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Chipotle Raises Prices for First Time in Years

Chipotle Raises Prices for First Time in Years

Your sofritas burrito is about to get a whole lot more expensive starting in June.

Your Chipotle burrito lunch is about to take a bit more of a bite out of your wallet. Chipotle has announced that, starting in June, it will be raising its prices by an as-yet undetermined amount (probably in the mid-single digit percentage range) to offset the rising cost of raw ingredients and suppliers like steak, avocado, and certain cheeses. An estimated five percent increase would raise the cost of a chicken burrito in New York from $7.81 to $8.20.

Besides the recent price increase, Check Out The 10 Things You Didn't Know About Chipotle (Slideshow)

“Food costs are way up,” said Chris Arnold, director of communications at Chipotle. “We have held the line on raising prices for three years (with no increases) but we have to account for the higher food costs. Even with the increase, our prices will remain competitive with others in spite of our using better quality ingredients than others do."

Joanna Fantozzi is an Associate Editor with The Daily Meal. Follow her on Twitter @JoannaFantozzi


Chipotle just raised its prices and burrito-lovers are mad

We know guac is extra, but now it’s super extra…. That's because approximately 440 Chipotle restaurants quietly just raised their prices by about 5 percent. So what does that mean for you?

Let's say you live in Washington, DC and you want to get your usual not-so-filling-so-I-don't-fall-asleep at my desk chicken burrito bowl for lunch. You'll be paying an extra .34 each time, according to Business Insider. Order that five times a week for a year and that's $88 extra — without any guac! In New York City, home of the most expensive Chipotle in the U.S. according to BI, the price of a burrito has increased by .43!

While company spokesperson Chris Arnold told Fortune that Chipotle had already gone on the record to say they it was considering raising prices in select markets, many customers felt angered by the extra cost.

When you notice Chipotle raised their prices and guac still isn't free pic.twitter.com/HYSfi4SbRb

— Ty (@TylerTFrank) April 19, 2017

How dare Chipotle raise their prices without consulting me first? My chicken bowl went from $7.88 to $8.26. Is it even worth it?!

— Siren (@SiaSunshinee) April 18, 2017

Chipotle raising prices by 5%. This is worse than gas prices going up.

— Alex Hanson (@AlexHanson21) April 18, 2017

The increase is said to help "offset wage and food inflation." This comes after the company suffered from a food safety crisis due to E. Coli outbreaks in many locations across the country in 2015. After working hard to get its customers’ trust back, the company points out that you have to pay for better ingredients. "Even with the new prices, our pricing remains very competitive, particularly if you factor in our ingredient quality," Arnold said.

On Twitter, the Chipotle social media team is back at it, fielding complaints from angry customers which feels a little reminiscent of the food safety crisis days. “We have whole, premium ingredients and want to keep the prices as low as possible,” one tweet explains.

“Unfortunately we have to increase prices as food in general gets more expensive,” another says.

But still, some customers say the food is so good, they don’t mind spending a little extra:

@ChipotleTweets I love Chipotle and I will pay any price for a chorizo burrito

— Andrew Michael (@AndrewNocheck) April 17, 2017

@ChipotleTweets I'll still pay extra even without my extra tax green. Gimme the guac

— Carly Miktuk (@carlyyymiktuk) April 18, 2017

How Was Chipotle's Fourth Quarter Performance?

Chipotle's overall revenue was up almost 12% in the fourth quarter to $1.6 billion while comparable restaurant sales advanced about 6%. The opening of 61 new restaurants contributed to the growth. While this performance was far from some of the blowout quarters we've seen from Chipotle in the past, given the operating environment, it was a solid quarter.

Not surprisingly Chipotle's digital sales played a heroic role. They were up 177% and accounted for almost half of total revenue. The rising popularity of the convenient Chipotlane drive-throughs was once again a big driver of digital growth. The digital contribution will likely subside over time, but it nevertheless confirms the power of Chipotle's digital ordering alternatives and the loyalty of its customer following. Also encouraging was the fact that Chipotle's restaurant-level operating margin expanded to 19.5% during the quarter.

