Chipotle And McDonald’s Try Fostering Trust With More Nutritional Transparency

It seems that restaurant chains are increasingly relying on transparency to create a goodwill. Fast food chains, long criticized for promoting obesity in America, are actually getting more transparent about the nutritional content in their products.

Last year, McDonald’s Corporation (NYSE:MCD) was among the first few to label the calorific content on its products. Another entrant to the party is Starbucks, which recently announced that it will soon display the calorie content for its products in all of the 11,000 locations within the U.S. ^[1]

Chipotle hasn’t started disclosing the calorific values yet but has a gone step ahead by labeling the ingredients that contain genetically modified organisms (GMOs). ^[2] In doing so, it becomes the nation’s first restaurant to voluntarily label GMOs. Chipotle has long touted itself as a healthier alternative to fast food by using organic and locally grown ingredients.

See full analysis for Chipotle Mexican Grill

Chipotle already uses naturally raised meats that do not contain any antibiotics or hormones. Antibiotics are used in animal feed to help livestock, pigs and chickens become more resistant to diseases as well as help them gain weight. But there are concerns that the residue of antibiotics is getting into the milk or the meat of cattle, and this poses risk to public health.

However, the cooking medium is not all natural at the moment. Chicken and other vegetables are often cooked using soybean oil. The soybean oil is generally made from modified soybeans. Chipotle has made it clear that it is working hard to reduce the GMO content from its menu. For instance, soybean oil has been replaced by the all natural sunflower oil for cooking certain menu products. Chipotle also mentioned that it will be hard to completely eliminate GMOs from the ingredients due to the practices followed by the food industry in the U.S. ^[3]

Everyone To Follow?

Eventually all big restaurant chains could follow suit. The U.S. Patient Protection and Affordable Care Act will require all restaurant chains with more than 20 outlets to disclose the calorie count of their products by 2014. It is argued that such a move will allow customers to make more informed decisions and help reduce obesity and related diseases.

By implementing the move earlier than usual, the companies hope to project themselves as ‘honest’ and ‘in the best interests of the customer’. Furthermore, studies have repeatedly shown that posting the calorie count causes little change in the consumption pattern of most diners. ^[4] So, anyone betting on the sales of the fast food chains to plummet due to the implementation of the legislation shouldn’t; the move is not likely to have much of an impact.

We have a price estimate of $350 for Chipotle Mexican Grill, which is about 5% lower than the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Starbucks Is Adding Calorie Counts, but Will It Curb Consumption?, June 18, 2013, heathland.time.com [↩]
2. The Genetically Modified Burrito: Chipotle Tells All, June 18, 2013, bloomberg.com [↩]
3. The Genetically Modified Burrito: Chipotle Tells All, June 18, 2013, businessweek.com [↩]
4. Do Calorie Counts on Menus Curb Eating? Not So Much, healthland.time.com [↩]