A Chain That Pigs Would Die For

Chipotle's embrace of sustainable food has driven up costs and forced it to raise menu prices. (Burritos now cost about $6, up from $5 before Chipotle started buying naturally raised meat.) Its food costs, which account for 31 to 33 percent of revenue, are among the highest in the "fast casual" restaurant category.

For Kremer, too, the switch to naturally raised pork was partly about marketing. In 1999 live hog prices fell to just 7 cents a pound (today they range from 45 to 50 cents per pound), and many of Kremer's colleagues were forced out of the business. Others signed contracts with major pork companies like Smithfield to guarantee a steady income and set up larger-scale "confinement" operations. ("Confinement" refers to hogs raised in closed pens and given no access to the outdoors.) "We saw the writing on the wall that the markets were starting to become concentrated," he says. "Our days were numbered unless we wanted to go raise hogs for the big guys."

Kremer wanted to stay small. For one thing, it's the only way he knows how to farm. Kremer's family left Germany for Osage County, Mo., in the 1820s and has farmed there ever since. Once you sign up with a big producer, Kremer believes, you lose control over your destiny. The company supplies you with feed and livestock and dictates the price they'll pay you for raising it. Farmers feel pressure to "grow" more hogs in confined pens to make up for slim profit margins. Kremer decides on his own how to breed his hogs and what to feed them. And, for now, demand for naturally raised meat outstrips supply, so Kremer's co-op can negotiate premium prices.

As president of the Missouri Farmers Union, Kremer organized consumer focus groups to find out what shoppers want from their cuts of meat. "We knew we had to set ourselves apart in order to gain market access," he says. What emerged from the studies was that consumers were willing to pay a small premium for naturally raised pork that came from small family farms. With the help of a corporate marketing executive, the farmers designed their Heritage Acres logo (a sun setting over verdant pastures) and the rest is history. Though the group has yet to see a consistent profit, Kremer believes that business from Chipotle and other large companies, like Whole Foods and D'Artagnan, has saved them from the abyss.

The marriage of corporate giant and small-town farmer isn't always a harmonious one. Joel Salatin of Polyface Farm in Swoope, Va., a star of "The Omnivore's Dilemma," started selling to Chipotle last year. Together, they have worked through a number of glitches big and small. One involved making sure that Salatin's meat stayed cold on the trip from farm to restaurant kitchen. Chipotle had an internal policy of not receiving any product in a nonrefrigerated truck. But Salatin, who sells mostly to individuals and local restaurants, had been relying on a fleet of Coleman coolers packed with ice. "I wasn't about to spend $40,000 on a truck just to see if we can dance with Chipotle," says Salatin. In the end, Chipotle supplied him with temperature strips, which show the range of temperatures at which the meat has been kept since leaving the plant. "Every time we had a hurdle like this, they basically duked it out internally and didn't involve us in the fray," says Salatin, who has broken off relationships with other large companies over similar issues.

Chipotle does buy meat from large processors as well. Tyson, which banned the use of most antibiotics in its chickens last year, created a naturally raised operation just for Chipotle. Chickens destined for the restaurants are raised separately from the rest of its stock by 100 growers in southwest Arkansas. Fed an all-vegetarian diet and never given antibiotics, the birds are allowed more space than conventionally raised hens to move about. The large suppliers aren't convinced that naturally raised is better. "It costs more to raise chickens this way, because of the higher cost of feed and the additional measures we take to ensure the health of the birds," says Tyson's Paul Rossi. David Warner, spokesman for the National Pork Producers Council, calls naturally raised products a niche market incapable of meeting rising global demand for meat. But to Ells and his colleagues at Chipotle, the company is improving America's food chain, one small step at a time.

© 2008