some ways the most difficult to

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 contagious 68 / 69

win. But winning the first Grand Prix for branded entertain-
ment made us really proud because we create content for
brands, thats our model.
CAA has also created Abandoned, another short film,
which set out to show the hardships faced by farmers in rural
communities. This shows three boys trashing an abandoned
home and then running back to their own farms as they realise
the family that lived there wasnt so different from their own.
Directed by David Altobelli, the film features Karen O, lead
singer of the Yeah Yeah Yeahs, singing Mama, Don't Let Your
Babies Grow up to Be Cowboys originally by Willie Nelson
and Waylon Jennings.
The situation this summer in the US, as farmers face a live-
lihood-jeopardising drought, makes this narrative particularly
resonant. It feeds into a broader sense of social responsibility
within Chipotle which is demonstrating leadership at a time
when farming communities most need it. Through the Culti-
vate Foundation, Chipotle adopts a role similar to an NGO,
making it easy for customers to do the right thing, not just for If we are able to impact on how
themselves but also for society at large.
other companies produce food,
INSIDE CHIPOTLE thats pretty profound.
Step inside a Chipotle restaurant and youll see a modern
design with wooden floors, subtle lighting and brushed steel
David Messinger, co-head, CAA Marketing
tables. Queues line up to the side of the service-point where
customers choose from the fresh ingredients on display and
staff members assemble their tacos, burritos, burrito bowls [a
burrito minus the tortilla] or salads. An open refrigerator with
cold cans and bottles supplies drinks; there are no hot drinks
or sweet treats. A sign next to the menu describes the mis-
sion of Food With Integrity: Our commitment to finding the
very best ingredients raised with respect for the animals, the
environment and the farmers.' This promise outlined next to
the concise menu just the four items listed above, but with
enough variety of ingredients to offer a multitude of different
meal options gives the firm impression that Chipotles com-
mitment to making people aware of how it sources ingredients
is equally important as the food itself.

FINE, NOT FAST

Ever since Chipotle founder Steve Ells opened the first res-
taurant in Denver, Colorado, in 1993, its been an ambition
of the chain to offer an experience that resembles fine dining
more than fast food. That means no brightly coloured plastic
or packaging, no bucket-sized drinks and definitely no micro-
waved food. Instead, theres an open plan kitchen where
customers can see their food being prepared right in front
of them.

International Expansion / Its been a successful formula for

Chipotle, which this year plans to add up to 165 restaurants in
the US alone, building on the 150 that opened there in 2011.
Chipotle has also opened in Paris and there are three outlets
in both Toronto and London, with two more planned for the UK
capital before the end of 2012. ShopHouse Southeast Asian
Kitchen, a sub-chain, opened in Washington DC in Septem-
ber 2011; a second branch will join it there later this year. All
Chipotle restaurants are owned by the company; unlike most
fast food empires, it doesnt operate a franchise system. This

