I know we're all a little bummed to hear that Chipotle
will probably be raising prices on their steak and barbacoa burritos. However, because I am a total nerd, I read the transcript
of the Earnings Conference Call and I came away thinking this is actually a
very positive development.
Here's the 411: Any publicly traded company
(like Chipotle) has to show growth to their investors and stock holders every
90 days. If the upper management teams do not drive their companies to consistent
growth they can lose their jobs, so the pressures are very real. Now, beef
prices are at an all time high due to "drought, disease, and demand," according to NBC
News. When faced with rising prices, a company could decide to sacrifice
their standards and buy a lower quality product to keep prices low and raise
profitability.
Chipotle explicitly chose not to that here, and I think
that is tremendously commendable. On the call, Chipotle said they are expecting a
4-6% increase on their beef products. I did some math on a napkin, and I think
that equates to approximately 50 cents more on your steak or barbacoa burrito.
For those extra few cents, what you are getting in return is meat that is
antibiotic free, and has been kept to certain standards of living.
I was also pleased to read on their call transcript that Chipotle
takes those standards seriously. Earlier this year, they suspended
a pork supplier that did not meet their animal welfare standards. This had
the affect of creating a carnitas shortage that impacted 1/3 of Chipotle's
restaurants. While that was an annoyance
for those of us who want carnitas all day every day, it was a real bummer that Chipotle's bottom line was really affected.
However, on their Earnings
Call, the company does not lament this loss in profit, but holds it as an example of their "commitment
to doing what is right" and discuss the importance of
their "food integrity mission." So, in
conclusion, I think $.50 is a small price to pay for the assurance that the meat I am
eating is not only antibiotic free, but also had a decent standard of life
while it was alive. It's rare to see big companies act like this nowadays, so
let's not lament this price increase — let's welcome it.