Where’s the beef?

Chipotle Mexican Grill (CMG) has been living large since McDonald’s seemingly miscalculated divestiture. Since the divestiture, Chipotle expanded from 500 locations to more than 1500. Ronald pocketed $1.5 billion from the deal, but Chipotle is now valued at more than $13 billion — that’s a lot of burritos.

No, but really.

Burrito sales are up 44 percent this year and up 1,316 percent since its initial public offering in 2006. Last year Chipotle served more than 120 million pounds of naturally raised beef, pork and chicken. There is such a high demand for burritos that Chipotle could not meet the demand if it stuck to the company’s “naturally raised beef” policy.

“The supply of naturally raised beef is certainly tight,” Chipotle spokesman Chris Arnold told Bloomberg Businessweek. “So it is definitely a challenge to get everything we need, and right now, we can’t get all that we need.”

As a rational producer, Chipotle finds a way to meet demand. In times of beef-drought, Chipotle uses “traditional” beef — which means that the animals could have been given antibiotics or hormones. However, Chipotle always posts signs when they are using “traditional beef.”

3 thoughts on “Where’s the beef?

  1. Do you think that Chipotle will continue to grow given that they are already encountering problems meeting demand for their original product? I think that the answer to this lies in the question of whether or not consumers view traditional beef as an adequate substitute, or whether or not there is a large proportion of consumers who really care if their beef is naturally raised or not. Chipotle may have branded themselves so well as being “natual” that small lapses in ingredient quality would not be largely detrimental, however where is the tipping point where Chipotle’s quality begins to no longer satisfy the customers’ demand?

  2. Typos!! – clean it up, and tighten your prose while you’re at it. And “120 pounds” must be wrong??

    Branding for quality is always risky; Toyota made that central to their image, but in the past few years has had more recalls than others in the industry. So far they’ve not paid a huge price for that, but certainly it’s part of their comparatively lackluster performance, and the bad PR will continue because lawsuits with associated media coverage are only just coming to trial. Lawyers will use that to make Toyota pay dearly to settle out of court and out of the public eye.

    Back to Chipotle: what is their market saturation? 1500 outlets equals 30 per state. Is the market for burritos growing? or are they taking away market share from mom-and-pop stores and rivals such as Taco Bell?

  3. My question is what exactly is naturally raised beef? Do they roam the plains like the buffalo of old? In our society, we have a lot of words which are meaningless to the public. Do people take that much comfort knowing that a cow was slaughtered “humanely”? Isn’t slaughter slaughter or is there some new way of killing an animal available? Extremism can be used both ways. Traditional and Natural to me seem much more like PR words than scientific words and consumers should make a note of this when deciding to buy that “Natural” burrito from Chiptole for $8 instead of that “wholesome” burrito from Tacobell for $1. Sometimes a price markup can be disguised as “natural”.

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