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Chipotle (CMG) Eliminates Additives from its U.S. Food Menu

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Chipotle Mexican Grill, Inc. (CMG - Free Report) has finally fulfilled its pledge of using no added colors, flavors or preservatives of any kind in any of its ingredients. Also, it claims to be the only national restaurant brand to do so.

The company assures this to be applicable in all of its U.S. restaurants and does not comprise beverages. Moreover, it states that the only preservatives used in its menu are the lemon and lime juices, which are added just for flavor.

We believe that the move is the latest push by the burrito-chain to outdo rivals as it tries to recover from the massive food safety scandal related to the E.coli and norovirus outbreak, which surfaced toward 2015-end and resulted in sales plunging and hurting its reputation.

Notably, Chipotle’s efforts to refine the menu have been ongoing for years, but it lost the spotlight during the food-safety crisis. Now, the company is finally free of all additives, given a revamp of its tortillas. It had taken the initiative of eliminating redundant additives and preservatives from the tortillas, which it uses to make burritos, tacos and chips, two years ago.

In fact, with the introduction of new tortillas, the company now makes use of only 51 real ingredients to prepare all of its food, in stark contrast to most other fast food chains.

Focus on ‘Food with Integrity’ Program & Food Safety

Chipotle has long been a pioneer in serving high-quality ingredients and never resorted to using added colors or flavors like many of its peers. It’s ‘Food with Integrity’ program, introduced in 2001, continues to drive traffic growth. Through this initiative, the company seeks to provide better food quality by using fresh ingredients and sustainably-grown and naturally-raised products such as pork, chicken and beef.

In 2013, Chipotle became the first restaurant to use genetically modified organism (GMO)-free ingredients in its food items. At present, all of the food at Chipotle is made with non-GMO ingredients. Moreover, in all of its restaurants, the company attempts to serve meats from animals raised without antibiotics.

The company has also undertaken an inclusive assessment of its food safety programs and practices to ensure the quality and safety of food. Additionally, it is focusing on developing new food safety protocols that include DNA-based testing of several ingredients coupled with changes to food preparation and food handling practices. Improvement in food handling, testing and food preparation procedures is the company’s top priority. To achieve this, Chipotle has significantly expanded training, food safety inspections and third-party as well as internal audits at its restaurants.

What’s the Fuss About?

At a time when the restaurant industry is facing a slowdown, food companies are adapting to changing consumer preference, bringing more transparency in their operations and trying to appeal to more health-conscious eaters by altering their practices and food lineup.

McDonald's Corp. (MCD - Free Report) recently replaced margarine with butter in its breakfast sandwiches and has also cut artificial ingredients from its McNuggets.

Similarly, Panera Bread Company recently announced that its entire U.S. food menu and lineup of Panera at Home (which focuses on selling Panera branded products to other retailers) products are now made without the use of artificial preservatives, flavors, sweeteners and colors from artificial sources, as barred by the company's so-called "No No List", inclusive of 96 separate ingredients and additive classes.

Also, Yum! Brands, Inc.’s (YUM - Free Report) Pizza Hut and Taco Bell brand had earlier committed to remove artificial preservatives from most of their ingredients and menu items.

However, mostly every fast food chain has chosen the simpler path of merely switching from artificial colors, flavors, sweeteners and preservatives to “natural” versions of the same additives that serve the same purpose.

It is here that Chipotle claims to make a difference altogether by avoiding the usage of industrial additives of any kind, artificial or natural, and focusing on preparation of fresh food using classic cooking techniques.

Bottom Line

Chipotle is one of the most recognized fast-casual Mexican restaurant chains in the U.S. The fact that it has used only healthy ingredients has long been its marketing strength, despite the comparatively high prices.

However, the company’s results and its popularity among the health-conscious diners continued to be affected in the past few quarters because of the negative publicity related to the food-borne illnesses.

But Chipotle is leaving no stone unturned to reinvigorate investors’ confidence and regain its footing. In this regard, the company’s new brand-management efforts along with various sales-building initiatives bode well.

Meanwhile, we note that the latest achievement furthers the company’s agenda of making better food accessible to everyone and should also aid in bringing back health-conscious customers.

Notably, Chipotle shares have outperformed the Zacks categorized Retail–Restaurants industry, over the past three months. The stock returned 12.9%, as against the industry’s loss of 0.4%, clearly reflecting that the company is indeed on the road to recovery.

 



Still, we believe, it will take some time for the company to completely restore its economic model as well as customers’ trust and return to its former glory.

Chipotle currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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