Given the ongoing uncertainty around the pandemic, economy management refrained from providing 2021 guidance. It did, however, note plans to open approximately 200 new restaurants this year, an ambitious agenda that reflects confidence in an evolving business model. If management is able to meet this expansion target it would bring Chipotle's footprint to nearly 3,000 locations.


Chipotle just added its first new meat to the menu in 3 years

There's a new Chipotle meat in town — and it's the first new protein the chain has introduced in three years.

Carne asada, a marinated steak, will join the restaurant's menu on Thursday, Sept. 19. Unlike Chipotle's current steak offering which is cubed, carne asada is sliced. Chipotle's version is seasoned with fresh lime juice, chopped cilantro and a blend of signature spices.

Since the carne asada marinade is free of sugar and select preservatives, the meat is also officially approved for Paleo and Whole30 diets.

Fans of the popular Mexican restaurant will be able to order carne asada in a burrito, burrito bowl, salad or taco. It will be available at restaurants nationwide, but Chipotle would not confirm for how long.

This marks the first time Chipotle has added a new meat to its menu since chorizo sausage made its national debut in October 2016. It was temporarily brought back for a limited time in September 2018.

Chicken, pork and some type of beef have all been on the Chipotle menu since the very beginning. Barbacoa, the chain's shredded beef offering, was introduced over 20 years ago. The brand also made waves when it introduced its first vegan protein, sofritas (a savory crumbled tofu mixed with spices), in 2013.

Related

Food Chipotle made a big change to its guacamole — and people are upset

Chipotle first tested carne asada in Cincinnati, Ohio, and Fresno, California, and decided to expand its reach after receiving overwhelmingly positive feedback on the sliced steak offering.

Lately, Chipotle has also made waves for some less desirable reasons.

Just last week, Chipotle made headlines when fans took to Twitter to share photos of less-than-stellar looking guacamole being served at several locations.

The popular chain's guac is usually bright green (thanks to fresh avocados and a hearty squeeze of lime juice), so many fans were curious if the recipe had changed when they came across brown, stringy guacamole filled with unripe chunks.

As it turns out, Chipotle didn't change its recipe, but it may be dealing with some less-than-ideal avocados.

@ChipotleTweets how is it even legal to sell this guac like this? Location on N Charles, Baltimore has been nothing but a disappointment lately pic.twitter.com/UzjsdjhHU1

— Eric Suris (@ejsuris) September 10, 2019

Chipotle's Chief Reputation Officer Laurie Schalow told TODAY that the guac's recent appearance was due to a change of its avocado supply as they switch between sources during peak growing seasons in different locations. Schalow said that many locations will start using mostly Mexican-grown avocados by the end of this month.

With that mystery solved and a new meat on the menu, this is a good week to be a Chipotle fan.


Chipotle Raises its Prices Nationwide

Chipotle completed the final phase of its systemwide price hike, spokesman Chris Arnold confirmed to CNBC Wednesday. The fast casual chain increased prices 5–7 percent in select markets in April and November of 2017, and extended those upticks to the remaining 45 percent of stores this week.

Before raising a few months ago, Chipotle had not changed its prices since mid-2014—before the company’s E. coli crisis. The changes come as Chipotle faces labor and food inflation across the country, especially in regards to avocados.

According to CNBC, Baird analyst David Tarantino told investors in a note Wednesday that "The move to implement pricing in the balance of the base was not entirely unexpected, as management previously had signaled willingness to complete the final wave of pricing actions in early Q1, after evaluating the customer reaction to the mid-November hikes."

In the third quarter, food costs were 35 percent of revenue, which was actually a decrease of 10 basis points compared to the prior-year period. Increasing menu prices helped ease some of the burden, Chipotle said.

“The benefit of the menu price increases taken in select restaurants during the second quarter of 2017 and decreased paper cost and usage were offset by higher avocado and beef prices, as well as steak making up a higher portion of our product mix compared to the third quarter of 2016,” the company noted at the time.