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 case study /chipotle /
is highly unusual, according to Nations Restaurant News' Los
Angeles-based west coast bureau chief Lisa Jennings, but it
brings consistency to the customer experience. It allows the
chain to maintain the quality of experience and control real
estate selection, she says.
The business model has certainly been profitable and
Chipotle remains an investor favourite: In the first six months of
2012, revenue grew by 23.2% compared to the same period
in 2011, to $1.33bn, and comparable restaurant sales grew
10.2%. Chipotles restaurant-level margins were among the
23.2% highest in the industry at 28.3%. When the company floated
Growth in revenue, on the New York Stock Exchange in 2006, it was the second
H1 2012 v 2011 most successful public offering for a restaurant, after Boston
Chicken (now Boston Market).
According to Kantar, Chipotle spent $5.8m on measured
media in 2011, down from $7.5m in 2010. Compare this with
the budgets of other fast food chains McDonald's global
marketing budget is estimated to be around $2bn and it is
chicken feed. Organic, of course.
We knew people were
BENEVOLENT ARCHES
Significantly, both Boston Mar- starting to care more
ket and Chipotle had help from
McDonalds when they were start-
about where their food
ing out: McDonalds took a minority came from, but we
interest in Chipotle in 1998, which
expanded into a majority stake in
just didn't know if they
2001. When Chipotle went public would give a crap.
in 2006, McDonalds divested itself
of its interest, yet perhaps it is still
influenced by its former charge, not least in scrutinising its
sustainable business practices.
Some industry analysts even went so far as to suggest
that McDonalds announcement on 13 February 2012 that it
was to phase out the use of gestation stalls for pregnant pigs
currently used by 70% of the US pork industry, according
to The Humane Society was prompted by the broadcast of
Back To The Start during the break of the Grammy Awards on
12 February 2012. OMG: McDonalds Does the Right Thing,'
squawked The New York Times.
Chipotles head of communications, Chris Arnold,
dismisses any connection: I imagine that was something dis-
cussed at McDonalds for months or years, and the timing was
nothing more than coincidence. Yet he adds that Chipotles
stance is starting to send ripples through the fast food sup-
ply chain. Anecdotally, there are companies that are changing
their practices in response to things that Chipotle has done.
$5.8m One of the largest pork suppliers in the US, Swift, announced
Chipotles measured a couple of years ago that they were going to eliminate ges-
media spend in 2011
tation crates from their production and specifically cited
Chipotle. We thought that was remarkable because theyre
not one of our suppliers. If we are able to impact on how other
companies produce food, thats pretty profound.
DIGITAL-FIRST STRATEGY
More than 40 million viewers saw Back To The Start during
the Grammys, while others had seen it courtesy of its digital-
first strategy; it launched first on YouTube and subsequently
to a collective audience of 21 million Facebook fans, leverag-
CHIPOTLE_EDITED_after proofs.indd 6
ing the combined social media fan-bases of Chipotle, Willie
Nelson and Coldplay. In the nine days after the Grammys, the
film had 5,071 relevant mentions across blogs, Twitter, news
forums, and Facebook, and made Chipotle the no.4 Most
Buzzed about Ad Online and no.1 for Positive Brand Senti-
ment according to Zeta Interactive. It also raised money for
the Cultivate Foundation and FarmAid by inviting viewers to
purchase The Scientist on iTunes. To date, the film has been
viewed on YouTube 6.5 million times.
The accidental ad / Somewhat surprisingly, the film never set
out to be advertising. Until it gelled with CAA, Chipotle had
never quite found the right fit in terms of ad agencies. David
Messinger, co-head, CAA Marketing, recalls: Two years ago,
Chipotle came to Los Angeles on a mission: they wanted to
find a way to tell their story. But they had never done advertis-
ing and said we dont believe traditional advertising is the way
to go. CAAs Coulter adds: We learned that Chipotle had,
for over 15 years, been finding inde-
pendent family farmers to source their
food. Theyve been really progressive
and have pushed the socio-political
agenda. When we heard that, we said:
Wow! Steve Ells is like the Steve Jobs
of food!
The next challenge was how to tell
Chipotles story without vilifying factory
farmers or using brutal imagery: the
film needed to strike a delicate balance
between telling Chipotles story but not
turning it into a horror show of animals in cages being pumped
full of chemicals. As Messinger points out: The reason why
it seems to resonate with people is because theres an ele-
gance to the storytelling. Incredibly, given the overwhelmingly
positive reaction, Coulter remembers: We knew people were
starting to care more about where their food came from, but
we didnt know if people were going to care about this story
that Chipotle wanted to tell. We loved it but we just didnt
know if people would give a crap.
Cultivating converts / Lisa Jennings at Nations Restaurant
News is in no doubt that the film, along with Chipotles use
of social media to connect with its customer base, has had
an effect. She says: Back To The Start has really made a dif-
ference in helping consumers understand Chipotles Food
With Integrity effort. The company also makes very good use
of Twitter and Facebook to harness the passion consumers
have for the better-food movement. Yet she sounds a note
of caution that such efforts are preaching to the converted.
Personally, Im a bit sceptical about those [Cultivate] festivals,
though I went to one and found it interesting. The people who
attend are already believers.
Frequency, not fanaticism / Chris Arnold estimates that 17,000
people attended Cultivate Chicago in 2011, and this year a
similar-sized turnout is expected, while a second festival will
take place in Denver, with around 10-12,000 anticipated. Yet
what might also make an impact is the Farm Team loyalty pro-
gramme, which sees restaurant managers, customer service
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800,000
Number of diners at
Chipotle every day
A hazard for Chipotle is that
so many very cool fast-casual
concepts are launching and
growing, so theres a lot
more competition.
Lisa Jennings, Nations Restaurant News

