Chipotle Invests in ESG Startups to Attract Gen Z

Chipotle is investing in startups that prioritise sustainability and local food, to appeal to younger consumers.

Chipotle's venture capital arm, Cultivate Next, recently disclosed its investment in two food companies that prioritise environmental, social, and governance (ESG) considerations. The move is aimed at meeting the needs and concerns of its millennial and Generation Z target markets.

Chipotle's investment in Local Line will also result in the company sourcing food from the platform. Local Line helps streamline the supply chain for regional food producers and buyers.

"Local Line is a great example of our commitment to assisting local farmers and promoting their growth to ensure the sustainability of real food," said Curt Garner, Chipotle's Chief Technology Officer.

He added that technology could be used to help unlock the potential of the U.S. farming industry and improve access to locally sourced produce. The second startup that Chipotle has invested in is Zero Acre Farms, which aims to produce healthier and more sustainable cooking oils.

Garner stated that Zero Acre Farms is redefining cooking oil in the same way that Chipotle changed the perception of fast food nearly 30 years ago. Garner added that Zero Acre Farms' healthier and more environmentally friendly offerings align with Chipotle's sustainability objectives.

According to Nate Lawton, the Vice President of New Ventures at Chipotle, catering to the ESG trends is crucial to satisfying the needs of the restaurant's target demographic, which consists of Gen Z and millennials. To appeal to these consumers, it is important to address sustainability and other ESG issues.

It is worth noting that Gen Z is the least inclined of all generations to make restaurant purchases. However, these consumers are disproportionately engaged with digital media, making them a valuable demographic. It is also crucial to secure the loyalty of these young consumers as they mature and begin to spend more, as this can contribute to long-term success.

PYMNTS conducted a study called "Digital Economy Payments: Consumers Buy Into Food Bargains," which revealed that as of July, only 50% of Gen Z had made a restaurant purchase in the preceding 30 days, which is a decline from 59% the previous month. Conversely, millennials are one of the most frequent restaurant-goers, with 72% of them having made a restaurant purchase during the same period, up from 71%.

Both Gen Z and millennials are highly connected from a technological standpoint. According to "The ConnectedEconomy™ Monthly Series: Meet the Zillennials," which relied on a November survey of nearly 4,000 U.S. consumers, 69% of Gen Z and 71% of millennials digitally engage with restaurants. This is considerably higher than the 54% of Generation X consumers and the 30% of baby boomers and seniors who do the same.

As such, given the value that these consumers represent for brands looking to increase omnichannel sales and develop a long-term future, it is critical for restaurants like Chipotle to consider what motivates their spending.

Alongside these ESG investments, Chipotle has been introducing menu items such as lifestyle bowls to cater to young consumers' demand for health-oriented options. The company also launched a new restaurant concept, Farmesa, which targets consumers' desire for fresher ingredients.

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Source: PYMNTS