For the nine months trailing September 30, food costs were 34.4 percent of revenue, a decrease of 50 basis points, year-over-year.

“Cost savings from bringing the preparation of lettuce and bell peppers back into our restaurants after using pre-cut produce during portions of 2016, reduced testing and waste costs, and the benefit of the menu price increase that went into effect in select restaurants during the second quarter of 2017 were partially offset by higher avocado prices,” Chipotle said.

This is a transitional period for Chipotle, and it will be worth tracking how customers react to the price hikes. Comparable same-store sales were up just 1 percent in the third quarter.

Chipotle recently revamped its queso recipe in an effort to turn consumer sentiment. Additionally, the company continues to search for a new CEO following the news founder Steve Ells would be shifting to a chairman position.


First-ever SF La Cocina cookbook: Remarkable women, must-have recipes

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San Francisco’s La Cocina is a pioneering incubator kitchen emulated in cities around the world, from Salt Lake City to Auckland. Since it opened in 2005, the Mission District nonprofit has helped 55 working-class food entrepreneurs, primarily immigrant women and women of color, realize their dreams of building a successful food business.

Their recipes — and their inspiring stories — are available for the first time in a cookbook, “We Are La Cocina: Recipes in Pursuit of the American Dream” (Chronicle Books, 287 pages $30). Co-authored by Caleb Zigas and Leticia Landa, the diverse collection features more than 75 recipes by 40-plus thriving alumni of the kitchen incubator, like Alicia Villanueva of Alicia’s Tamales Los Mayas in Hayward, who started by selling her black bean tamales out of a cooler.

Minnie Bell’s Soul Movement went from pop up to a recently renovated permanent stall at Emeryville’s Public Market. (Anda Chu/Bay Area News Group)

There’s also Fernay McPherson, whose soul-satifsying rosemary fried chicken popped up at every barbecue and baptism before she opened Minnie Bell’s Soul Movement in Emeryville. You’ll recognize Reem Assil’s savory lamb pastries from her Arab street corner bakery in Oakland, as well as the chile-laced Cambodian noodle soup from neighbor Nyum Bai’s Nite Yun, a 2019 James Beard semifinalist for Best Chef: West.

Reem Assil joined La Cocina in 2014 and went on to open Oakland’s Reem’s California and Dyafa. Reem’s was recently nominated for a James Beard Award. (Doug Duran/Bay Area News Group)

Even the format of the magenta-covered cookbook is unique. It’s not organized by country or cuisine but rather by the chef-graduate, with stunning National Geographic-like portraits by photographer Eric Wolfinger and profiles by Zigas and Landa, who tell their intimate stories of hope and hard work with beautiful prose. The authors spent countless hours with these women, rolling masa and simmering curries together in La Cocina’s 2,200-square-foot commercial kitchen.

Most entrepreneurs come to La Cocina because of that subsidized kitchen space, which they need to legally sell their food. Here’s how the process works: Backed by a board of directors that includes execs from Wells Fargo and Levi Strauss, La Cocina seeks out predominantly low-income women of color who have the talent and tenacity to make it in the industry but face barriers, especially at a time when 75 percent of food businesses are owned by men.

La Cocina graduate and wholesale business owner Alicia Villaneuva makes 40,000 tamales a month with employees in her Hayward factory. Her tamales are available in 40 Whole Foods markets. (Photo: Eric Wolfinger)

In addition to the affordable kitchen space, La Cocina provides high-level business advice from chefs and mentors, places to sell, and, of course, access to capital. “Graduating” from the program means launching that pop-up, finding distribution for a product or opening that brick-and-mortar. To date, there are more than 30 La Cocina-grown restaurants in the Bay Area.

One very public place for recent graduates to shine — and share the stage with established Bay Area chefs — is at La Cocina’s annual San Francisco Street Food Festival in the Dogpatch neighborhood. Now in its 10th year, the nationally renowned festival is where Binita Pradhan of Bini’s Kitchen sold her first Nepalese momos and Azalina Eusope of Azalina’s, and most recently, Mahila’s, first shared her bold Malaysian curries with San Francisco.


