Chipotle just went GMO-free — a savvy move to impress Millennials

Chipotle co-CEO Steve Ells has argued Millennials are willing to pay “a little more for something they recognize as better.”

That might be true. But what about the rest of Americans? Research indicates not all groups are willing to open their wallets wider for healthier foods.

Chipotle (CMG) this week made good on a 2013 promise to remove all genetically modified organism (GMO) ingredients from the food it serves in its restaurants. The decision can be viewed as a bet on the younger generations in America.

The Mexican food purveyor says it was the first national restaurant company to voluntarily disclose GMO ingredients in its foods in March 2013. But the company isn’t the only leader when it comes to talking about GMOs. That same month, grocer Whole Foods (WFM) announced it would require all U.S. and Canadian stores to label products that contain GMOs. That label transparency requirement for suppliers goes into effect by 2018. GMO crops, which are common among corn and soybeans, contain altered DNA that make plans more resistant to pests. Over 90% of corn and soybeans grown in this country came from GMO strains in 2014, according to data from the USDA National Agricultural Statistics Service.

Consumers are paying attention. Foods without GMOs are considered “very important” to 43% of those surveyed across 60 nations by Nielsen in a recent study. That outranked concerns about lower calories, artificial flavors, and those looking for gluten-free or low sodium options. But only 33% are more willing to pay a premium for non-GMO products, a 10 percentage point difference, Nielsen said.

Research firm NPD Group observed the same trends. NPD found that while over half of U.S. consumers expressed some concern about GMOs, 67% of primary grocery shoppers were not willing to pay a higher price for non-GMO foods.

“Since more consumers over the last few years have been expressing concerns about GMOs, it’s time to have a dialog with shoppers about what they are and what roles they play in the food chain,” said Darren Seifer, a NPD food and beverage industry analyst.

It’s important to add that a generational split is occurring when it comes to changing attitudes about healthy food. Younger consumers are more willing to pay a premium price for foods they believe have healthy attributes. Nielsen said 29% of Millennials are “very willing” to pay a premium for healthy foods. That figure is 26% for Generation X, and 23% for Baby Boomers.

Meanwhile, Chipotle has won praise from diners and investors for its focus on better quality ingredients, resulting in strong sales and traffic at the company’s restaurants, while fast-food purveyors struggle with weaker demand. The rise of Chipotle and other so-called fast-casual restaurant concepts has signaled to many observers a change in how U.S. consumers view their food and beverage choices. Chipotle believes consumers today, in particular Millennials, are more concerned about how their food is raised and prepared than previous generations.

That explains why Chipotle will often make business decisions that hurt profit in the short term, but help maintain a pristine image among younger diners. For example, it faced a pork shortage at hundreds of restaurants after suspending a supplier that had violated its standards. The company’s well-known “Scarecrow” ad painted a gloomy picture of the food manufacturing process — and highlighted how Chipotle aims to be different with fresh ingredients.

On Monday, Chipotle took another step forward. It said it met its goal of using only non-GMO ingredients to make all of the food in its U.S. restaurants, including its Asian concept ShopHouse Southeast Asian Kitchen. The company is also actively working on new recipes for its tortillas, which are the only food item left to use any artificial additives. Chipotle now uses just 46 ingredients for its entire menu (excluding tortillas). A typical Mexican fast food restaurant uses well over 200.

“There is a lot of debate about genetically modified foods,” said Ells. “Though many countries have already restricted or banned the use of GMO crops, it’s clear that a lot of research is still needed before we can truly understand all of the implications of widespread GMO cultivation and consumption. While that debate continues, we decided to move to non-GMO ingredients.”

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