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CULTIVATE
As Americas agricultural system becomes
$2m increasingly industrialised, Chipotle is
looking to show how US farmers are
facing hardships through The Chipotle
Cultivate Foundation. The Foundation,
which has contributed more than $2m
family
towards initiatives supporting sustainable
farming
agriculture, family farming and innovation
that promotes better food, is committed
to creating more sustainable supply
chains and to raising awareness about
food issues. As well as teaching younger
generations about food through farming
communities, the Foundation also
supports ranchers and farmers who are
working to develop more sustainable
practices. Steve Ells says: Delicious
affordable food can be produced without
exploiting the farmers, the animals or the
environment. Chipotle has proven this to
be true, but Chipotle is only one small part
of the solution. Our goal now should be
to have all food produced as sustainably
as possible. To support it in its goals,
CAA Marketing created the Cultivate
brand platform which incorporated film,
music, events and a loyalty programme.
The Cultivate platform was awarded
the first ever Grand Prix for Branded
Entertainment at Cannes Lions in 2012
with its Back To The Start film.

Headquarters CAA MARKETING

CAA Marketing, a division of Los Angeles
los
angeles
based talent agency CAA, leverages
the power of entertainment to build
brands for clients including General
Motors, Mattel and Best Buy. Marketing
strategists and creatives can access key
pop decision-makers in entertainment and
culture
media and can also benefit from CAAs
early insight into popular culture and
consumer trends. Jesse Coulter, co-
chief creative officer, says: We are all a
bunch of brand geeks who want to push
the boundaries of what advertising is
so wed never make a short film or a TV
programme just for the sake of it. David
Messinger, co-head, CAA Marketing,
adds: Our clients want to tell their
stories by leveraging the expertise we
have here to create entertainment that
people really want. Willie Nelsons cover
of The Scientist was number one in the
iTunes country music charts. People
paid to download that song because
its beautiful, not because its a piece
of marketing. CAA Marketing was the
driving force behind Coca-Colas long-
standing partnership with American Idol
and Hasbros Transformers film franchise.

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 contagious 72 / 73

workers and social media teams inviting people to participate.

He elaborates: Its not about frequency, its about fanaticism. Winning the first Grand Prix
Were looking for customers who are super loyal and passion-
ate. Through Farm Team, we help them learn more about what
for branded entertainment
makes Chipotle work and provide incentives for them to share made us really proud because
that information with other people, so they become brand
evangelists. Members of the Farm Team programme cur- 800,000 thats our model.
rently number 6,000, a tiny percentage of Chipotles 800,000 Number of diners at
Chipotle every day
Jesse Coulter, CAA Marketing
daily customers, although there are plans to build on the pro-
gramme in the coming months now that its kicked off with
super-fans.

ORGANIC GROWTH
When a company reaches a certain size, critics begin to
suggest that its ideals risk being compromised. Ian LaPoint, A lot of people saw
cultural insight consultant at WPP-owned consultancy Added Chipotle as a burrito shop.
Value in New York, comments: When I first noticed Chipotle,
they started cropping up in university towns; they dont seem 17,000 Now its a company that
can change the world
to be trying to pepper a map with store locations. That gives Attendees at
Jesse Coulter,
Cultivate Chicago
a great sense of the companys ethos which markedly sets co-chief creative officer,
them apart from other players in the market. Certainly, Arnold CAA Marketing
makes it clear that the company wont be changing. Weve
grown up with that ethos; its so embedded in our culture. He
adds: The food we serve 10 years from now should be better
than the food we serve today because were always striving
for improvement and pushing ourselves to the next milestone.
Yet there is ever more competition, not just from traditional
fast food brands but also from newer rivals who understand
the needs of consumers who want burger alternatives. Panera
Bread, for instance, a chain of fast-casual cafs specialising
in artisan loaves that first launched in 1981, is currently going
through a growth spurt: it opened 100 new locations across
the US last year.
Arnold himself admits that, while he wishes other industry
players would emulate the companys commitment to more
ethical farming practices, its usually the restaurant format that
gets copied. Lisa Jennings agrees, and suggests that newer
entrants to the market often offer healthier options, too: A haz-
ard for Chipotle is that so many very cool fast-casual concepts
are launching and growing, so theres a lot more competition.
Many are more health-focused from a nutrition standpoint.
Chipotle, for all its better-for-the-planet ingredients, has a
menu thats still pretty high in calories and personally I wish
theyd offer half portions. She adds: Restaurant analysts see
a lot of growth potential for the Chipotle brand, but the fact
that theyve launched ShopHouse indicates it might be time to
start building a new concept for people to get excited about.