Chipotle Just Raised the Price of Steak and Barbacoa

Chipotle has been on a roll this summer: Carnitas have returned, a new all-natural tortilla is in the works, the quesarito was finally recognized, and burrito delivery has officially rolled out. But there's a bit of a speed bump ahead for burrito lovers, who'll soon have to start coughing up more cash for beef.

If you're a fan of the slow-roasted barbacoa or steak slices, you already pay a premium price at Chipotle locations nationwide. But beginning today, the meat will cost you an additional 4 to 6 percent in all burritos, bowls, tacos, and salads.

The chain's communications director, Chris Arnold, cites "continually rising beef prices" as the cause of the price hike. He also notes to Eater that last year was the first time in three years Chipotle had upped price tags "in spite of persistent food inflation."

I guess there's literally no better time to learn how to get double the burrito for your dollar. (But really, there are legit hacks for getting twice as much of everything in your order.) Because if you've gotta shell out more for that steak, you should get something in return&mdashright?


The Golden Arches (MCD) recently announced that it will raise hourly wages "by an average of 10%" for more than 36,500 employees at more than 660 U.S. restaurants.

"These increases, which have already begun, will be rolled out over the next several months and include shifting the entry level range for crew to at least $11-$17 an hour," the fast food giant said in a statement — adding that shift managers would be paid at least $15 an hour.

The wage increases will not apply to employees at the fast food giant's 13,000+ franchise locations.


Is Chipotle Worse Off Now than After the Outbreaks?

From a customer sentiment perspective, Chipotle is in worse condition today than it was during 2015’s food-safety crisis, according to data mined by UBS analyst Dennis Geiger.

Geiger, backed by the UBS Evidence Lab, broke down customer review scores over the past several years. His findings, along with a downgrade to sell from neutral and a target-price cut to $290 from $345, sent Chipotle’s shares tumbling nearly 5 percent to $308.82 in Thursday (February 1) trading.

“Despite aggressive efforts to improve brand perceptions through a new national advertising campaign and the launch of new products including queso recently, customer review scores have not shown any signs of improvement," Geiger noted, as reported by CNBC.

The data showed that Chipotle’s online review ratings were hovering around 3.80 in March 2010.

The brand’s food-safety issues really hit public conscious in November 2015 when the chain voluntarily closed 43 of its Washington and Oregon locations as health officials investigated an outbreak of E. coli food poisoning. What followed was a 14-state crisis that led to a yearlong sales downturn and erased around half of Chipotle’s market cap.

Geiger’s findings from more than 230,000 Chipotle reviews showed a steady decline from that 3.80 mark through November 2017. There was a brief rebound in March 2016 but the line has gone down ever since.

Geiger said that 37 percent of the more than 1,600 customers polled online by UBS said they frequent Chipotle less often than they used due to food-safety concerns.

“Chipotle's brand perceptions remain challenged and headline risk from potential future incidents remains elevated. As a result, it remains unclear how long it will take for Chipotle brand perception to reach previous levels," CNBC reported Geiger as writing.

There are reasons to believe Chipotle’s issues are more perception than fact driven. Not that the source really changes the bottom line. But there is simply no chain in America that elicits such stock market reaction—and overreaction—from less news.

For example, on January 30, shares dropped about 5 percent as anecdotal reports surfaced on user-generated website iwaspoisoned.com. There were nine individual reports the day before on the site, all from different locations. For some perspective, Panera Bread, a similarly sized fast casual, had six reports on January 29.

And how much of this stems from the, "Well, I did eat at Chipotle, and don't they have food-safety problems" line of thinking? “Supergirl” actor Jeremy Jordan blamed Chipotle in November for an illness on Instagram and the news dropped the chain’s stock as much as 5.9 percent to $263, the lowest mark in almost five years. A report at a Los Angeles store in December plummeted shares nearly 8 percent by noon that day. In both cases, Chipotle said it was looking into the reports but hadn't found links.

And then there was the Sterling, Virginia, incident in July. More than 130 customers fell ill from norovirus-like symptoms. Chipotle said the issue likely stemmed from an employee coming to work sick and not following proper protocol.

