Socially Responsible Investing: McDonald's Vs. Chipotle
I'm excited for the official posting of my TEDx Talk from November 14, but in the meantime I thought I would provide some details and examples to get you all intrigued about socially responsible investing (SRI). If you'd like a refresher on the subject matter, please click here.
In the meantime, many of you have said that SRI is a novel concept but does it really work? What does this look like in the form of a stock? I like using food companies to provide an example because they are very easy to understand. In this case, I talk about a stock everyone knows: McDonald's (MCD) and its foil: Chipotle Mexican Grill (CMG). For those of you unfamiliar with this chain, it is a sustainability-focused, GMO-free fast-casual restaurant chain that incidentally was a subsidiary of McDonald's from 1998 to 2006. At the time, McDonald's said they were dropping Chipotle to focus on improving its core restaurants. In reality, McDonald’s management was frustrated that Chipotle would not adhere to its franchise and general restaurant practices – namely when it came to food preparation. They just wanted a way to compete with Taco Bell.
McDonald's originally invested $360 million to buy Chipotle and ended up divesting the company for $1.5 billion. A nice profit right? Well today Chipotle on its own is now valued at $23.1 billion – that’s nearly a third of the value of McDonald's.
However, at a third of its value, Chipotle’s stock is just shy of $750 per share, while McDonald's can’t break above $100. Why? Consumers believe in the values Chipotle is conveying and are willing to shell out $9 for a burrito. Have you seen McDonald's recent campaign to be “more transparent” about their food? They didn’t understand why this campaign wasn’t working. The point was people already know what goes into your food, and they don’t like it. In the last few months, McDonald's made a few baby steps in the right direction, announcing it would stop feeding its chickens antibiotic grains and growth hormones. Not a solution, but it’s a start.
Consumers are putting their dollars into the socially superior company, so imagine what would happen if investors did the same? You have the ability and the responsibility to align your retirement savings with companies that reflect your values. If you really like a company, buy their stock, if you don’t like what they’re doing, boycott them AND tell shareholders to sell the stock.
Disclosure: None.
No offense but sri is as old as the hills. I first heard of it back in the 80's.
Secondly I don't buy it as an investment theme- I am sure the Ted crowd loved the idea.
.Making money should never be hamstrung by altruism.
Money is money. Being a boy scout is quite another thing.I write a check to my favorite charity every year.That's it. Separate and clean.
I don't care that people want to put garbage in their mouths.it's their mouths. They want to kill themselves by the forkful,so be it.
MCD is just plain bad food and always will be but they have a huge market of eager eatesr who love fatty cheap food that makes them feel full for less money than just about anywhere else except maybe a 7Eleven.
My local MCD is always busy- the drive in window full of cheap American cars and college kids, painters, leaf blowers- you get the picture
CMG spoonfeeds their customer a story they want to believe. The food is slightly better but nothing even close to healthy eating.
Th famous Burrito is loaded with fat and salt and calories.Management there is WORSE than MCD because they give a false sense of health. Very covert and unethical if you want to go there with SRI type thinking.
But 18-35 yr old guys have an addiction to the burrito. They drag their girlfriends along who get something they think is healthy because theyre too lazy to read ingredients.
If you want to eat healthy, you have ONE choice. Eat at home and get really anal about what you feed yourself. It takes discipline and commitment. Good luck with that
Gluttony always wins out- the stomach always over-rules the brain. Yes the flesh is indeed weak.
I am long MCD and CMG and many of the fast food casual group.Cheers Carol
I have not heard this term before, but it's a very interesting concept. More investors should adopt this method.