CMO: Chipotle’s Successful Because It’s Been ‘Very Consistent’

Chipotle, the food industry’s fastest-rising star, reported earnings Monday that far exceeded Wall Street’s expectations. Despite higher menu prices because of some food supply shortages, Chipotle’s burritos (from the bowl-sheathed varieties to the tortilla-ensconced specimens) and tacos (soft and hard) are flying off the counters. The company’s sales at locations open for at least a year bounced up 17 percent over the last year, an enviable figure for any restaurant. The company’s stock rose 12 percent on Tuesday with the announcement that in three months alone, Chipotle had revenues of over $1 billion. And Chipotle predicted it will open between 180 and 195 stores in 2014. (That’s at least one every 48 hours.)

Founded in 1993 with the opening of its first store in Denver, Colorado, Chipotle was one of the first chain restaurants to move to using naturally raised animals, which meant securing a meat supply that wasn’t — and still isn’t — fed hormones and antibiotics. It got an early boost from McDonald’s, which divested its assets in 2006 when Chipotle went public. Chipotle started serving naturally-raised pork in 2000 and naturally-raised chicken 2002 and continues to refine its food supply.

To find out more about what is making Chipotle so hot, we talked to the company’s chief marketing officer and right-hand man to CEO Steve Ells, Mark Crumpacker.

TIME: I have to ask, because it’s a question I ask myself whenever I go to Chipotle: When is the guacamole going to be free?

Mark Crumpacker: [Laughs] When it costs less than steak. Guacamole is incredibly expensive. I wish it were free because people love it. I think more than half of our orders include guacamole in one form or another.

T: Chipotle raised its menu prices this year, but in-store sales still increased 17 percent. Why are people so into Chipotle despite higher prices?

MC: I wish there were a super-simple answer for it. We haven’t changed a lot about what we’re doing. We’ve been very consistent with what we’ve done over the years. Chipotle doesn’t play the typical marketing game where we add new menu items and try to get people in with gimmicks like that. So I don’t think we’ve changed so much as consumer demand has changed. I have to wonder if maybe consumers aren’t catching up with us, in a way. Frankly, we’re just really positioned well to be where those folks want to go.

T: What are foodies demanding these days, and how does that line up with what Chipotle cooks?

MC: We see a trend toward people wanting higher-quality food. And it comes in a number of different flavors. Some people are interested in health, other people are interested in the impact of the food they eat on the environment. Generally speaking, across most of the different age segments we look at, we’ve seen an increase in people’s propensity to do that. If you’re going to do that, if you’re going to care a little bit more about where your food comes from, and you’re going to eat fast food, your choice is going to get limited pretty fast. There’s not a lot you can do, and Chipotle is quite well-known for having higher quality ingredients.

T: Who does Chipotle compete with? Do you compete with non-chain, mom and pop restaurants, or Taco Bell?

MC: A lot of people talk about doing the things we’re doing, but I don’t think there’s a competitor our scale that’s doing what we’re doing with regards to spending more on our ingredients. Our food costs are just higher than the other guys’ are. We’re spending more on them and there aren’t processed menu items. We do a lot of the cooking by hand in the restaurant. There’s not a lot of that going on [with other chains].

Having said that, we compete with everybody. Our customers definitely go to McDonald’s, some of them go to Taco Bell, they go to a lot of different restaurants.

T: McDonald’s was an early investor and divested its assets in 2006. In what ways did Chipotle overlap with McDonald’s, and then how have the two companies now become different entities?

MC: The companies were always very different entities. McDonald’s had a very hands-off relationship with Chipotle. They provided support where we wanted it and that was largely on real estate, logistics, supply chain issues initially. But it quickly become apparent that we were essentially heading in a different direction and there was really no influence on the food side in the experience we created in our restaurant.

T: Do you have a favorite menu item?

MC: I’m partial to the carnitas. In fact, I snuck out of a meeting today and had that. I visit all these farms and know where all the ingredients come from and that’s the one I’m most proud of. It’s delicious.

Of all the proteins we serve, the difference between commodity pork and naturally-raised pork is the most dramatic. If you’ve ever been to a confinement hog operation, it is absolutely terrifying. It’s brutal, it’s unpleasant for the animals and the people working there. And the difference between that and our hogs which are raised, even if they’re not totally outdoors‚ and just deeply bedded pens, is really, really dramatic. The alternative is very grim.

T: So it feels good to eat it, then?

MC: Yeah. I think if you’re going to eat meat, that’s a pretty good one to eat. Having been to the farms and seen all the animals, I feel best about that one.

T: Does Chipotle’s growth have something to do with the rise in popularity of Mexican cuisine? Would this have been possible 30 years ago?

MC: When Chipotle started 21 years ago, Mexican food in the United States was very, very different. It was a large plate with multiple items, usually something doused in red or green chili sauce and refried beans. Chipotle introduced to the masses the San Francisco-style burrito, which even frankly those San Francisco burritos were smothered in chili sauce. So I wonder how much it’s people more interested in Mexican food, as it is Chipotle introduced them to a different kind of cuisine altogether.

T: What is the most number of times you’ve eaten at Chipotle in one week?

MC: This is probably going to be embarrassing. I’d say five times. I’ve never eaten there every single day. But you know, if you work there and you’re in the restaurant, that’s what you’re going to eat. I know our crews eat our food every day.

T: Any complaints about getting sick of it?

MC: [Laughs] Well, you know, one of the things I learned about Chipotle, which fascinated me when I first started, you need to be very careful about what you order the first time at Chipotle because most people eat that same thing for like, the next decade.

T: What’s Chipotle going to be doing differently five years from now?

MC: Our menu has stayed the same, but underneath that menu we’re constantly striving to improve each individual ingredient. Each one of them is one its own trajectory. If you went through our 25 or so primary ingredients, each one would have a path for some distant goal of where we’d like to go with it. There’s a particular path for chicken, and then for beef and then for pork and all those veggies. We’re almost rid of any ingredients on our menu that are genetically modified. When I look out five years I suspect that the menu will be pretty much the same, but the ingredients underlying will continue to transform as we go.

T: Thanks.

MC: Thank you.