Chipotle increases menu prices by 2%

NORTH AMERICA – Multinational fast casual chain Chipotle has revealed it is increasing prices in the US and Canada by 2% to alleviate the effects of inflation.

Laurie Schalow, Chipotle’s Chief Corporate Affairs Officer, noted that this is first time the company has increased prices in over a year.

According to William Blair analyst Sharon Zackfia, these increases range from 1.4% in Washington, D.C., to 2.7% in Atlanta. 

Previously, Chipotle implemented a price hike in California in April 2023 to address a 20% wage increase and introduced a 3% rise in late 2023.

Looking ahead, another 3% price adjustment is planned for early 2024 to offset anticipated low single-digit food cost inflation, Zackfia added. 

Despite the price hikes, consumer traffic is expected to remain steady. During the third quarter, Chipotle experienced positive transaction growth each month, a trend that extended into October.

Executives noted during the latest earnings call that the fast-casual segment continues to attract consumers prioritizing quality, even with higher entree prices.

Competitors like Cava and Sweetgreen also reported increased traffic last quarter, reflecting strong demand in the category. 

Chipotle’s Q3 revenue grew 13% year-over-year to $2.8 billion, driven by 6% comparable sales, 3% transaction growth, and store expansion, according to CEO Scott Boatwright.

The launch of the limited-time Smoked Brisket in September has bolstered transactions and spending into the fourth quarter.

Zackfia predicts another strong performance in 2024, with modest traffic growth, margin improvements, and reinvestments in consistent portion sizes. 

CFO Adam Rymer explained that the latest price increase was necessary due to inflation affecting key ingredients like avocados and dairy, as well as increased ingredient usage to ensure consistent portions.

Earlier this year, the company faced customer complaints about irregular food portions, prompting operational changes. 

To manage costs and improve efficiency, Chipotle is prioritizing innovation and operational enhancements.

Initiatives include adding expeditors to accelerate order processing during peak hours and testing new technologies like an automated digital makeline from Hyphen, an avocado cutting robot, and a produce slicer.

Additionally, the company is introducing a dual-sided grill, or “plancha,” to enhance cooking speed and consistency.

These efforts reflect Chipotle’s focus on balancing rising costs with customer satisfaction, positioning the brand for continued growth in the competitive fast-casual market.

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