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When President Donald Trump threatened tariffs on Mexican imports, many in the food industry feared disruptions to their supply chains.
But Chipotle (CMG-0.57%) apparently didn’t flinch. The casual dining giant had spent the previous seven years diversifying its avocado supply to reduce its dependence on Mexico, which accounts for about 90% of U.S. avocado imports.
“We started thinking, ‘wouldn’t it be great if we had access to avocados all year-round from different countries of origin?’” said Carlos Londono, Chipotle’s head of supply chain, in an interview with the Wall Street Journal (NWSA+0.71%).
While about half of Chipotle’s avocados still come from Mexico today, other countries including Colombia, Peru, Brazil, and Guatemala are also part of the company’s sourcing roster. Central America is on its radar for future expansion.
Thanks to its global search for avocados, Chipotle sources nearly 132 million pounds of avocados annually – roughly 5% of the total avocados used across the U.S. The strategy ensures a steady supply to the company’s 3,700 U.S. locations, especially given the limits of local production. However, since avocados ripen differently depending on the region, Chipotle must carefully manage its supply chain to meet its taste standards. One thing is for certain: The company won’t send the avocados back.
California remains a key U.S. location for Chipotle’s avocado needs, and the company is also exploring domestic avocado farming, particularly in Florida, to further reduce its reliance on imports.
The threat of tariffs is not the only disruption Chipotle has faced in recent years, though it’s one of the most pressing. In 2020, the pandemic exacerbated supply chain vulnerabilities when the U.S. imposed temporary restrictions on nonessential travel across the Mexico border. This raised concerns of avocado shortages, and at one point, Chipotle faced soaring avocado prices – sometimes more than doubling the usual cost per case. Chipotle managed, largely because of its diverse sourcing network.
Chipotle’s global avocado strategy highlights the importance of a single ingredient in its operations. Despite challenges like trade disruptions and inflation, the company has delivered strong earnings, even in the face of price hikes. In Jan., Chipotle announced a 2% menu price increase to help offset the bite of inflation.