Chipotle Woos Gen Z With Investments in ESG-Focused Startups

Chipotle’s venture fund is backing startups focused on local food and sustainability, courting young consumers.

Cultivate Next, the arm of the fast-casual giant that invests in emerging companies, announced Wednesday (March 22) in a press release emailed to PYMNTS that it has invested in two food companies with an eye toward environmental, social and governance (ESG) concerns. These moves come as Chipotle Mexican Grill increasingly seeks to meet the demands and address the concerns of its Generation Z and millennial target demographic.

One of the two startups, Local Line, helps digitize the supply chain for regional food producers and buyers. With this investment, Chipotle will also procure food from the platform.

“Local Line exemplifies our mission to support local farmers and help grow their businesses so we can ensure the future of real food,” Chipotle Chief Technology Officer Curt Garner said in the release. “Together we can leverage tech to unlock the potential of the U.S. farming industry and increase access to locally sourced produce.”

The other company, Zero Acre Farms, aims to produce healthier and more sustainable cooking oils.

“Similar to the way Chipotle altered the perception of fast food nearly 30 years ago, Zero Acre Farms is redefining cooking oil with healthier and more environmentally friendly offerings,” Garner stated.

Certainly, focusing on ESG trends can be key to meeting the demands of Chipotle’s “target demographic, Gen Z and millennials,” as Nate Lawton, vice president of new ventures, described the restaurant’s customer base in an interview with PYMNTS earlier this month. To reach these consumers, it is key to consider issues of sustainability and other ESG concerns.

Notably, Gen Z is the least likely of all generations to make restaurant purchases to begin with, but these consumers are disproportionately digitally engaged, making them a valuable demographic. Additionally, securing these young consumers’ loyalty can be key to long-term success, as they age up and start to spend more.

Research from PYMNTS’ study “Digital Economy Payments: Consumers Buy Into Food Bargains” found that in July, the most recent month on record, only 50% of Gen Z had made a restaurant purchase in the previous 30 days, down from 59% the month before. Millennials, meanwhile, are among restaurants’ best customers, with 72% having made a restaurant purchase in the same period, up from 71%.

Both groups are highly connected from a tech standpoint. PYMNTS research found that 69% of the Gen Z population and 71% of millennials engage digitally with restaurants, according to data from “The ConnectedEconomy™ Monthly Series: Meet the Zillennials,” which drew from a November survey of nearly 4,000 U.S. consumers. These shares are far higher than the 54% of Generation X consumers and 30% of baby boomers and seniors who do the same.

Consequently, given the value that these consumers offer for brands looking to drive omnichannel sales and build a long-term future, it is key for restaurants such as Chipotle to consider the factors motivating their spending.

In addition to these ESG investments, Chipotle has also been launching menu items such as lifestyle bowls to cater to young consumers’ demand for wellness offerings and launched a new restaurant concept, Farmesa, aiming to target the desire for fresher ingredients.