A Fast Food “F”

Just some thoughts today about a report card:

From: “Chain Reaction: How Top Restaurants Rate On Reducing Use of Antibiotics In Their Meat Supply”

Where are we going? To fast food tradeoffs.

Animal Welfare Decisions

Recognized as a social responsibility, a commitment to cage-free eggs, to the elimination of pigs’ gestation crates and to minimal use of antibiotics in meat and poultry is good business for Chipotle and Panera. Taco Bell though has a different outlook.

One problem is an inadequate supply chain. Chipotle was willing to remove pork from its menus and see its bottom line suffer when its producers did not achieve its welfare standards. But it took six months for Chipotle to get the meat it wanted. For cage free eggs also, it will take years to have enough. Maybe Taco Bell is waiting for the supply side to expand.

A second supply chain challenge is cost. Occupying the lower rungs on the fast food price ladder, Taco Bell has to keep costs low. Any switch to less efficient more responsible food production would create price pressure. With young, mostly male customers, Taco Bell is catering to a group that cares more about price and less about animal welfare.

Our Bottom Line: Demand Elasticity

An economist would suggest that the cost of animal welfare takes restaurants to demand elasticity. When diners care most about price, they are displaying a demand elasticity that makes them especially sensitive to an price increase. Correspondingly, when price goes down, their willingness to buy more “stretches” like an elastic band.

While the Taco Bell customer has more of an elastic response to price, the Chipotle diner does not. As a result, Chipotle can raise prices when its meat and poultry costs increase from social responsibility. But the world’s Taco Bells have more of a tradeoff.

As a result, they get an “F” on their animal welfare report card.