Good Food Nation / According to the afterword in the 2012

reprint of Fast Food Nation, the good food movement in the
US is picking up momentum. Over a decade after his book
was first published, Eric Schlosser writes: Issues that were
rarely discussed in the mainstream media food safety, ani-
mal welfare, the obesity epidemic, the ethics of marketing junk
food to children, the need for a new and sustainable agricul-
tural system have become inescapable. Chipotle is now
an instantly recognisable part of that conversation. As Jesse
Coulter puts it: A lot of people saw Chipotle as a burrito shop.
Now its a company that can change the world.

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analyst insight / CHIPOTLE

By Dominik Prinz, Interbrand /
Analyst
Insight Chipotle is changing how people think about and eat fast
food. It has helped start a movement: six million people
have seen Back To The Start on YouTube, prompting
social media conversations and impressive buzz. Yet, it
will take more work to change the way many people think
about what they eat, especially in the US where not-so-
healthy fast food is widely and frequently consumed.
Frankly, its the ethical aspect of Chipotles brand
that has built a loyal army of ambassadors, and thats
what will keep the brand differentiated from and ahead
of the competition. As Chipotle continues to grow and
sets out to attract more customers in various markets,
the brands promise and ethical values will have to be
constantly endorsed by Steve Ells and the entire leader-
ship team. Reinforcing those values is essential during
this time of expansion.
Chipotle is doing a good job in communicating Food
With Integrity and it is smart to stay away from tra-
ditional media. The focus on social media and word of
mouth appeals to new generations of consumers and
feels less corporate. To keep people engaged, it will
need to continue offering relevant and exciting stories
that encourage people to buy into its mission. Creating
authentic brand experiences that connect people with
places where good food comes from, like setting up
urban farms in major cities or offering day trips to local
farms, would be a fantastic way to authentically commu-
nicate its stance.
The biggest risk for the brand is the possibility of
slipping as it grows. It will have to work to exercise more
control over more suppliers and partners, and keep-
ing up its good track record will require vigilance. For
Chipotle, it comes down to this: you have to say what you
do and then (continue to) do what you say.
Chipotle is paving the way for a new set of competi-
tors by educating consumers about good food, re-
sponsible sourcing and transparent supply chains as it
continues to create a profitable market segment.
Naturally, this will attract more players to join the
party. However, its not the new players about which
Chipotle should be most worried. Chipotle stole the
thunder from McDonalds in terms of leading the debate
around good food, but I expect we will see McDonald's
leveraging its brand and marketing power to reclaim this
position in the sustainability arena. McDonald's certainly
has the desire, global reach and brand awareness it
takes to be the front-runner in healthy fast food, and
watching Chipotle grow, the worlds most famous fast
food restaurant chain is seeing the immense benefit and
business opportunity in tapping into the health-con-
scious, ethically aware millennial demographic.

