Investments in labor, supply chain and robust digital channels are "paying off," said Chipotle leadership on its earnings call Wednesday. In Q1 2021, the company reported $1.7 billion in revenue, a 23.4% year-over-year jump.
CFO Jack Hartung said "we think we're well prepared from [a] supply chain standpoint," but that it is the "wild card" the company will be watching closely over the year to monitor its ability to meet a potential surge in demand.
Delivery fees pushed Q1 operating costs up 16.9% YoY. "We'll continue to evaluate and fine tune our delivery strategy in this dynamic market," Hartung said.
Chipotle added drive-thru delivery lanes (called Chipotlanes) to 65% of its new locations in Q1 and expects more than 100 more by the end of the year. It is also investing in autonomous vehicles for delivery.
"Chipotle has been making significant investments in digital over the last few years, and that has paid off in a big way," Hartung told CFO Dive in June. "You've seen our results. In April, we had digital sales as high as 70%. That was up from 20%, pre-COVID. Three or four years ago, it was only 5% of our business. Companies without a digital offering are struggling a lot, lot, lot more."
Hartung is proud the company has been, financially, in a position to make the right investments all along the way; "a lot of companies weren't so fortunate," he said.
Sustainable growth, sustainable culture
Last week, Chipotle released its annual sustainability report, in which it shared a 51% waste diversion rate. CEO Brian Niccol said sustainability is one of the brand’s top strategic priorities. It’s one of Hartung’s too; Chipotle’s supply chain and development teams report directly to him.
“We really started this idea of sourcing more sustainable ingredients in the early 2000s, before it was fashionable,” Hartung told CFO Dive in an interview Friday. “As CFO, I spent a lot of time on farms, because I wanted to understand what sustainable agriculture and proper animal husbandry looks like. Do I need to do that in my role as CFO? Of course not, but it really inspired me, and it made it more important to me that our business model supported sustainable farming and produce.”
In its sustainability report, Chipotle committed $5 million to young farmers over five years, pledged to partner with growers to convert over 400 acres to organic farmland and outlined a goal to purchase over 37 million pounds of produce from local farmers through its Local Growers Program this year. The restaurant chain locally sourced 31 million pounds of produce in 2020.
“You’ve seen all the things we’re doing to support farmers,” Hartung said. “A lot of that comes down to actually spending time with them. If I sat in my office and just looked at spreadsheets, it might’ve been easy to say, ‘This is too expensive, we're not going to do it.’ When you spend time with the animals and the farmers, you see the difference, and you can't help but [want to] find efficiencies elsewhere.”
A.B. Brown contributed to this report.