When you consider that Chipotle has more than 2,350 restaurants, the reality doesn’t quite line up with the reaction. But that’s the price Chipotle has paid for several years, and Geiger’s info doesn’t show any let-up on the horizon.

Here were the reasons for why people are eating at Chipotle less often than they used to:

  • Concerns about food safety: 37 percent
  • Like other quick-service restaurant better: 22 percent
  • Too expensive: 22 percent
  • Food not as good as before: 18 percent
  • Family don’t want to go: 15 percent
  • Less spending money: 14 percent
  • Restaurants not as clean as before: 12 percent
  • Eating at quick-service restaurants less often: 10 percent
  • Friends do not want to go: 9 percent
  • Food and drinks not healthy: 8 percent
  • Service not as fast as before: 7 percent
  • No new menu items: 6 percent
  • Fewer promotions: 5 percent
  • Don’t like atmosphere: 4 percent
  • Any other reason: 16 percent

There are some interesting numbers here. No. 1, as noted earlier, is kind of an obvious crutch. The expensive note, however, is something worth tracking. Chipotle hiked its prices nationwide in mid-January, completing a process that began earlier in the year when select markets in April and November saw upticks of 5–7 percent. Chipotle rolled the increase out systemwide early in 2018.

Chipotle had to change its price structure to balance rising food costs. Could this offer a small window into what the customer reaction might be?

In general, quick service has been a value war lately, with many brands building offers around the $5 price point and others, like McDonald’s and Taco Bell, competing for $1 bargain hunters. Taco Bell’s Nacho Fries just released at that starting point and McDonald’s said in its January 30 conference call that the $1 $2 $3 Dollar Menu has already fired up sales. Sonic CEO Cliff Hudson, after the chain’s first-quarter review, said: “There is that tension at all times of what is the price point in order to try to drive traffic in this value-sensitive time where competitors are very, very stuck on that—large competitors in particular.” Sonic has a Double Feature bundle meal for $3.99 and recently announced a Soft Pretzel Twist for $1.99.

Chipotle’s menu hasn’t moved much, either in offerings or price points, since it became a household name. Before the recent hike, prices had not changed since mid-2014, before the food-safety crisis. The company said in the third quarter that increasing prices eased some of the commodity burden. In the third quarter, food costs were 35 percent of revenue, which was actually a decrease of 10 basis points compared to the prior-year period. For the nine months trailing September 30, food costs were 34.4 percent of revenue, a decrease of 50 basis points, year-over-year.

Menu wise, Chipotle garnered a lot of attention—in both directions—for its queso release in September. The brand revamped the recipe in December after negative feedback. Chipotle also cut chorizo from its menu in September.

These moves, or lack of, don’t seem to bother most consumers, evidenced by the paltry 6 percent who took issue with the lack of new offerings.

Perhaps a more relevant question is whether customers believe Chipotle is still worth the price tag compared to its competitors. The brand’s ability to leverage local and fresh ingredients has taken a backseat to food-safety reports in recent terms.

“Food safety issues likely gave customers a reason to try a new brand or return to more mature brands. The increasing penetration of fast casual brands and traditional quick service restaurants has likely weighed on Chipotle's efforts to regain lost customers,” Geiger said in the note.

Chipotle reports its fourth-quarter earnings after the bell on February 6. In addition to tracking its recent performance, investors will likely be looking for an update on the chain’s CEO search. Founder Steve Ells announced he was stepping down in November and the board’s search committee would start searching for a new leader “with demonstrated turnaround expertise to help address the challenges facing the company, improve execution, build customer trust, and drive sales.” Along with directors Robin Hickenlooper and Ali Namva, Ells, who is now executive chairman, said he would be part of the search.

Whatever the news might be, expect Wall Street to react swiftly, and harshly—if the news calls for it. In October, the brand’s third-quarter earnings, which showed 1 percent same-store sales growth versus the prior-year period, sent shares nosediving. Extending a year in which they were already down about 14 percent, they plummeted an additional 14.5 percent the day following the report. The nearly 50–point tumble beneath $300 marked the first time since March 2013 Chipotle shares were valued so low.

