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How Chipotle Mexican Grill’s menu price increases compare to its peers

Think Chipotle Mexican Grill has raised menu prices more than its competitors?

Think again.

A report by Wall Street analyst Peter Saleh of BTIG looked at Chipotle’s prices in 25 cities against its peers on Thursday. Saleh found that, in fact, Chipotle remains the “value leader,” despite double-digit price increases. By the end of 2022, Saleh expects Chipotle prices to average about 20% higher than they were at the end of 2020, including prices that are up 8, 5% in 2021 and 10.5% in the first quarter of this year.

“Although this price level is approximately 4-5 times higher than normal, we believe Chipotle remains the value leader in the fast-casual Mexican category, as many of its peers have increased prices at a similar rate or higher,” the report said. .

According to the survey, Chipotle’s prices were 10.7% cheaper than Qdoba’s; 9.2% cheaper than Moe’s Southwest Grill; and about 5% less than Baja Fresh.

Focusing specifically on chicken dishes, which make up around 60% of Chipotle’s sales mix, Qdoba and Moe’s have increased prices for these dishes by around 21.5% and 28.1%, respectively, since 2018. , against a 19% rise in prices for chicken dishes at Chipotle.

Additionally, the report indicates that Chipotle has room for further menu price increases.

“We expect Chipotle to continue to increase menu prices, albeit at a more moderate pace than many of its peers, maintaining its value proposition,” Saleh wrote.

With inflation hitting 9.1% in June – the highest level since November 1981 – menu prices have been a major concern, with restaurants closely monitoring consumer reactions and competitor movements.

While inflation continued to drive up prices for food at home, which increased by 12.2% for the year ending in June, food out of home also rose by 0.9% in June, or an increase of 7.7% over the 12-month period.

The BTIG survey also looked at price increases among other emerging fast food chains, including Chopt, Sweetgreen and Dig Inn. Again, the survey found chipotle prices to be cheaper or comparable in the markets where they compete.

Chopt’s prices were about 13.5% higher than Chipotle’s, according to the survey, while Dig Inn was essentially in line with Chipotle. Saleh, however, noted that Sweetgreen and Dig Inn are historically around 12-13% more expensive than Chipotle, so the value gap has narrowed somewhat.

The analyst also thinks Chipotle is relatively cheaper than Shake Shack – although the report also claims that Shake Shack is behind on menu prices and is expected to raise prices more aggressively in the coming months.

BTIG also notes that Chipotle’s traffic remains positive, although traffic trends have slowed over the past year as prices have climbed.

Chipotle’s first-quarter same-store sales increased 9% and restaurant-level margins reached 20.7%. CEO Brian Niccol said in April he expected margins to remain “bumpy” due to inflation, but reiterated the chain’s pricing power, predicting margins would hit 25% in the second quarter with the expected price increases. The company is due to release its results on July 26.

The BTIG report noted that many of Chipotle’s competitors have closed stores or exited markets since 2018, while the 3,000-unit Chipotle continues to expand, reaching 7,000 locations in North America. with a variety of formats.

“We believe Chipotle remains in the midst of its sales and unit economic recovery, with considerable momentum on initiatives such as menu innovation, digital sales expansion and stronger marketing,” Saleh wrote. . “The strength of these initiatives (pre-COVID-19) has resulted in improved same-store sales and restaurant margin which we expect to continue as these metrics progress toward historic levels.”

Contact Lisa Jennings at [email protected]

Follow her on Twitter: @livetodineout

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