Chipotle Fires Fresh Salvo in GMO Battle

NEW YORK (TheStreet) - If you haven't seen the trailer yet for Chipotle Mexican Grill's (CMG) new "Farmed and Dangerous" mini-series, it's a must see.

The Denver-based burrito chain announced on Monday that it was launching the satirical comedy series via Hulu and Hulu Plus on Feb. 17. The series, which was produced by New York-based Piro, "explores the world of industrial agriculture in America." And judging from the comments when doing a simple search on Twitter (TWTR) under hashtag #farmedanddangerous, viewers are getting pumped.

This four-episode series is sure to be filled with suspense and plenty of entertainment, all while attempting to show Chipotle's view on sustainable agriculture and against genetically modified foods.

The marketing tactic heats up the battle over genetically modified foods, with companies like Chipotle, Hains Celestial (HAIN) and Whole Foods Market (WFM) on one side of the GMO battle fighting against them, while companies like DuPont (DD) and Monsanto (MON) are spending millions opposing legislative proposals in a handful of states that would require GMO-labeling of foods.

Last year, Chipotle became the first national restaurant company to voluntarily disclose the use of GMOs in its food, and the first to announce plans to eliminate GMOs from the ingredients it uses at its 1,550 restaurants, according to the release.

"Much of our marketing is aimed at making consumers more curious about where their food comes from and how it is prepared," Mark Crumpacker, chief marketing and development officer at Chipotle, said in a release. "By making complex issues about food production more understandable -- even entertaining -- we are reaching people who have not typically been tuned into these types of issues."

The show, which does not have any explicit Chipotle branding, "satirizes the lengths to which corporate agribusiness and its image-makers go to create a positive image of industrial agriculture," the release says.

The season, apparently the first, focuses on the introduction of PetroPellet, a new petroleum-based animal feed created by fictional industrial giant Animoil, Chipotle says.

"PetroPellet promises to reduce industrial agriculture's dependence on oil by eliminating the need to grow, irrigate, fertilize and transport the vast amount of feed needed to raise livestock on factory farms. Before its new feed formula can forever reshape industrial agriculture, Animoil's plans go awry when a revealing security video goes viral sending Animoil and their spin master, Buck Marshall (Ray Wise [of] 'Twin Peaks,' 'Mad Men' [and] '24') of the Industrial Food Image Bureau (IFIB), into damage control mode," it says.

"Farmed and Dangerous" comes on the heels of two animated short films from Chipotle -- 2013's "Scarecrow" and 2011's "Back to the Start" -- both of which helped spark conversations about agriculture and industrial food production in entertaining ways, it says.

On Tuesday, Steve Ells, Chipotle's founder, chairman and co-CEO, took to the Huffington Post today to further the company's position and speak out against GMOs.

Some excerpts of Ells' op-ed piece below:

"We knew at the time that showing the world which of our menu items is likely to contain GMOs and working to eliminate these same ingredients would present some hurdles. But in the end, these were easy decisions to make."

"We believe that everyone, including Chipotle customers, should have access to food made from ingredients produced in a way that preserves farms and rural communities for future generations. And we know that without healthy soil, you can't produce healthy food. Given the possibility that widespread cultivation and consumption of genetically modified ingredients could compromise these things, we feel a responsibility to our customers to seek out non-GMO alternatives whenever possible," Ells writes. "This decision has been portrayed as controversial."

"The argument that GMOs are an improvement over natural seeds because they were produced by scientists is a convenient one. After all, most reasonable people agree that science has produced some astounding advances. But genetically modified foods hold out promises that are at best untested, and at worst unrealistic."

As part of the campaign, the company also on Tuesday put out a full-page spread in the New York Times supposedly as an "open letter" from IFIB's Buck Marshall, in which he tells readers:

"[If] sustainable agriculture is so 'sustainable,' why are family farms disappearing at the rate of more than 300 per week? If we aren't careful, the sustainability crowd will regulate away our right to cheap food. Take GMO labeling for example. We all know labels are hurtful. What would you do if your child's elementary school teacher labeled your child 'dumb? You wouldn't stand for it and neither did my parents. Putting labels on food is cruel and makes some foods look harmful even though they may not be... So the next time someone tries to warn you about where your food comes from, ask yourself whose side are they really on."

The IFIB's tag line in the letter is "Making food affordable at any cost."

The marketing tactic comes just as Chipotle is to report fourth-quarter earnings on Jan. 30. Analysts, according to Thomson Reuters, expect Chipotle to report earnings of $2.53 a share, up 30% from the year-earlier quarter. Revenue is expected to rise 18% to $826 million.

Deutsche Bank analyst Jason West rates the company at "hold," based on the stock's expensive valuation at 38x the next 12 months price-to-earnings ratio versus a five-year average of 31x, he writes.

"Thus, the bar remains reasonably high amidst a challenging backdrop," West writes in a note on Tuesday. "That said, we expect CMG to (again) be one of the few chains to maintain recent comp momentum,as SSS are more driven by share gains, execution and growing awareness than general retail traffic."

As altruistic as the move to a GMO-free menu is, it's assumed to place pressure on food costs and part of the reason that Wall Street has been expecting price increases to Chipotle's menu, which has so far been deferred. Once again, the timing of Chipotle's menu price raise will be a central question during the company's earnings conference call.

Chipotle said at the ICR XChange conference earlier this month that it is "likely" to raise menu prices this year, but not before the second half of the year and "it is not set in stone," West writes.

Chipotle's move to a GMO-free menu "has been lower than expected, which may suggest management now feels less need to raise prices," West writes, adding that he expects a 4% price increase anyway given rising costs of commodities including beef, cheese and produce, general wage inflation and rising health care costs.

Chipotle shares were rising 1.1% to $494.46 on Tuesday.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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