Dominik Prinz is associate director of strategy at

Interbrand, New York. www.interbrand.com

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 case study / chipotle /
Challenge /
Promote Chipotles commitment to Food
With Integrity, which means serving
high-quality food that has been farmed
humanely.
Tell Chipotles story: since 1998 it
has taken a progressive approach to
sourcing food, forging relationships
with independent family farmers and
eschewing industrialised alternatives.
Find a more creative means of
communicating with consumers
that doesnt depend on traditional
advertising formats.
Avoid shock tactics or coming across as
heavy-handed or pious.
Chipotle dont seem to be trying to
pepper a map with store locations.
That gives a great sense of the
companys ethos which markedly
sets them apart from other players.
Ian LaPoint, Added Value
CHIPOTLE_EDITED_after proofs.indd 12
Brand Map / chipotle
Solutions /
FILM
Back To The Start is a two-minute
animation that shows a farmers
Damascene conversion from factory to
sustainable farming. The film sparked
awareness about Chipotle and its
Food With Integrity stance. It also won
industry acclaim, including the Grand
Prix for film and branded entertainment
at Cannes Lions 2012.
Event
The Cultivate Festival, focusing on
food, music and ideas, launched in
2011 in Chicago, attracting a turnout of
17,000 people. This year, a similar-sized
audience is expected and a second
Cultivate takes place in Denver, with
around 10-12,000 people anticipated.
Social media
Chipotle is active on Twitter (95,000
followers) and social marketing
benchmarking company Unmetric
reports that it has responded to 100%
of its followers 15,002 tweets. Back To
The Start was launched to a collective
Facebook audience of 21 million (fans of
Chipotle, Willie Nelson and Coldplay) as
part of the film's digital-first strategy.
Music
Back To The Start was sound-tracked
by Willie Nelson covering Coldplays
The Scientist, a track which became
available on iTunes. Proceeds went
to The Cultivate Foundation. Karen O
covered Willie Nelson's Mama Don't
Let Your Babies Grow Up To Be
Cowboys on Abandoned, a short film
that explored farmers' hardships.
Loyalty
Chipotles Farm Team loyalty
programme sees restaurant managers,
customer service workers and social
media teams inviting people to
participate, rewarding fanaticism, not
frequency. The Farm Team programme
currently has 6,000 members.
In-store
Chipotles modern design and focused
menu are features of its 1,250
restaurants and owe more to fine dining
than fast food traditions. A sign next to
the menu describes the mission of Food
With Integrity, giving the firm impression
that its commitment to making people
aware of how it sources ingredients is
as important as the food itself.
06/08/2012 18:30

Chipotles restaurant-
level margins were among the
highest in the industry in the six
months to June 2012 at 28.3%
$1.33bn
Revenue for the first
six months of 2012, up
23.2% from the same
period in 2011.
40 million people watched
Back to the Start during
Chipotle Mexican Grill profit margin December 2008 - June 2012
2008
$5.8m
Chipotle spent $5.8m on
measured media in 2011,
down from $7.5m in 2010
(Kantar). McDonalds global
marketing budget is estimated
to be around $2bn.
CHIPOTLE_EDITED_after proofs.indd 13
contagious 76 / 77
Results / Takeouts /
Avoid approaching advertising as
advertising. By following a desire to
6.5 million times share its story, Chipotle has helped
Back To The Start has been viewed on YouTube alone
raise awareness and become part of the
6.5 million times movement around better food.
Embrace the opportunity to behave as
an NGO. Chipotle has made a positive
impact on farming communities through
its Cultivate Foundation. This isnt a
box-ticking CSR exercise but a genuine
commitment to a more sustainable food
supply.
Reward fanaticism, not dollars spent in-
store. A high-spending diner might not
have the same value from a marketing
point of view as an ardent fan who is
happy to be vocal about the brand.
Be transparent in your business
the Grammys objectives, even when they dont always
hit the mark. Chipotle has openly stated
in its annual report that it may not always
11.82% be possible to get the produce that meets
12%
its high standards. But it always gives the
impression that it is trying
8%
The reason why it seems to resonate with
4%
2009 2010 2011 2012
people is because there is an elegance
to the storytelling.
David Messinger, co-head, CAA Marketing
1,300 restaurants
During the first six months of the year, 87 new Chipotle
restaurants were opened bringing the total restaurant
count to more than 1,300 at the end of June 2012.
Expansion
There are three outlets in both Toronto and London, with
two more planned for the UK capital before the end of
2012. ShopHouse Southeast Asian Kitchen, a sub-chain,
opened in Washington DC in September 2011; a second
branch will join it there later this year.
06/08/2012 18:30