A Recipe for Profitability: Supply Chain Transparency Can Save Dwindling Restaurant Sales

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Chipotle's Secret Salsa: Supply Chain Transparency

If you want to understand what's so alluring about the fast-casual movement, start by visiting a Chipotle restaurant at lunchtime. Notice the scores of students, professionals, and everyone in between line up patiently, some visibly excited about the burrito bowl they’ve been waiting for since that morning. It’s not just the tasty and affordable food that makes Chipotle such a hotspot, but the chain’s emphasis on healthy options and transparency when it comes to food sources. People feel good about eating at Chipotle not only because they can get their burrito fix—it’s also because they can trust that their food is sustainably sourced. They trust the food, so they trust the brand, and that pays the bills: the first quarter of 2015 marked Chipotle’s fifth in a row of year on year growth. With many fast food chains posting record losses in recent months, it is clear that restaurants like Chipotle have tapped into the public’s shifting priorities.

Focus on honesty and supply chain transparency has been Chipotle’s “secret salsa” to avoiding scandal and fostering a loyal customer base. Just last month, the chain announced that it would discontinue use of GMO corn; they also boast their use of local, organic ingredients when possible. Now that the fast-casual movement has gotten some steam behind it, other companies are beginning to implement similar tactics. Last week, Target announced that it will begin to give priority to fresher, healthier foods over the currently ubiquitous packaged food products from well-known brands such as Kraft and Kellogg. But it’s not all about health (no one can claim a Chipotle Burrito will help you lose weight). Consumers are looking for food they can trust – food they feel good about eating, both in taste and origin. If food producers want to build a strong relationship with consumers, they will need to shift with the times, rather than fight against them. That means being taking a closer look at and, if necessary, changing their supply chains.

No More Horsing Around

This increasing importance of transparent food production marks a paradigm shift for many food suppliers. In the past, traceability has not been prioritized by major food distributors because of the high cost and difficulty of tracing certain food items. Typically, food supply chains are exhaustive and chaotic, making them incredibly difficult to track; it’s also easy for contaminated or adulterated products to make their way to American consumers. Recent scandals, such as the expired meat distributed by Shanghai Husi Food Co in 2012, or the 2013 horsemeat scandal in Europe, have brought the importance of transparency to the forefront of the American consciousness. In a recent study, 63% of consumers said that scandals such as these have damaged their trust in the food industry; 83% expressed their desire for increased transparency. The emphasis on open and healthier options means that, in order for food distributors to succeed going forward, spending money on improving transparency and visibility will be necessary.

Many distributors leave it up to the FDA to test food safety. However, with the global food market expanding, it has become nearly impossible for the FDA to test everything that comes into the country. The amount of food the US imports has  spiked considerably in recent years, reaching almost 70 million tons of imported food items in 2014 – up from around 30 million in the early 1990s. Despite the rapid increase, the FDA is only able to examine about 2% of those imports, and has no plans to improve due to a lack of funding. Many suppliers are vying for “supply chain visibility technologies”, which will help them track their food and increase transparency. RFID chips, Global Data Synchronization Networks, and specialized product codes could help track food products and help suppliers ensure that the food they sell is up to standard. However, none of these technologies are mandated by law. While the FDA and the USDA have certain laws in place that require distributors to reveal their product origin upon request consumers do not have access to this information. Many large food corporations have expressed their opposition to such laws, claiming that the law violated their right to free speech.

A Fresh Look

Despite widespread industry opposition the food consumption climate is changing, and many food suppliers are deciding to change with it. McDonald’s response has been to  implement the “Our Food. Your Questions” program, employing Mythbusters’ Grant Imahara to explain the components of the food chain’s menu. Through helping customers understand where their food is coming from and why, corporations can ease worries and improve brand trust in the rapidly changing world of food consumption. More than good taste, suppliers must cultivate good faith. In addition to improving image, deeper visibility into supply chain allows for better procurement decisions, a focus on innovation, and the ability to boost efficiency and reduce waste within the supply chain. And while a detailed look into a supply chain can seem costly, significant returns are seen in reducing inefficiencies and building consumer trust and loyalty.

The success of Chipotle and other adopters of transparent food supply chains present a clear case study: supply chain visibility holds weight with the modern American diner. As consumers clamor for more knowledge of their dinner’s provenance, new technologies will continue to enable access to that information. Better to invest in trust now than risk rebuilding it later.

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