Chipotle Opts for Higher Food Costs

Even restaurants that don’t preach the gospel of local, fair trade and organic produce—which is to say, most of them—could face a dilemma when they order fresh tomatoes this winter. Should they source them through the usual channels and pay the market price? Or should they take the high road and pay extra for tomatoes picked by better-compensated workers? Chipotle Mexican Grille plans to voluntarily increase its food costs this way, following the lead of some QSR giants. Would doing the same make a positive difference for your restaurant?

More than 30,000 tomato workers labor in Florida during the six- to seven-month harvesting season, and it seems like they wouldn’t be overwhelmed by Chipotle’s agreement to pay them an extra penny a pound. Yet that amount represents a 64 percent pay increase for the workers. Chipotle will be sourcing its tomatoes exclusively from East Coast Farms, one of Florida’s largest tomato growers.

“Our efforts have always been rooted in doing the right things, and in finding solutions that have a real impact,” says Chipotle head Steve Ells. “By working with East Coast Farms to improve wages and working conditions for workers who harvest tomatoes for Chipotle, we have taken another important step forward.”

Which is to say, Chipotle has widened its “Food With Integrity” focus by factoring in not just how its ingredients are raised or grown, and by whom, but how much the people who are employed by its suppliers earn and what working conditions are like.

Seem too complicated? It’s a big commitment, but it’s one that Burger King wished it had made when it first had the chance.

Chipotle negotiated its deal with the help of labor group Coalition of Immokalee Workers (CIW), which steered the chain to East Coast Farms. CIW had previously brokered similar deals with McDonald’s and YUM Brands, but was initially rebuffed by Burger King.

What followed was a mini-firestorm of protest involving religious and community activists, union members, concerned students and even a few lawmakers. Burger King became the target of protest marches and rallies, petition drives, even congressional hearings. In the end, it was hurting business, which led Burger King to cave in. Here’s the statement Burger King c.e.o. John Chidsey made when it did.

“We are pleased to now be working together with the CIW to further the common goal of improving Florida tomato farm workers’ wages, working conditions and lives,” he said when making the announcement in June, 2008. “The CIW has been at the forefront of efforts to improve farm labor conditions, exposing abuses and driving socially responsible purchasing and work practices in the Florida tomato fields.

“We apologize for any negative statements about the CIW or its motives previously attributed to BKC [Burger King] or its employees and now realize that those statements were wrong. Today we turn a new page in our relationship and begin a new chapter of real progress for Florida farm workers.”

It’s certainly a different spirit than Chidsey displayed in a prior speech meant to “debunk the myth” of farmworker poverty. You can see a video of it at http://www.youtube.com/watch?v=eP8W2xHzxls. The upshot: Chidsey won’t be tackling touchy subjects before a camera again after this debacle.

In the end, it makes more business sense for these companies to give in than to deal with the protests and boycotts. It’s something sneaker giant Nike wishes it could go back and do. The company has for years been dogged by complaints over what protesters say were “sweatshop conditions” and unspeakable child labor practices at many of its manufacturing facilities around the globe, including those in Vietnam, Indonesia and El Salvador. Surveys found that a significant number of consumers were aware of the issue, and a smaller, yet-still-significant portion of them said they would honor Nike boycotts suggested by various human rights and labor advocacy groups. In a word, it was bad for Nike’s business, particularly bad for its stock price and, in the long run, bad for the brand.

One reason Nike became a target and took such a big hit was that it was a public company. Which may be why Ells thought he was perhaps getting ahead of the curve by signing up for higher tomato prices while the signing was good. It’s interesting to note that Ells now says “these choices come at a price, giving Chipotle the highest food costs in the industry.” When was the last time a publicly traded restaurant company head could brag about high food costs?

The immediate question for all the non-public restaurant companies now is if they should agree to pay more for their tomatoes in the name of social justice and labor solidarity. We don’t have an answer, but we do note that the bigger the target you are for protest groups, the more likely you’ll eventually hear about it. The lesson from Ells: be proactive.