Again, that kind of magma-hot reaction is reserved for few in foodservice, if any. But that’s simply life as Chipotle knows it these days.


All the junk food you love is pricier this year

You may want to start buying your burritos in bulk. Facing a surge in food costs, the Mexican fast food chain Chipotle has announced plans to boost prices over the next few months.

But the price hikes aren’t confined to burritos: Customers will have to shell out more for fast food and snacks across the board. In a recent research note, Goldman Sachs analysts spotlighted “pricing on the table” as one of the key themes of the first-quarter earning season now coming to a close.

While it should be said that overall US consumer prices have remained remarkably stable in recent years, it’s always interesting to hear why and what consumers are going to be asked to pay more for. In this case, companies offered several quite different explanations for their price hikes—some attributing it to strong consumer demand while others blamed it on rising costs:

Chipotle

Chipotle’s impending price increase, the first in three years, seems to be commodities-based. The chain’s food prices were up 34.5% last quarter in total, with big increases on some of the staples of Chipotle’s famously high-velocity assembly line. Beef prices are up, largely due to a huge drought. And there’s also significant inflation in cheese and avocado prices. Pork might be a concern too.

“With all of this food inflation we have seen so far and expect to continue to see, we’ve decided to increase our menu prices,” explained Chipotle CFO John Hartung on the company’s most recent earnings call. “While we want to remain accessible to our customers, we’re at a point where we need to pass along these rapidly rising food costs.”

Here’s the rise in beef prices, which helped spur a lot of the following price increases. The chart starts with prices at $4.90 a pound, as they were at the beginning of last year.

McDonald’s

McDonald’s has already boosted prices, saying that first-quarter commodity prices rose nearly 3%, primarily due to protein costs. The company projects that the “food-away-from-home” inflation index will be 2.5-3.5% for the full year, higher than overall consumer price inflation. ”I think inherent in that is you do see franchisees generally around the industry, not just McDonald’s, anticipating some of these higher input costs,” CFO Peter Bensen said.

First-quarter profits were still down at McDonalds, with the boost from higher prices offset by fewer guests, higher commodity costs, and labor. McDonald’s expects similar pressure in the current financial quarter.

YUM! Brands

Increased consumer demand prompted the owner of Taco Bell, Pizza Hut, and KFC to raise prices at the latter two restaurants near the end of last year, according to CFO Patrick Grismer, and he said the company expects to benefit from those increases on pizza and fried chicken through the year. This wasn’t a response to commodity prices, but to better economic conditions, Grismer said: “We felt that we had room to do that based on the recovery that we saw in key consumer metrics.”

But like Chipotle, Taco Bell is also facing greater-than-expected pressure on the beef and cheese front, Grismer said. ”You’ll recall that we came into the year expecting 4% inflation in meat and 4% deflation in cheese,” he said. “Things could not have played out any differently, as we’re now expecting low- to mid-double-digit inflation in beef… And then for cheese, we’re expecting now mid-single-digit inflation. It was up over 20% in the first quarter.”

PepsiCo

Pepsi took the glass-half-full approach, saying it raised prices last year and in the first quarter of this year because it feels its brand is strong enough to justify it, according to CEO Indra Nooyi. Coming into the summer selling season, consumers can expect pricing to go up in both “carbs and non-carb” beverages she said.

“The strength of our brands is clear in our ability to achieve consistent net price realization,” she said.


When a well-known activist investor suddenly places a big bet on a beaten-down stock, investors typically can’t wait to jump on the bandwagon.

But can Bill Ackman fix Chipotle Mexican Grill (ticker: CMG)?

The shares surged 5.2% to $435.71 during recent market action after Ackman’s Pershing Square Capital Management hedge fund revealed in regulatory.

Does Bill Ackman Have the Right Recipe for Chipotle?

When a well-known activist investor suddenly places a big bet on a beaten-down stock, investors typically can’t wait to jump on the bandwagon.